Assignment of Exclusive Spectrum Licenses in Japan: Use of an Auction for the Licensee Selection Process

The demand for spectrum resources has increased in the past decade due to the flourishing wireless industry worldwide. This change requires Japan's Ministry of Internal Affairs and Communications (MIC) to establish a transparent, fair and efficient spectrum allocation process that will enable it to select an optimal set of licensees to realize efficient spectrum use. This thesis proposes an auction system that assigns exclusive spectrum licenses to firms competing in the Japanese wireless industry. MIC currently uses a comparative examination system, which unfortunately lacks certain features the Ministry is required to address. An auction system is an alternative, already employed by many countries to allocate spectrum resources optimally, to secure a transparent and fair decision-making process, and to raise revenue for national coffers. The Diet's approval of legislation authorizing MIC to use auctions is one obstacle because it requires much time and effort to persuade political parties, incumbents, and newcomers of the value of the auction system over the current system. Another challenge to the effectiveness of the auction system is its design, which must be built-to-order based on the goals of each government and specific market conditions. This research covers four areas: (1) The development and transition of the Japanese mobile industry; (2) Analysis of stakeholders' attitudes toward the introduction of the auction system; (3) A proposed strategy for developing an auction design based on an analysis of English, Germany and Clock Auction Design; (4) The design of an auction system for Japan's specific cases. Thesis Supervisor: William Lehr Title: Research Associate, Communications Futures Program