Wireless industry insiders increasingly seem to be making the case that governments should consider “rebates” to carriers that bid too much money at spectrum auctions for third-generation wireless services. While they make some strong points, one has to wonder how many times this issue should be debated. Changing rules after the fact would (still) undermine the integrity of the auctions and it remains unfair to reward companies for bad business plans.
Why are there rumblings of rebates (a euphemistic term for bailouts,) now any way? Are companies that were once considered too big to fail now in danger of being unable to deliver the promise of 3G? In a word, yes. In a sagging economy, stock prices and massive amounts of debt are hurting wireless carriers that once were thought to be unstoppable.
Yet, like their smaller counterparts, large players knew the risk when they bid astronomical amounts for spectrum only a short time ago. In Germany, the auction for UMTS licenses raised nearly $46 billion for the government-the highest amount yet for 3G spectrum. The winners were backed by solid names in wireless: Deutsche Telekom, Vodafone, E-Plus-Hutchison, British Telecom, France Telecom, and Telefonica-Sonera. In the U.K., the 3G spectrum auction brought in $34 billion, again from companies familiar with the industry. All told, “winners” have pledged about $100 billion to build 3G systems in Europe.
Motorola’s Adrian Nemcek pointed out that the very governments that stand to make the most money from 3G licenses (Germany and the United Kingdom) ultimately may be hurting their economies because they may hurt the very companies that contribute substantially to their respective economies.
That’s true, and governments will have to consider overarching effects like the national economy if and when they consider rebates. But it is too easy to sit back and blame greedy governments for escalating 3G licenses. Shouldn’t the companies who showed some restraint at auction be rewarded for that wisdom?
If massive debt forces another round of consolidation, likely global consolidation, is that such a terrible consequence? Or is that just part of the process? What if these large telecom behemoths are being mismanaged and government bailout only masks the underlying problems in these companies? To jump in and try to fix the process before it plays out may only lead to different difficulties down the road.
In the United States, the government already has tried comparative hearings and lotteries and found them to be lacking. Auctions-where the company that most values the spectrum receives it-make more sense. It’s just messy.
