Spectrum Auction Bidding Strategy and Auction Design

Developing and executing a spectrum auction bidding strategy

For mobile operators, participating in a spectrum auction is often a high-risk and high-profile exercise which typically involves committing high levels of cash in addition to accepting, potentially demanding, spectrum licence obligations. Spectrum auctions occur relatively infrequently and require specialist academic knowledge and expertise in game theory and auction design, skill sets and experience that most mobile operators do not have in-house. Coleago has worked extensively with a wide range of mobile operators to help them achieve their auction objectives whilst minimising their exposure to risk.

Coleago has established a panel of academics who specialise in game theory, auction design and developing and executing spectrum auction bidding strategies. The panel of academics complement our in-house experts. The members of the panel have been carefully chosen, not only for their academic brilliance but also their understanding of the practical and commercial challenges facing mobile operators when participating in an auction. Our approach to delivering projects through partnership with some of the leading game theorists in the academic world ensures that our clients benefit from the latest academic insights into game theory, bidding and auction design.

Many academics will tell clients that the three secrets to successful spectrum auction participation are valuation, valuation and valuation! As specialists in spectrum valuation, working with Coleago ensures that the spectrum valuation and auction bidding strategy workstreams dovetail perfectly.

When working with clients on spectrum auction bidding strategy projects we typically begin with a series of capacity building workshops to ensure that senior executive management understand the key principles, features, opportunities and risks of the auction in which they will have to participate.  Coleago is highly skilled in explaining complex game theory concepts and ideas in simple and easy to understand language for executives who are often time poor and perhaps, have not previously participated in an auction.

In the next step of the project, we incorporate the results of the spectrum valuation exercise to agree with senior management what their primary and secondary auction objectives are and we facilitate a discussion around attitudes to corporate risk. Working alongside our academic partners, we then analyse the auction rules in detail to develop a range of potential spectrum auction bidding strategy options. These are then presented and explored in further workshops before we move on to planning for auction execution.

Depending on the complexity of the auction, we might undertake war gaming exercises and simulations to test the bidding strategy and to train the bid team. If required, we will also develop appropriate auction bidding support and reporting tools. Finally, we prepare an auction playbook which sets out the bidding strategy as well as a wide-range of protocols and procedures to support effective auction bidding strategy execution. If appropriate, we can also provide live auction support. Our goal is to ensure that auction participation is boring and uneventful and delivers upon the client’s objectives.

Spectrum auction design

When we work with regulators and governments to design spectrum auctions, we are able to leverage our auction experience of working with operators. Auction design is often predicated on the assumption that bidders are only interested in ‘maximising profits’ and face limited constraints on their ability to do so.  However, our experience of working with a wide-range of operators has revealed that operator objectives are often more complex, multi-layered and can include a political element and they are almost always, to a lesser or greater extent, budget constrained. Working with Coleago to design and implement an auction ensures that the auction design reflects the real world realities of decision making within mobile operators.

Our approach to supporting regulators and governments in spectrum auction design also begins with a series of capacity building workshops. These are then followed with a programme of stakeholder engagement to establish the objectives and priorities for the auction.  We then combine our technical knowledge, commercial modelling and strategic understanding with our expertise in game theory and auction design to select the most appropriate auction format and the detailed auction rules. The auction design and rules are then subject to extensive testing to ensure that the auction is robust to all potential eventualities.

Coleago works alongside a number of specialist auction software firms to implement the auction design in an electronic bidding system. Coleago can provide end-to-end support to regulators and governments from agreeing the auction objectives, designing the auction through to preparing consultation papers and information memorandum before supporting auction execution and post auction formalities.