Comments on Experimental Design for Evaluating FCC Spectrum Auction Alternatives

We are responding to Public Notice DA 05-1267, which seeks comment on the proposed experimental design to eva luate aspects of the FCC's alternative auction methods, both with and without package bidding. The experimental design is ambitious. Our main comment is that the effort will be more productive if there is more focus on elements for which past experience and existing knowledge does not provide adequate support with which to make a selection. We believe it is a mistake to focus all attention on the simultaneous multiple round auction (with and without package bids), given that there is substantial theory and experience suggesting that a clock auction or clock-proxy auction would perform better in the FCC setting. There are several advantages to the clock implementation, described in greater detail in our paper, " The Clock-Proxy Auction: A Practical Combinatorial Auction Design. " Some of our other references related to clock auctions and proxy auctions are listed at the end of this Comment. The clock auction is a simpler process than the simultaneous ascending auction. Bidders are provided the minimal information needed for price discovery—the prices and the excess demand. Bidders are not distracted by other information that is either extraneous or potentially useful as a means to facilitate collusion. The clock auction also can take better advantage of substitutes, for example, using a single clock for items that are near perfect substitutes. In spectrum auctions, there is a tendency for the FCC to make specific band plans to facilitate the simultaneous ascending auction. For example, anticipating demands for a large, medium, and small license, the FCC may specify a band plan with three blocks—30 MHz, 20 MHz, and 10 MHz. Ideally, these decisions would be left to the bidders themselves. In a clock auction, the bidders could bid the number of 2-MHz blocks desired at the clock price. Then the auction would determine the band plan, rather than the FCC. This approach is more efficient and would likely be more competitive, because all bidders are competing for all the bandwidth in the clock auction. With the preset band plan, some bidders may be uninterested in particular blocks, such as those that are too large for their needs. The proposed experimental design does no t address this important issue. Clock auc tions are faster than a simultaneous ascending auction. Simultaneous ascending auctions are especially slow near the end, when there is …