Economic and technological aspects in the design of a regulatory framework for PCS markets in Colombia

Abstract

The cellular telephony markets in Colombia started only as recently as 1994. The success of the market outgrew all forecasts: by the end of 1998 each of more than one million eight hundred thousand users were connected to one of six cellular companies raising the density indicator to 4.75%. The new technological possibilities and the increasing demand for mobile services has obliged the Ministry of Communications to begin a process of setting the regulatory and technological framework for PCS services. This paper presents a brief overview of the cellular markets in Colombia and analyzes the main aspects of the topics concerning the definition of the rules for the PCS markets: technology, geographical structure of the future markets and license assignment procedures. At the same time, based on the huge success of auctions for PCS licensing in other countries, the paper is concerned with assessing the expected revenues that the Colombian government would collect should it decide to use simultaneous ascending auctions. Benefits to consumers will be apparent once the new PCS operators start operating their networks since it is concluded that, given the development of new services provided by the current cellular operators and the similar services to be offered by the new PCS players, which can be considered close substitutes, price will be the distinctive issue regarded by consumers.