KISDI Proposes Four Policy Measures to Strengthen Financial Accountability in Spectrum Auctions (detail)

※ URL(Korean): https://www.kisdi.re.kr/bbs/view.do?key=m2101113055776&bbsSn=114871

KISDI Perspectives (25-12-03): Enhancing Financial Accountability in Spectrum Auctions—International Cases and Policy Implications

▲ Four key issues identified: payment methods, pre-screening, cancellation penalties, and alternative assignment approaches
▲ Comparative analysis of international practices
▲ Review of the canceled 28 GHz auction award highlights the need to prevent speculative bidding
▲ Suggestion to consider safeguards for installment payment obligations
▲ Need to strengthen prequalification criteria for new entrants
▲ Emphasis on balancing financial safeguards with competition promotion

The Korea Information Society Development Institute (KISDI, President Sangkyu Rhee) recently published KISDI Perspectives (25-12-03): Enhancing Financial Accountability in Spectrum Auctions—International Cases and Policy Implications, which presents policy directions for strengthening bidders’ financial compliance capacity in spectrum auctions.

The report analyzes policy responses in major countries to prevent speculative bidding and ensure bidders’ financial capacity, drawing on the case of the canceled award in the 2024 28 GHz auction in Korea, where the winning bidder’s designation was revoked due to insufficient capital.

In particular, the report examines institutional reforms in the context of lowered market entry barriers following the shift from a licensing-based to a registration-based system in 2018. It identifies four core institutional issues—payment methods, pre-screening, cancellation penalties, and alternative assignment—and conducts comparative analysis of international practices.

Under Korea’s current system, the winning bidder pays 25 percent of the allocation fee upfront, with the remainder paid in equal installments over the license period.

Baek So-seong (Associate Fellow, KISDI) noted that installment payment systems are designed to reduce financial burdens in capital-intensive mobile communications markets and support service deployment and network upgrades. However, he observed that bidders may submit offers exceeding their actual repayment capacity based on optimistic expectations. He suggested reviewing safeguards for installment payments, such as guarantees for outstanding fees, drawing on practices in the United States and Hong Kong.

Regarding pre-screening mechanisms, Baek explained that many countries set eligibility criteria at a minimum level to filter out unqualified bidders while preserving efficient market-based allocation. He emphasized that objective quantitative indicators are preferable to qualitative assessments to minimize subjective intervention and enhance predictability. He also suggested that while procedures could be simplified for established operators, stricter requirements may be appropriate for new entrants, referencing examples from India and Singapore. At the same time, he noted that higher entry thresholds for new operators may warrant compensatory measures such as priority allocation of designated bands.

The report concludes that spectrum assignment design involves balancing two competing objectives—ensuring financial compliance and promoting market competition—and recommends comprehensive policy design reflecting market conditions, policy priorities, and institutional trade-offs.

The KISDI Perspectives report is available for download on the KISDI website (www.kisdi.re.kr).

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KISDI Proposes Four Policy Measures to Strengthen Financial Accountability in Spectrum Auctions