ABSTRACT
The debate about 3G spectrum auctions centers around the UK case, which started the European round. In the spring of 2000 the British government auctioned five 3G mobile licenses on 20-year leases. The telecoms business is very far from being a perfectly competitive market. Until it was assumed to be a natural monopoly due to the enormous fixed costs involved in building out a national network, and the consequent increasing returns to scale as more and more customers paid to use such an expensive network at very small marginal cost. The short-run marginal cost to the operator is whatever it immediately costs to supply with that service: perhaps some fraction of the cost of a subsidized handset plus customer service plus fractional operating costs. By sliding down the demand curve from left to right, the operator adjusts the price and therefore the number of units sold.
