This report, for the NCC, recommended reserve prices for the 700 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2600 MHz band auctions in Taiwan.
Plum used a combination of international benchmarking analysis, cost reduction modelling and full enterprise value modelling to provide indications of spectrum value. This provided a range of estimates of spectrum value for each band.
When setting reserve prices it is necessary to take account of the government’s auction objectives and the likely level of competition in the auction. Typical objectives for spectrum auctions are to maintain competition in the mobile market, to foster broadband services and to raise revenues that reflect commercial value of spectrum. It is also desirable to avoid collusion in the auction, but this was unlikely a significant issue in Taiwan given there are five operators in the market.
For frequency bands to be attractive to smaller operators (and thereby help maintain competition) and to foster broadband services, lower reserve prices should be set. On the other hand, raising revenues and avoiding collusion could suggest setting reserve prices higher: this means government is assured of a minimum level of revenues and reduces operators’ incentives to collude, rather than compete, in the auction.
Taking into account the NCC’s objectives, Plum used the range of estimates derived from the modelling and benchmarking work to provide recommendations for the auction reserve prices.