Restoring competitive balance to the upcoming spectrum auction

Google's Public Policy Blog has one of the clearest explanations of the issues involved with the FCC's 700MHz auction.

In recent days, and especially following Eric Schmidt's July 20 letter to FCC Chairman Kevin Martin, many people have asked us a straightforward question: why don't you just attempt to win the spectrum bidding outright, and then implement an open wholesaling business model yourself? Or, as AT&T has put it, "put up or shut up."...

..."monopoly rents"...

...Third, and perhaps most important, the incumbents have every incentive to preserve and protect their existing business model. Given their investment in all the necessary business inputs, and the relatively high prices and low bandwidth characteristics of their existing service offerings, the incumbents must prevent the entry of potential competitors to the market. In a spectrum auction, this means paying whatever it takes to block new entry. Not surprisingly, economists call this a "blocking premium." ...

...Recent studies have confirmed that this is a pervasive aspect of the FCC auction environment. ...

...
Un-skewing the spectrum auction
When looking at the combined impact of the incumbent blocking premium and the incumbent dilution discount, it's easy to see how FCC auction results become skewed.
Ironically enough, it is Google that has been accused
of attempting to skew the auction structure, by our recommendation that the licenses be conditioned on certain "open platforms" requirements.
Of course, as we have explained it is the current auction system that skews the results away from potential new entrants and in favor of existing incumbents. ...

...While Google embraces the kinds of openness and innovation that are the hallmark of the Internet, the incumbents apparently prefer their existing business models. That of course is their prerogative. However, open platforms -- specifically, open applications, open devices, open wholesale services, and open network access
-- together make the spectrum more valuable to Google, or any other potential bidder seeking to create innovative, higher-speed, lower-priced offerings. ...