I always wondered -as a person who has been working in the telecomms field for the past 11 years- how the firms developed their spectrum bidding strategies and how they implemented those. After all, these are billion-dollar games that have long and profound impacts in the firms as well as in the industry, and even in the economy of the country.
Spectrum auctions are sealed-bid long-run auctions where bidders -typically incumbent telecom operators- bid aggressively to get the spectrums that they need for their future infrastructures. FCC is the regulator of such lucrative auctions. FCC is incentivized by highe, successful bids and fair outcomes.
Recently, C-block auction resulted in a 8-week 20-billion dollar bidding process. FCC had a 4.6 billion dollar reservation price in this block. Before Google joined the bidding, no one knew why it was doing so. Google was actually planning to invest into the applications and handset business that would work on this spectrum block. As a result, Google needed big incumbents to invest heavily in this auction so that it can develop and sell handset and application products. In other words, Google played a billion-dollar chicken game, increasing its own bidding multiple times at points. Result: Google made sure that reservation price is reached, but it did not win. It was the outcome that Google desired. This strategic, well-played move was a big win for Google. Playing devil's advocate: What would happen if Google was the winner of the bidding process?In my opinion, they could either have dived into an industry that they are not very familiar with and failed eventually, or they could have sold the spectrum to another firm, potentially writing off some loss.
More details in the following article:
http://www.pcmag.com/article2/0,2817,2281382,00.asp
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