Feeds

Wrong scapegoat, 3G auction architect says

Why they remain a Good Thing

  • alert
  • submit to reddit

The Power of One Infographic

Almost three years on, the carpers and cavillers are still complaining about the huge sums extracted from the telcos in the European 3G spectrum auctions. It is blamed for all manner of things, including the telecoms industry crisis, shareholder misery, wife-beating and crop failure.

At the time, some of us (OK, me) - at The Register thought the 3G spectrum auction was an impressive government funding mechanism. We (OK, me) hold this view still.

Much more eloquent is Paul Klemperer, Edgeworth Professor of Economics, Nuffield College, who advised the UK government on its 3G licence auction. This week, Klemperer conducted the defence of the effects of the 3G auctions, through the pages of the FT. The article is published in full (pdf) on his website (pdf).

Here is the potted version: First the opposition, as characterised by the prof.

The critics assume three things: that the telecoms companies paid more for the licenses than they thought the licenses were worh; that this expenditure has reduced investment in 3G; and that it destroyed market value."

Now, the defence: Of course, the licences look expensive. In retrospect many things do. But "like any other market, an auction simply matches willing buyers and willing sellers - it cannot protect them agains their own mistakes".

The 3G reduced investment argument is odd, Klemperer argues: "The auction fees are history; they have (almost) all been paid in full, cannot be recouped by cutting investment and make no difference to its profitability.

As for destruction in shareholder value in the telecoms sector, US companies have come out worse, even though no 3G auctions took place in the US. It seems a stretch to blame $700bn of shareholder misery on $100bn of shareholder fees.

Klemperer concludes: The main effect of the licence fees was simply to transfer $100bn from shareholders to certain European governments. This was both equitable, since the companies were buying a public asset that they valued this highly at the time, and efficient, since such a lump sum transfer is much more efficient than most forms of taxation. Efficient, equitable and voluntary government funding is not easy to find: perhaps we should be more enthusiastic about it.

And so say all of us(OK, me). ®

The Power of One Infographic

More from The Register

next story
Auntie remains MYSTIFIED by that weekend BBC iPlayer and website outage
Still doing 'forensics' on the caching layer – Beeb digi wonk
Major problems beset UK ISP filth filters: But it's OK, nobody uses them
It's almost as though pr0n was actually rather popular
Microsoft unsheathes cheap Android-killer: Behold, the Lumia 530
Say it with us: I'm King of the Landfill-ill-ill-ill
All those new '5G standards'? Here's the science they rely on
Radio professor tells us how wireless will get faster in the real world
Apple orders huge MOUNTAIN of 80 MILLION 'Air' iPhone 6s
Bigger, harder trouser bulges foretold for fanbois
Oh girl, you jus' didn't: Level 3 slaps Verizon in Netflix throttle blowup
Just hook us up to more 10Gbps ports, backbone biz yells in tit-for-tat spat
GoTenna: How does this 'magic' work?
An ideal product if you believe the Earth is flat
Telstra to KILL 2G network by end of 2016
GSM now stands for Grave-Seeking-Mobile network
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.