Anorak News | The insane Czechs makes a hash of the 4G auction

The insane Czechs makes a hash of the 4G auction

by | 12th, March 2013

THIS should be a spoof but unfortunately it isn’t: they’ve managed to get the economics of this situation entirely the wrong way around:

As bidding topped £680m, the Czech regulator pulled the plug on the 4G auction, saying that to continue would risk pushing cripplingly high prices onto the winner’s customers as well as delaying deployments – both to the detriment of the country’s citizens.

The Czech Republic was hoping for a fast deployment, and the regulator had placed a reserve of 7.4bn Czech Koruna (£250m) on the bands being auctioned off, but with four operators determined to divide the bands into three bundles, the bidding got out of hand and the regulator decided to pull the plug rather than taking the money.

This is insane.

It’s a basic economic concept that businesses are greedy bastards. They’ll scrape as much money out of the wallets of their customers as they possibly can. So, given that they’re already doing that they cannot scrape any more out if their costs are higher. So, prices will be exactly the same to consumers whether the spectrum costs $1 or $100 million.

All the price of the spectrum, changes is who gets that money? The shareholders or the government? And, to be quite honest, it’s usually thought of as a good idea if it is the government that gets this money. Spectrum is just there, it simply exists, and in order for it to be usable we’ve got to limit the number of people who can use it. That limitation thus makes free profits possible: and there’s no reason at all why the shareholders of a private company should wax fat on nature’s bounty. Better that government gets some of the cash that it needs from it.

As to the other idea, that high prices will slow down roll out, words fail me. Imagine the price was $1: do we think that people will be rushing to get the system set up and more slowly if they’ve paid $100 million for it? Seriously? For usually we think the more you’ve already spent the faster you’ll be running to get some of the cash back, no?

Posted: 12th, March 2013 | In: Money, Technology Comment | TrackBack | Permalink