MARKETS don’t simply emerge, but are created by the state, argued Karl Polanyi, an economist, in “The Great Transformation”. This is certainly true for radio spectrum, an intangible natural resource, which governments now regularly sell in auctions. The most intricate ever organised came to an end in America on February 10th, bringing in $19.6bn.
When America’s Federal Communications Commission (FCC) started auctioning spectrum in 1994, it did so because lotteries and “beauty pageants” to allocate the scarce resource seemed otherworldly when billions were at stake. Two decades later the FCC again tried something new, because the established auction system, in turn, was no longer adequate. With most spectrum compatible with today’s technology already allocated, the agency could only satisfy ever-growing demand from mobile carriers by convincing current holders of big slices, mostly broadcasters, to give up some of their licences.
The FCC’s solution was to organise not one but two sets of sell-offs, collectively called an “incentive auction”. The first set finds out the prices at which broadcasters are…Continue reading