UMTS in France and Europe: How to allocate the licenses?

The awarding of UMTS mobile licenses in France gave rise to a passionate debate as well as to a rather fluctuating history. A beauty contest with a predetermined price was preferred to an auction mechanism, as opposed to what was decided in most European countries, in particular United Kingdom and Germany where licences' prices reached very high levels. In France, only two candidates could be selected from a first tendering and a second one is now being organized in order to allocate the two remaining licences, after the Government has drastically lowered the price of all four licenses. The purpose of the present contribution is to show that auctions, although refused in France for the sake of "controlability" of the awarding procedure, are indeed an appropriate means of spectrum allocation for mobile services, provided that the mechanism is carefully designed and adapted to the context, which may differ according to the country. We first summarize the main lessons from the auctions theory and then discuss the compared efficiency of different mechanisms and their resistance to predation or collusion. On this basis, we finally analyse the actual process of UMTS auctions in various European countries and we tentatively propose a backward fictitious scenario for France.