The Adverse Economic Effects of Spectrum Set-Asides

In February 2007, Industry Canada released a consultation that outlined a proposed auction design for spectrum Ifor Advanced Wireless Services. As part of its consultation, Industry Canada contemplated a spectrum set-aside in the AWS auction to facilitate the entry of a new wireless service provider in Canada; however, it noted that a potential drawback of a spectrum set-aside is that it can induce uneconomic entry into the market. In this paper, we show that a set-aside for AWS spectrum in Canada is more likely to result in uneconomic entry than in a viable domestic entrant into the Canadian wireless industry. Furthermore, if Industry Canada desires another wireless service provider, there are far more constructive ways than a set-aside to promote viable entry into the Canadian wireless industry