We have been talking about it for months, evaluating the possibilities, intervening and going back: beauty contest? Auction? The assignment of the TV frequencies of the so-called "internal digital dividend", or obtained thanks to the transition to digital terrestrial, is becoming a very thorny issue for the Government, caught between opposing positions. The last shock came from three agendas of Pd, IdV and Lega presented to the Chamber and accepted by the Government.
The more measured, that of the Democratic Party, asks to evaluate the economic feasibility of the auction, while the other two are much more decisive: the League - signed by the former Minister of the Interior, Maroni - asks to cancel the beauty contest. Italia dei Valori went further and went to the Senate, where it also has an amendment with the aim of introducing the auctioning of frequencies by legislative means.
At the moment all scenarios are possible and the outcome of the story is far from obvious. The only certain result is that for now Minister Passera has stopped a beauty contest which, in a few days, should have given its results.
They are there are three issues that the Monti government is called upon to resolve: identifying an assignment mechanism capable of ensuring an efficient use of frequencies, assigning them a correct economic valorisation, introducing mechanisms that lead to the liberation of spectrum by the Ministries (especially by that of Defence).
To dissolve the first node must clarify the tool of the beauty contest. Everywhere in Europe TV frequencies have been assigned through a beauty contest, the possibility of using an auction mechanism has not been taken into consideration, up to now, by any country. A fact, but the mechanism hypothesized up to now is a partial beauty contest: it guarantees, in fact, that the frequencies are assigned to operators already present in the analogue TV market and does not introduce any competitive mechanism: there is no real “contest”.
The criteria established for the beauty contest in question, i.e. the current coverage commitments or the quality of the marketing plan presented by the companies, are not sufficient. The real beauty contest consists in fact in the establishment of a varied set of criteria (technical, investment, commercial but also economic) with different scores and weights, fixed a priori. In a country that needs development, it is necessary to introduce new selection criteria, which are more effective for the purposes of industrial policy: in essence, companies will have to commit to minimum investments and the creation of new jobs.
It's been done before. The beauty contest scheduled in 1994 for the assignment of the first block of mobile radio frequencies won by Omnitel Pronto Italia (today Vodafone). That beauty contest can certainly be used by the Government.
Il second node is related to the assignment of a correct economic valuation of the frequencies. The free assignment of frequencies, envisaged by the current beauty contest, has sparked a great deal of debate in recent days. The many concerns raised appear to be largely justified, but solutions need to be sought that go beyond the mere introduction of an auction mechanism.
La replacement of the beauty contest with a "pure" auction (similar to that used in the recent assignment of LTE frequencies) or even mixed (as in the case of UMTS frequencies) is not able to lead to a valid and rapid solution. It would mean, as also stated by the supporters of the auction themselves, changing the very structure of the Italian television market (resulting, for example, in a separation between network and content) and would require a reform of the advertising market. Too complex, too late: it is necessary to find a realistic solution, pace of theorists of the matter.
The fastest and most effective way could be the introduction of an economic valorisation in the current beauty contest itself, divided into three levels:
1- The introduction of a economic criterion which is given the weight of at least 30% in assigning the score with the presentation of an offer in a sealed envelope by the participating companies. In this way, companies will base their valuation of frequencies on market estimates and on their own business model (current and future), thus avoiding an overvaluation. Moreover, such a mechanism would reduce the risk of collusive phenomena;
2- The adaptation of the current one concession fee, currently set at too low levels. 1% of the turnover for all national, public and private broadcasters is a much lower value both in comparison with that of other countries and with what is paid by other companies, such as mobile operators, which use the frequencies. It is a measure that does not seem to present insurmountable problems and, moreover, it would be a structural measure whose benefit will be positive for the state coffers even in the long term;
3- Theinserting a clause which, in the event of the sale of frequencies after the prohibition period (5 years, also set in the current tender regulations), provides that a significant percentage of the extra value realized is returned to the State;
The sum of these three criteria is certainly safer and, perhaps, capable of obtaining greater economic results than an auction could achieve with the current market structure.
THElast look it is undoubtedly the most critical, although it has not yet found adequate space in the debate of these days. The introduction of mechanisms that lead to the release of spectrum by Ministries does not seem to be postponed anymore: the absence of an industrial plan for the management of frequencies, in the years assigned for example to the Ministry of Defense and the Ministry of the Interior, prevents the valorisation of such a precious and scarce asset as frequencies. The Ministry of Defense's failure to release part of the frequencies – unused or underused, in an inefficient manner – has always conditioned operators active on the mobile radio market and, in fact, in the last LTE tender it reduced the possibility of participating of other operators.
The introduction of mechanisms of Administrative Incentive Prices (AIP), already used in Great Britain, which consist, in summary, in setting incentive prices that take into account the underlying opportunity cost for the use of unassigned frequencies through auctions (i.e. setting them at values very close to the market value), could lead to a 'further enhancement of the spectrum currently in public hands, with a consequent greater return for our country's coffers.
