The Rules of Engagement for 3G in Ukraine

By Dmytro Ilin (Institute for Economic Research, Kyiv) and Tymofiy Mylovanov (University of Pittsburgh, USA)

The Ukrainian government is about to decide on the format of the 3G license auction. What are the best international practices for the spectrum auctions?

Format. The standard format in the world is "open ascending (clock) auction", not sealed bid. This helps transparency of the auction and reduces possibilities for collusion among the participants. This is the format that the government of Ukraine intends to use.  

It is not (only) about revenue. The government heralds the auction as a way to raise revenue in the difficult time of the economic and security crisis. An important objective of the auction, however, should be increasing competition in the downstream market. This might require discrimination in the auction and/or offering more licenses than there are current market participants in order to provide incentives for new domestic and foreign companies to enter the market and create competition. Competition will drive prices down and will increase consumer surplus. The government in Ukraine might overlook or fail to understand this criterion.