Modified Lease Auction: Proposal of a New System for Efficient Assignment of Radio-Spectrum Resources

Abstract

This paper proposes a system by means of which the utilization of radio spectrum may be improved from extreme inefficiency at present to equilibrium and efficiency in the future. It introduces a system which takes advantage of market mechanism with regard to spectrum assignment as distinct from spectrum allocation. It is composed of two parts. The first part proposes a system called “modified lease auction (MLA),” in which the government leases (rents) spectrum competitively to business and public users. To protect incumbents from excessive risk of losing spectrum rights, it proposes a number of ways including a provision of insurance. The second part considers the transition from the current system to MLA. It proposes a process in which the spectrum price be increased gradually from the current zero level to the target equilibrium level. Further, in order to reconcile to oppositions by incumbents to MLA, a scheme is proposed for compensating income to incumbents without hurting the incentive to save spectrum.