Discussion Papers

No. 421: Incentive auctions as a new tool of frequency management 

(Full version only available in German)  

Author: Lorenz Nett 


Spectrum is an essential and scarce resource for a variety of wireless applications. Most prominent to the public are certainly mobile broadband access, broadcasting and wireless Short Range Devices, like the wireless remote control of a TV set or music players. Frequency management has a focus on the determination of usage conditions and the assignment of frequency user rights. In Germany the Bundesnetzagentur is the Spectrum Management Authority that is responsible for these issues. According to the German Telecommunications Act spectrum management shall implement the efficient usage of spectrum. A set of flexible management tools is already available to promote such an efficient allocation of spectrum holdings. Flexible user rights which enable actual users to select the most efficient technologies are such an arrangement. Spectrum trading and leasing are alternative means to promote efficient usage. Spectrum auctions to assign high valuable and scarce spectrum in case of free or cleared user rights ensure that those receive spectrum user rights which can use them most efficiently.  

Incentive auctions are a new tool which is now applied in the United States of America. The main intention is to reallocate spectrum user rights to more efficient usage. In the incentive auction which started in May 2016 current licence holders using UHF and VHF frequencies for broadcasting services face the option to sell spectrum user rights. Alternative users mainly interested to use these frequency bands for mobile broadband access or other 5G services face the option to buy UHF spectrum user rights. Depending on demand and supply the transfer price and amount is implicitly determined in the incentive auction. In parallel as a result spectrum reassignments and reallocations will happen which may also affect other spectrum right holders to ensure that spectrum usage for broadcasting and mobile broadband access happens with a limitation of mutual interference.

The following paper discusses incentive auctions in their characteristics and importance as a new tool of spectrum management. The Incentive Auction in the United States of America received a strong attention.

Discussion Paper is available for download.

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