It's a problem if it destroys an industry. Or would it be better if the government spent on industry subsides so that the revenue generation action doesn't destroy it?

I don't have any good answer. Auctions work best when the market is predictable, but telecom is about the opposite of predictable. Maybe the government could detach the spectrum from the service somehow and make the spectrum revenue predictable.

I don't see any alternative to an auction that is actually better around here, and don't know of any either.