Results tagged “incentive auctions”

July 12, 2013 11:39 AM

Bidder Exclusion? Ain't Nobody Got Time for That

So I take my eyes off the spectrum auction debate for a couple months, and what happens?  Well, for the most part, absolutely nothing . . . or so it seems.  Actually, it's worse than nothing happening, because parties have refused to wisely ignore the DoJ's substance-less April ex parte submission.  Instead, a "tire fire" of a debate (toxic, polluting, and burning for far too long) has rather predictably broken out; a fact that confirms the darkest suspicions of many--that one can never underestimate the FCBA crowd's appetite for mindless bickering.

 She obviously read the DoJ ex parte

The putative beneficiaries of DoJ's casual musings--Sprint and T-Mobile--are struggling to animate this theory by adding their own piece parts, like the "Dr. Frankensteins" of economic policy creation.  Others, who oppose these efforts, are also exaggerating the substance (or lack thereof) of the Department's submission so that they can then "slay" the paper tiger of their own creation. 

Fortunately, and finally, one "grownup" expert has, admirably, refused to reflexively engage in the "yea or nay" foreclosure debate, choosing instead to simply, and elegantly, point out that the DoJ submission lacks sufficient substance to even be worthy of discussion.  This expert calmly explains that the DoJ never contends that the likelihood of the auction being subverted by a bidder pursuing an "input foreclosure" strategy is high enough to merit any exceptional analytical framework, or specific prophylactic rules. 

Before I reveal the identity of our helpful expert, I'll give you one hint.  This expert understands, possibly through experience, that the Antitrust Division is well aware of the level of detail and documentation that must accompany a regulatory policy proposal if it is to be taken seriously by the regulator.

When DoJ Is Serious About An Economic Framework

When you think about it, this realization becomes a little more powerful.  The Antitrust Division knows full well how to provide a regulatory agency with enough factual and theoretical support for its theories to give the agency that adopts its proposals a good chance of surviving appellate review.  

A good example of the DoJ at its best is the Department's Evaluation of the Bell Atlantic (Verizon) Application to provide "long distance" service in New York.  The Division filed over 200 pages of advocacy, including 2 economist declarations.  The DoJ's evaluation contains 8 single-spaced pages of citation sources.  In contrast, the DoJ probably devoted twice as many words to cataloguing the sources it used in its New York 271 analysis than it did in its "police sketch" of a foreclosure theory in the April ex parte. 

An even better comparison is the analysis the Antitrust Division provided in its 1992 Comments on rules for the PCS auction, which was the FCC's very first spectrum auction.  The DoJ filed 41 pages of very thorough analysis in November of 1992, which it followed with an equally-thorough 28 pages of Reply Comments in January of 1993. 

Interestingly, the content of the DoJ's rigorous PCS auction comments could not be more different from the more "casual" reasoning in its April ex parte.  Even though there were only 2 mobile wireless providers at the time of the PCS auction, the Division opposed a any flat prohibition on wireless mergers (which the Commission was considering adopting).  While mergers between the new PCS entrants would certainly result in increased concentration, the Division was unwilling to "foreclose" from consideration mergers that would result in enhanced efficiency of spectrum use, because such mergers could benefit consumers.  See 1992 Comments, pp. 23-28. 

When DoJ Wants To Be "Supportive" Without Providing Support

So, I know you're probably wondering which expert rationally declined to join the melee of parties jousting against the DoJ's "windmill" chimera of input foreclosure.  Somewhat ironically, and yet not surprisingly, the expert is former Deputy Assistant Attorney General for Economics of the Antitrust Division, Michael "it's cool for" Katz.  Katz, and some other economists, submitted a declaration (at pp. 5-13) on behalf of AT&T last month.

So how did Katz, et al., cut through the noise surrounding the DoJ ex parte?  Take a look for yourself (pp. 5-13).  The first clue is that it's 8 double spaced pages long, and the first two pages summarize the DoJ filing.  The brevity of the Katz, et al., Declaration is its elegance. 

The Katz Declaration uniquely approaches the DoJ filing from a generously analytical perspective.  Accepting the DoJ's threshold premise--that there could be circumstances in which the largest firms might profitably pursue a foreclosure strategy--Katz, et al., explain essential elements of the theory, as well as factual predicates (i.e., "evidence"), that the DoJ would have discussed if the Department reasonably expected the FCC to adopt such a justification for bidder exclusion.

Professor Katz, of course, is a classy dude, so he never actually says "if the Division was serious . . . ."  That's way too vulgar, and--as far as I can tell--it's the only reason AT&T chose him to make this point instead of me.  Thankfully, Professor Katz and his colleagues have advanced this docket by demonstrating for all participants that there is no risk of the Commission adopting any part of the Division's ex parte.

Given that the DoJ fails to present their "theory" in an economically correct manner, or to even recklessly--much less accurately--assert factual predicates that would require the FCC to consider the DoJ's ex parte, it is safe to assume that the Antitrust Division has no intention of providing the FCC with the requisite legal, factual, and economic testimonial support that would give the FCC even the barest excuse to exclude auction bidders on an "input foreclosure" theory.    Hopefully, all parties, including the FCC, will soon appreciate this reality, and stop wasting valuable time arguing over an ex parte that not even the DoJ expects the FCC to take seriously.

May 25, 2011 12:37 PM

The Commission's Wireless Competition Conundrum: "Neutral" Is Not an Option

Since 1997, Congress has required the Federal Communications Commission to file annual reports that measure whether certain industries, such as mobile wireless services, are "effectively competitive."  Every report the FCC has issued since 1997 has found the wireless market "effectively competitive," until 2010, when the Commission failed to make any finding at all for calendar year 2009. See 2010 Report.

While it is not difficult to understand a bureaucracy's fear of commitment--making no judgment on one matter in the present seems to preserve all options for future matters.  There are now news reports, though, that the FCC might take the same "neutral" stance with respect to wireless competition that it took last year.  This time, though, that course destroys, rather than preserves, options, and the Commission must reconsider its fear of commitment.

The article notes that the Commission may be afraid of finding the wireless market to be "effectively competitive" for fear of limiting its options in reviewing the proposed AT&T/T-Mobile merger.  If this report is correct, the Commission's reasoning is both specious, and dangerous to its present agenda regarding spectrum policy and incentive auctions--an issue that Chairman Genachowski has been aggressively, and correctly, pursuing since the beginning of the year.  

Continue reading The Commission's Wireless Competition Conundrum: "Neutral" Is Not an Option