The FCC's first spectrum auction sold all ten licenses at once, in rounds, for $617m

For decades the FCC gave away radio licenses through comparative hearings — beauty contests that drowned in applications — then through lotteries, which allocated prime spectrum randomly and created a speculator secondary market: licenses worth billions changed hands while the Treasury collected nothing. By 1993, deficit politics made free allocation untenable and Congress authorized auctions.

The design problem was complementarity: licenses in adjacent cities are worth more together, so sequential sales create the exposure problem — bidders bid timidly on one license, unsure of winning its complements, or bid big and get stranded. Milgrom and Wilson's simultaneous multiple-round auction opens all licenses at once, raises prices in rounds, and closes nothing until demand stops on every license; an activity rule ties how much a bidder may chase to past activity, killing stalling and sniping.

The first test came in July 1994: the Nationwide Narrowband PCS Auction, ten licenses, five days, 47 bidding rounds, $617 million collected for spectrum the government had previously allocated practically for free. Peter Cramton's account of the auction, 'Money Out of Thin Air,' documents the rules and the full bidding history; the result was read on all sides as a triumph of auction theory applied to a real allocation problem.

The format became the world standard. Finland, India, Canada, Norway, Poland, Spain, the UK, Sweden and Germany adopted it for their own spectrum sales; the FCC's auctions alone brought in more than $120 billion over the format's first twenty years, and globally the mechanism has generated over $200 billion.

Sell every license at once, in ascending rounds

Simultaneity removes the exposure problem: a bidder can price each license as part of the bundle it wants, without betting on winning the complements in a later, separate sale

Ascending rounds reveal rivals' information round by round, which shrinks the winner's curse and lets bidders bid closer to true value

The activity rule makes waiting games unprofitable, so prices move instead of stalling while bidders lurk

It converted a lottery that handed billions to speculators into a sale that handed them to the Treasury

When buyers need bundles, don't sell the pieces one at a time. Sell everything simultaneously with rules that force steady bidding, and the market discovers value the seller could never name.

The SMRA became the default design for spectrum worldwide and spread to electricity, natural gas and other goods sold in bundles. The FCC's auctions raised more than $120 billion in their first two decades. Milgrom and Wilson shared the 2020 Nobel memorial prize in economic sciences for auction theory and formats, with the Nobel committee citing the 1994 FCC adoption as the turning point. Later designs — clock auctions, combinatorial package bidding, the two-sided broadcast incentive auction — are all branches grafted onto the 1994 trunk.