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Jeremy Bulow, Stanford University
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Jeremy Fox, University of Michigan
Ian Gale, Georgetown University
Jacob Goeree, University of Zurich
Brent Goldfarb, University of Maryland
Shane Greenstein, Harvard University - Technology & Operations Management Unit; National Bureau of Economic Research (NBER)
Robert Hahn, University of Oxford
Robert Hall
Ward Hanson
Barry Harris
Robert Harris, University of California - Berkeley
Janice Hauge, University of North Texas
Jerry Hausman, Massachusetts Institute of Technology
Thomas Hazlett, Clemson University
Kenneth Hendricks, University of Texas at Austin
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Mark Jamison, University of Florida
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Ilan Kremer, Stanford Graduate School of Business
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Charles Plott, California Institute of Technology
Robert Porter, Northwestern University
Philip Reny, University of Chicago
Michael Riordan, Columbia University
David Salant, Columbia University
Scott Savage, University of Colorado at Boulder
William Samuelson, Boston University
Richard Schmalensee, Massachusetts Institute of Technology
Marius Schwartz, Georgetown University
Andrzej Skrzypacz, Stanford University
Vernon Smith
Daniel Vincent, University of Maryland - Baltimore
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Scott Wallsten, Technology Policy Institute
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Gregory Rosston, Stanford University

Document Type


Publication Date

April 2009


The signatories to this document are economists who have studied telecommunications, auctions, and competition policy. While we may disagree about the stimulus package, we believe that it is important to implement mechanisms that make stimulus spending as efficient as possible. To that end, we have come together to encourage the National Telecommunications Information Agency (NTIA) and Rural Utilities Service (RUS) to adopt auction mechanisms to allocate broadband stimulus grants.The broadband stimulus NOI asks which mechanisms NTIA and RUS should use to distribute grants and how those mechanisms address shortcomings in traditional grant and loan programs. In this note we explain why procurement auctions are more efficient and more consistent with the stimulus goals of allocating funds quickly than a traditional grant review process. We recommend that NTIA/RUS use procurement auctions to distribute at least part of the stimulus funds.The American Recovery and Reinvestment Act (ARRA) requires NTIA/RUS to distribute $7.2 billion in broadband subsidies. The broadband component of the Act has dual, and not entirely consistent, objectives of providing immediate economic stimulus and improving broadband service. NTIA/RUS faces a formidable challenge in determining how to spend the money quickly and efficiently in ways that meet these goals. The traditional grant application process is long, complicated, and involves subjective and arbitrary decisions regarding which projects to fund. In other words, requesting and reviewing grant applications is not an effective way to implement the plan.Procurement auctions, in contrast, provide a mechanism that can allocate grant money quickly, efficiently, and according to well-defined rules. As a result, procurement auctions offer NTIA/RUS the most promising method of maximizing broadband improvement while also creating some level of “temporary, timely, and targeted” stimulus. We therefore strongly recommend that NTIA/RUS adopt procurement auctions as its preferred method of distributing grants.This memo has three parts. First, it explains why the traditional grant application process is unsuitable for this task and why procurement auctions are better suited. Second, it sketches out a procurement auction plan. This plan is intended to be a starting point from which auction design experts would proceed to build and implement a fully functional auction. Finally, we explain that even if policymakers are skeptical of procurement auctions, one could be implemented quickly as part of an initial tranche of stimulus funding in order to test its efficacy relative to traditional approaches. This approach would allow NTIA/RUS to quickly expand upon or modify the procurement auction program in subsequent funding rounds.