Download - Structure of the CCA - Rebecca Burdon - ACMA
Structure of the Combinatorial
Clock Auction (CCA)
Rebecca Burdon
Principal Economist, Regulatory Futures, ACMA
Overview
> Purpose
- Step through the structure of the CCA as outlined in the early
exposure draft of the auction procedures (http//engage.acma.gov.au/digitaldividend/feedback-sought-on-draft-auction-procedures/)
> Outline
- Reasons for using a CCA for Digital Dividend allocation
- Overview of the auction process
- Allocation stage structure and rules
- Assignment stage structure and rules
Advantages
> Aim is an efficient allocation – the auction format
should allow bidders to bid effectively for all
combinations of spectrum they are interested in
acquiring
> Multiband auction – complementarities likely, both
across bands and within a band
> CCA
- Bidders can bid for packages of lots - no exposure risk
- Multiple open rounds - aids price discovery
- Pricing rule - simpler to develop bidding strategy
- Generic lots - assigns contiguous lots to winners
Yes
Auctioneer increases price for all products with excess demand
ApplicationClock rounds - series of bidding rounds
Assignment stage – sealed bid round(s)
Determines
amount of
spectrum won
by each bidder
Determines
location in
the band
Excess demand for any
product?
Supplementary round – sealed bid round
Auction ends
Allocation stage
No
Overview: the auction process
Allocation stage: the product
> The spectrum will be grouped into products for sale
> Each product includes a number of generic lots
- in the same frequency range
- of the same bandwidth
- for the same geographic area
- with the same licence conditions and technical framework
> All lots in a given product will have the same opening
prices and eligibility points - perfect substitutes in this
stage of the auction
Allocation stage: illustrative example
of possible product offering
REGIONS CATEGORIES
700 MHZ upper 700 MHz lower 2.5 GHz band
National 8 lots of 2X5 MHz 1 lot of 2X5 MHz
Metro Perth
14 lots of 2x5 MHz
Metro Darwin
14 lots of 2x5 MHz
Metro Adelaide
14 lots of 2x5 MHz
Metro Brisbane
14 lots of 2x5 MHz
Metro Sydney
14 lots of 2x5 MHz
Metro ACT
14 lots of 2x5 MHz
Metro Melb
14 lots of 2x5 MHz
Metro Hobart
14 lots of 2x5 MHz
Regional East Aust
14 lots of 2x5 MHz
Regional West Aust
14 lots of 2x5 MHz
Remote Aust
14 lots of 2x5 MHz
Yes
Auctioneer increases price for all products with excess demand
ApplicationClock rounds - series of bidding rounds
Assignment stage – sealed bid round(s)
Determines
amount of
spectrum won
by each bidder
Determines
location in
the band
Excess demand for any
product?
Supplementary round – sealed bid round
Auction ends
Allocation stage
No
Overview: the auction process
Allocation stage: clock rounds - structure
> Clock rounds are a series of open bidding rounds
> Clock rounds are scheduled at the auction manager’s
discretion
- Each clock round is likely to run for around 30 minutes
- Recesses between clock rounds are likely to run for around 30
minutes
> Auction system will give the anticipated schedule of
rounds and recesses for a given day, and bidders will
be notified of any variation
Allocation stage: clock round - bids
> In each clock round bidders should bid for the quantity
of lots in each product they most want at current
round prices
- Each bidder can make one bid in each clock round
- Each bid is a package bid for all the lots specified in that bid
> A valid bid is a binding commitment to buy the
relevant package for any price up to the amount of the
bid
> A bidder can change its bid within a round – the
binding bid is the last valid bid made by the bidder in
the round
Allocation stage: clock round - constraints on bids
> Bids in clock rounds are subject to constraints
- The quantity bid cannot exceed any relevant spectrum cap
- In the first clock round - the quantity bid must not exceed the
eligibility established in the bidders lot application form
- In all subsequent clock rounds the proposed activity rules
require that the bid:
- must not exceed the bidder’s eligibility based on previous
clock round bids; or
- must be consistent with preferences revealed in previous
clock round bids
Allocation stage: clock rounds - information
> Before the start of each clock round, each bidder will be notified
of:
- the start and end of the round time
- the round prices that will apply to lots in each product
- the aggregate demand for each product in the previous clock round
- the quantity and value of its own bid in the last clock round
- its own eligibility to bid in the next clock round
> During each round each bidder will be notified if a bid is invalid
> Bidders will not be informed of others’ individual bids or others’
eligibility to bid in the next clock round
Allocation stage: clock rounds - end
> In each subsequent clock round the auction manager
- increases prices for all products with excess demand
- does not change prices for all products where demand is no
greater than supply
> The clock rounds end when there is no excess
demand for any product
> Bidding remains open on all products until the clock
rounds end
Yes
Auctioneer increases price for all products with excess demand
ApplicationClock rounds - series of bidding rounds
Assignment stage – sealed bid round(s)
Determines
amount of
spectrum won
by each bidder
Determines
location in
the band
Excess demand for any
product?
Supplementary round – sealed bid round
Auction ends
Allocation stage
No
Overview: the auction process
Allocation stage: supplementary round - structure
> The supplementary round is a single sealed bid round
> Auction manager has discretion over the time and
duration of the supplementary bid round
- There is likely to be at least one full business day between the
end of the clock rounds and the start of the supplementary round
- The supplementary round is likely to take place on a single
business day and last for between four to eight hours
Allocation stage: supplementary round - bids
> In the supplementary round each bidder can submit a number of
bids to:
- increase its bids for the package(s) bid on in the clock rounds and
- bid on other packages
> Each bid in the supplementary round must specify:
- the quantity of lots sought in each product (the package) and
- the amount the bidder is offering for that package
> Each valid supplementary round bid is a binding commitment to
buy the relevant package for any price up to the amount bid
> A bidder can change its supplementary bids during the round –
the set of valid supplementary bids on the auction system at the
end of the round is the binding set of bids
Allocation stage: supplementary round –
constraints on bids
> Bids in the supplementary round are subject to constraints
- A bidder cannot submit a supplementary bid for a package that:
- exceeds any relevant spectrum caps
- exceeds its eligibility in the initial clock round
- The amount of each bid must:
- be at least the sum of the opening (reserve) prices for the lots in
the package
- be at least as much as any bid that bidder made for the same
package in the clock rounds
- satisfy the Revealed-Preference Cap for the relevant package
Allocation stage: supplementary round –
information
> During the supplementary round the auction system
will:
- identify if any bids in a set of supplementary bids are
invalid, and
- notify the bidder of which bids are invalid
Allocation stage: determining winners
and allocation prices
> The winning allocation stage bids are the set of clock and
supplementary round bids that give the highest total
value, subject to:
- the available supply of lots
- only one allocation stage bid being accepted from each bidder
> If there is more than one equal highest value set of bids, tie
breaking rules will be used
> An allocation price is calculated for each winning bid:
- that is at least as much as the sum of the reserve (opening) prices for
each lot in the package, and no more than the amount offered by the
winning bidder for the set of lots won
- using a weighted Vickrey Nearest – Minimum Revenue Core pricing
rule
Allocation stage: end
> When the auction manager has determined the
winning allocation stage bids and each winner’s
allocation stage prices, bidders will be told:
- the number of winning bidders
- the total number of lots in each product allocated
> Each bidder will also be told:
- the number of lots in each product it has won
- the allocation price for the package it has acquired
Yes
Auctioneer increases price for all products with excess demand
ApplicationClock rounds - series of bidding rounds
Assignment stage – sealed bid round(s)
Determines
amount of
spectrum won
by each bidder
Determines
location in
the band
Excess demand for any
product?
Supplementary round – sealed bid round
Auction ends
Allocation stage
No
Overview: the auction process
Assignment stage: structure
> Assignment stage is used to award specific frequencies to the
winners from the allocation stage
- Only winners from the allocation stage can bid in the assignment stage
> The assignment stage may consist of one or more assignment
rounds
> Each assignment round will be a single sealed bid round
> The auction manager has discretion over the time and duration of
the assignment stage. Any given assignment round:
- is likely to take place on a single business day
- is likely to commence no sooner than the day after the end of the
supplementary round
Assignment stage: structure - number
of rounds
> Appropriate number of assignment rounds will depend on the
number of winning bidders for each product and the number of
lots won by each winner. For example:
- it may be appropriate to have separate assignment rounds for each
product
- if bidders each win the same number of lots in every region in a
frequency band it may be appropriate to run an assignment round that
includes all the regions in that frequency band
> Auction manager has the discretion to select the appropriate
number of assignment rounds
Assignment stage: bids
> An assignment round bid should state the additional amount a
bidder is willing to pay to be allocated a specific set of
frequencies, over and above the bidder’s allocation price
- Each bidder can submit a set of bids stating the amount it is willing to
pay for each of the frequency assignment options listed by the auction
manager
- Zero bids are permitted
- If a winning bidder from the allocation stage does not submit an
assignment bid it is deemed to have bid zero
> Each allocation stage winner is guaranteed to be assigned the
number of lots it acquired in the allocation stage
> Each assignment bid is a binding commitment to pay a price up
to the amount bid for the specific frequency assignment option
Assignment stage: constraints on bids
> Each allocation stage winner can bid on any of the
frequency assignment options listed by the auction
manager
> All assignment bids must be a non-negative amount
Assignment stage: information
> At the start of the assignment stage, the auction manager will
inform bidders of the start time and end time for each assignment
round
> Prior to the start of each assignment round, the auction manager
will, for each bidder, list the set of frequency options for the
products being assigned in that round:
- that ensure each allocation stage winner obtains a contiguous
frequency range corresponding to the amount of spectrum acquired in
the allocation stage
- identifying any unallocated lots, and whether the location of unallocated
lots in the band is set by the auction manager or to be determined by
bidding in the assignment round
Assignment stage: determining
winners and assignment prices
> For each assignment round the winning assignment bids are the
highest value set of assignment bids subject to:
- only one bid from each bidder being accepted
- each bidder being awarded a distinct set of frequencies
- any rules regarding the treatment of any unallocated lots being met
> The auction system will calculate the assignment prices for each
winning assignment bid. Assignment prices:
- can be no more than the amount offered by the winning bidder for the
specific frequencies it has been assigned
- are calculated using a weighted Vickrey Nearest – Minimum Revenue
Core pricing rule
Assignment stage: end
> When the auction manager has determined the
winning assignment bids and the assignment stage
(additional) prices all bidders will be told:
- the identity of the winning bidders
- the frequency ranges awarded to each winning bidder
- the allocation stage (base) prices and any assignment
(additional) prices to be paid by each winning bidder
> The licence fee payable by winning bidders will be the
sum of the allocation prices and the assignment
prices
Questions?