NERA experts have drafted a report, on behalf of Telefónica UK, which explores the incentives for strategic bidding by bidders in a combinatorial clock auction (CCA), a package-bid format that has been used primarily for awarding radio spectrum. The report dispels the myth that in spectrum auctions the best strategy in a CCA is always to bid straightforwardly based on intrinsic valuations. Drawing on their experience as advisors to bidders in more than ten auctions using variants of the CCA format, the authors highlight circumstances under which bidders may achieve superior absolute or relative outcomes through tactical bidding. Further, in a series of case studies, they explain how strategic bidding may have affected allocation and price outcomes in the Irish, UK, and Austrian multi-band 4G spectrum awards.

This report was one of a series of reports prepared for Telefónica UK, as part of its submission in response to Ofcom’s February 2015 further consultation on the determination of annual license fees (ALF) for the 900 MHz and 1800 MHz spectrum bands.