Simultaneous auctions are held only when they are needed, such as when a new areas of bandwidth are opened up for use by the FCC, yet dozens of such auctions were held in the first decade following their inception alone (Cramton 2004; Webpaz 2010). Using web-based technologies greatly assists in the practical functioning of simultaneous ascending auctions, as it allows bidders form disparate geographical locations to participate in the process quite easily, making the process more fair than it might otherwise be (Millgrom 1999).
In order to participate in a simultaneous ascending auction, companies must make these initial deposits according to the rules set out by the Federal Communications Commission at each auction, which can vary somewhat depending on the sections of bandwidth being auctioned and the number of different “items” being offered for sale (Milgrom 1999; Cramton 2004; FCC 2010a). Technically, any entity is allowed to participate in the simultaneous ascending auction process to bid on and purchase frequencies as long as they can prove that they have the capabilities to put these frequencies to efficient and effective use. In reality, however, the final cost of purchasing the licenses to radio spectrum frequencies is prohibitive to most companies and unofficially limits the pool of potential bidders and overall participation in the bidding process.
In order to participate in the bidding process, stakeholders must go through an application process that culminates in their depositing of at least a minimum amount of funds to be used in the bidding process, which goes directly to the government (in the United States, to the U.S. Treasury via the Federal Communications Commission) to cover the final purchase price of the given frequency/bandwidth (Millgrom 1999). During the bidding process itself, stakeholders learn about pricing during the early stages of the process and continually return bids for desired items through successive rounds, always aware of current high bids and bidders for each “item” put up for sale (Cramton 2004; Millgrom 1999).
Again, though technically anyone with broadcasting/communications capabilities that can sufficiently utilize the frequencies and/or bandwidth being purchased is able to participate in auctions for these frequencies, the ultimate price of sections of the radio spectrum are prohibitive to most entities from entering the bidding process.
There might be nominal fees associated with participating in the bidding process, but in general simultaneous ascending auctions generate such huge revenues that they far more than offset the cost of conducting the auctions themselves (Cramton 2004; Millgrom 1999). The real limitation in participation comes from the high cost of the spectrum frequencies in the final bid, as well as providing evidence of the ability to fully utilize the frequencies once purchased, both of which preclude all but the largest of corporation from taking part in the process.
Electromagnetic waves are a natural phenomenon and run the gamut from very-low frequency waves traveling through space to extremely high frequency cosmic rays, with the radio spectrum, the visible light spectrum, microwaves, x-rays, and a multitude of other waves in between. The most useful sections of the spectrum are highly sought commodities in the modern era of advanced communications via satellites, radio and television broadcasting, wireless Internet, and cell phones. As demand increases, the complexity and the costs of frequency allocation have also increased, these trends seem likely to continue into the future.
Cramton, P. (2004). “Simultaneous ascending auctions.” Accessed 18 October 2010. http://www.cramton.umd.edu/papers2000-2004/cramton-simultaneous-ascending-auction.pdf
Cringely, R. (2008). “Everything You Always Wanted to Know About the 700-MHz Auction but Were Afraid to Ask.” Accessed 18 October 2010. http://www.popularmechanics.com/technology/gadgets/news/4246037
FCC. (2010). “Online table of frequency allocations.” Accessed 18 October 2010. http://www.fcc.gov/oet/spectrum/table/fcctable.pdf
FCC. (2010a). “Spectrum allocation, assignment, and enforcement.” Accessed 18 October 2010. http://www.fcc.gov/connectglobe/sec7.html
Huurdeman, A. (2003). The worldwide history of telecommunications. Hoboken, NJ: Wiley.
Kittross, J. & Sterling, C. (1979). Television frequency allocation policy in the United States. New York: Arno.
Milgrom, P. (1999). “Putting auction theory to work.” Accessed 18 October 2010. http://www.market-design.com/files/milgrom-putting-auction-theory-to-work.pdf
NASA. (2010). “Radio waves.” Accessed 18 October 2010. http://science.hq.nasa.gov/kids/imagers/ems/radio.html
NTIA. (2010). “Frequency allocation table.” National telecommunications and information association. Accessed 18 October 2010. http://www.ntia.doc.gov/osmhome/allochrt.pdf
Webpaz. (2010). “FCC vote on rules governing frequency allocation.” Accessed 18 October 2010. http://www.webpaz.com/fcc-commission-vote-on-rules-governing-frequency-allocation-process-white-space-broadband-wireless-innovation-alliance/
Withers, D. (1999). Radio spectrum management. London: Institution of electrical engineers..