Chutzpah, Thy Name Is Wireless Incumbent.

So here we are in the middle of the most intensely competitive auction ever. As you can tell looking at the recent postings by fellow Wetmachiner Greg Rose this auction has dramatically pushed up the amount of money paid by bidders for licenses and has created more intense competition for a broader group of licenses than previous auctions, strongly suggesting that — as Greg and I predicted when we first started pushing anonymous bidding in March 2006 — anonymous bidding eliminates all kinds of targeting, collusion and retaliation that typically held back smaller bidders and allowed larger bidders to pick up licenses for a song. An utter smashing success (at least from the perspective of those who favor using auctions for distribution of licenses), right? Who could have a bad word to say about it?

Answer: All the people who hate anonymous bidding BECAUSE it eliminates the ability to signal, retaliate, and collude and thus makes the auction more competitive. i.e. The incumbent wireless licensees (other than Verizon, which wanted anonymous bidding to avoid being targeted).

More below . . . .

Of course, in the face of just about every indicator that anonymous bidding is a raving success, you would have to be pretty brazen — and have the assistance of a compliant trade press and an uninformed audience — to actually even try to make such a claim. Happily for the incumbent wireless carriers, Washington abounds in all these things.

Which leads us to the front page of Monday’s (2/4) Communications Daily (sorry, not available online). As reported by the article, members of the wireless industry are hard at work on a preemptive campaign to sow doubt about the usefulness of anonymous bidding despite just about every single shred of evidence showing it has been outrageously successful. Mostly, this is reduced to a lot of unsupported muttering about how awful it would be if something leaked out of the FCC, with the expected dropped hints that somehow the anonymous bidding rules are responsible for the emerging D Block debacle.

Well sure, if I postulate that a major crime will happen, then I can imagine all manner of things going wrong. i point out, however, that the previous open bidding system, which were shown time and again to produce auctions where incumbents block new entrants and win licenses on the cheap. So the fact that if someone at the FCC did leak something it might prove disastrous does not impress me overmuch.

Another “anonymous industry official” has the baldfaced temerity to suggest that “it’s hard to know whether it has depressed pricing.” Excuse me, it isn’t “hard to know.” If you actually take a look at all the relevant measures (as Greg has done, with charts and everything), you will observe that anonymous bidding has dramatically increased revenue. Whether it has also made it possible for new entrants and smaller incumbents to bid more agressively and win licenses (as we hoped) still remains to be seen. But no one rational (unless motivated by self-interest) can argue that this auction has suffered from depressed revenue.

I can’t claim to be genuinely shocked, of course. In a town where I routinely see duopolists claim they face “fierce competition,” monopolists claim they have “no market power,” and Comcast claim that it doesn’t degrade p2p traffic but merely “delays” it, it is impossible for me to be shocked by any kind of industry chutzpah. And I understand the rationale for trying to create fear uncertainty and doubt (FUD) in advance of the auction conclusion. Because if the wireless incumbents can shape expectations ahead of the conclusion of the auction, the wireless incumbents will have a shot at bringing back “the good old rules” where they lived as lords of creation, smaller operators and rural operators knew their place, and new entrants got cold shouldered aside. Hopefully, folks at the FCC and on the Hill will look to the results, not the spin, and will keep the enormously succesful anonymous bidding rules in place for next time.

Stay tuned . . . .

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