Interaction of Spectrum Auctions and Mobile Market Competition: Review of Theory and Evidence from European 4G Auctions

This paper examines the effects of ex ante market structure on spectrum auctions and their impact on mobile market outcomes. We review the relevant theory and provide a simple analytic framework suggesting that larger incumbents acquire more spectrum in auctions to disadvantage smaller competitors. Using novel data on European 4G spectrum auctions, we present suggestive evidence of this effect for low-band ( < 1GHz) auctions. Exploiting idiosyncratic differences in auction timing across countries, we show that HHIs, and potentially prices, increase following low-band auctions, particularly in markets where incumbent operators had relatively high pre-auction market shares. These changes are not accompanied by improvements in coverage or increased investment. Operator-level regressions show that these effects are driven by incumbent operator behaviour.