3G Spectrum Research Articles

The determinants of price in 3G spectrum auctions

ABSTRACTThis article examined the empirical relationship between prices paid for national 3G wireless licenses when spectrums were sold by auction. The reduced-form modelling approach was based on the premise that auction design features can, and do, affect both final (revenue) and intermediate (viz., auction competitiveness and license assignment) auction outcomes. Importantly, the analysis recognizes, and explicitly allows for, the endogeneity of bidder entry and sample selection arising from an absence of bidding. Generally, these key features have only received attention in isolation. In particular, the study addressed the principal question of: which regulator chosen auction design variables determine prices paid in spectrum auctions? The analysis showed that flexible-package formats increased prices paid, and that higher reserve prices had a dampening effect. The article also showed that longer license terms and more competitive auctions (as measured by the bidders-to-licenses ratio) enhance prices paid.

Factors Influencing 3G Internet Usage Satisfaction of Youth in Dhaka Metropolitan area

3G is the third generation mobile network which provides customer video call and better data speed than EDGE (second generation internet service). It was first launched in Japan in 2001. In Bangladesh, Teletalk- the government owned mobile operator- was the first operator to launch 3G as pilot run in October 2012. In September 2013, the auction of the 3G spectrum for commercial usage of four major private mobile operators – Grameenphone, Banglalink, Robi and Airtel held and the four operators paid $525million to the Bangladesh Telecommunication Regulatory Commission (BTRC) to secure licenses. Grameenphone and Teletalk bought 10 Mhz, while Banglalink, Robi and Airtel each bought 5Mhz. In late 2013, Grameenphone, Banglalink, Robi and Airtel launched 3G commercially. As of September 2014, most of the major districts and metro areas are under the coverage of 3G.

Spectrum auction designs and revenue variations

This study examines a sample of 93 national 3G spectrum auctions for the period 2000–2011 to identify the sources of substantial revenue variations. An implied reduced-form econometric model that recognises the censored nature of the sample relates per capita winning bid (per Mhz, per million populations) values to regulator-determined auction design characteristics, auction competitiveness, mobile wireless market conditions and spectrum package attributes identified from tender documents. The analysis reveals that among other factors, all auction design characteristics independently impact on realized 3G spectrum auction revenues.

Competition and Innovation in Telecom Sector: Empirical Evidence from OECD Countries

The paper aims to analyze effect of competition and innovation in OECD next-generation mobile phones (as a proxy for telecom sector) by examining factors affecting diffusion pattern. A rigorous econometric model is estimated using mobile telecommunications panel dataset comprised with 19 OECD countries where at least 80% data are covered. The econometric model categorizes variables as: (1) GDP per capita income and mobile user cost, (2) competition policies (3) telecom infrastructure (4) technological innovations (5) others such as role of MVNO (mobile virtual network operators), multiple standards for 3G as for appropriateness of outcome. The study represents country specific influence in terms of mobile contents and technological innovations. A new and important empirical finding is that there are still many opportunities available for mobile network operators (MNO) in this region by providing better telecom infrastructure to support technological innovations and to upheaval decreasing trend of average revenue per user (ARPU). Besides, most important factors are identified as high speeds and necessary time require for porting mobile number.Keywords: Next-Generation Mobiles; Technological Innovations; Competition Policy, Panel Data Analysis; Standardization(ProQuest: ... denotes formulae omitted.)1 IntroductionAfter digital mobiles, third generation (3G) technology around world have come across to a new platform of debate among regulators and policy makers. With an opti-mistic view, developed countries around world have taken first initiative to allo-cate 3G spectrum for proper deployment and to meet criteria of IMT-2000 as standard-ized by International Telecommunication Union (ITU). Although digital mobiles have ensured faster growth and reached toward saturation within a decade or less, but a dif-ferent phenomenon is observed for 3G tech-nologies accept Japan and Korea. Still, sev-eral important issues are unobserved and dif-ficult to determine what factors have signifi-cant effect on next-generation mobiles.As Dippon [1] mentioned, yet, why is case that only two countries, Japan and Ko-rea, have more 3G than 2G subscribers? Sim-ilarly, why do leading nations, like U.S., U.K., and Germany, have 3G penetration rates of less than 30%? The statements are in some extent difficult to answer, while (2007) [2] mentioned the Japanese and later other service providers solved first startup problem for mobile Internet (mobile Internet uses proxy for 3G) with entertain-ment content that was supported by a micro-payment system (service providers collect and pass on content fees to content providers) and customized handset that enabled to dis-play this content in a consistent manner, while Western service providers were slow to introduce micro-payment systems and enter-tainment content due to their initial focus on business users. Although statement of Funk is backward but it provides two inter-esting points for mobile Internet deployment such as: entertainment content and micro-payment systems. Abu [3] empirically ana-lyzes 3G deployments in Japan and identified technological innovations such as electronic payment; high-speed access and entertain-ment services are important factors for success of 3G technology. Policy issues, for example mobile number portability (MNP), pay little attention for 3G deployment. Also, 3G penetration is not only question of quantity but also quality. Recent study on broadband gap by Vicente and Gil-deBernabe [4] mentioned, good is it? How And, how fast is fast? and identi-fied that Japan is found to be only coun-try of 42 countries studied currently pre-pared to deliver quality required for next-generation web applications over next 3 to 5 years in order to meet Broadband Quali-ty Score-an index that combines three key performance parameters for quality of a connection (upload and download speeds, and latency). …

Analysis of spectrum auctions in India—An application of the opportunity cost approach to explain large variations in spectrum prices

The remarkable growth of mobile communication has reinforced the significance of the radio spectrum for mobile network operators. The availability of spectrum varies considerably between different countries due to national regulatory decisions. The focus in this paper is on India where operators have access to a limited amount of spectrum. This paper analyses the value of spectrum by estimating the opportunity cost, which is calculated by the savings that can be achieved by acquiring appropriate amount of spectrum rather than investing in additional base stations. The applied approach combines network deployment, user demand levels, cost, and capacity issues, which are integrated in the application in the opportunity cost approach for spectrum. The opportunity cost of spectrum is compared with prices paid at spectrum auctions. The analysis includes a discussion of drivers that determine the willingness to pay for spectrum. The results show that the opportunity cost of spectrum in relation to auction prices is lower than prices operators paid for 3G spectrum in the metro circles (service areas) while the value derived from the opportunity cost is higher than auction prices in the remaining circles.

The value of 1800 MHz and 2100 MHz spectrums in India and implications for auction design

The sequence of events leading up to the upcoming auction of 1800MHz spectrum in India has led to the auctions acquiring an extraordinary significance for the future of the Indian mobile industry. A key feature of the auction design proposed by the regulator TRAI is the benchmarking of the reserve price of 1800MHz to the price of 2100 – 3G spectrum revealed in the 2010 auction. In the context of the low number of LTE devices available and the fragmentation in the 1800MHz band, this paper proposes reducing the duration of spectrum holding to ten years (from the current level of twenty years), and calibrating the reserve price of 1800MHz with its value with GSM deployment. An economic model is used to compute the value of startup and incremental 1800MHz spectrum. The estimated values are shown to differ from the value of 2100MHz spectrum at a pan-India level and also in their distribution across circles. A new set of reserve prices are computed based on the estimation. The estimated values are also shown to be close to the AGR-adjusted price revealed in the 2001 auction. A reserve price based on the 2001 auction is also provided. Concomitant features of the auction are suggested to give coherence to the auction design.

Policy Framework for Spectrum Management in Emerging Economies: Lessons from Mobile Broadband Spectrum Allocations in India and the Philippines

Given the sparse wire line/cable infrastructure in most emerging economies, mobile broadband is likely to become the mode of broadband access for most people in these countries, especially given the near ubiquity of mobile networks. Spectrum allocations for 2G mobile services in many emerging economies happened in the context of weak policy and regulatory institutional infrastructure, using allocation mechanisms that were often not transparent. However, since then, spectrum have gained greater acceptance as an instrument for allocation. Several countries have also adopted more market oriented mechanisms such as refarming (India, Philippines, Sri Lanka) and some have introduced trading (Gautemala). Despite adopting newer methods of spectrum management, deployment of mobile broadband is constrained as many emerging economies have to contend with the legacy issues of 2G allocations, as several bands for mobile broadband are those used for 2G as well (900 and 1800, 1900 MHz). Some of these issues relate to licenses being technology and service specific, no specific policy for refarmimg or inadequate incentives for incumbents to move to newer/other spectrum bands. On the other hand, developed countries such as USA and UK are able to design and implement new instruments such as incentive auctions and spectrum trading respectively, not only facilitating market mechanisms to prevail, but also showing agility and ability to adopt new ideas in the regulatory and policy bodies. Such aspects are often lacking in an emerging economy context. This paper examines the context of spectrum allocation for mobile broadband in India and Philippines. Besides established regulatory institutions - Telecom Regulatory Authority of India (TRAI) and the National Telecommunications Commission (NTC) respectively, the courts and the media have had a role to play in this allocation. Both countries also are dealing with the legacy allocations. For example, in India, the Supreme Court had cancelled 122 2G licenses and directed TRAI to auction the spectrum so released. But TRAI withheld some spectrum, citing future requirements of refarming for mobile broadband. The Supreme Court reiterated that all spectrum related to cancelled licenses had to be auctioned. Similarly, in Philippines, there were cases in the court relating to allocation of 3G spectrum and reallocation of spectrum from broadcasting to BWA services by NTC. This paper adopts the case based approach advocated by Eisenhardt (1989) and Yin (2003) to generalize from the selected mobile broadband allocation context in India and Philippines to delineate the role of the regulatory and policy making agencies, judiciary and other institutions in spectrum management. We used primary and secondary sources of data for developing the cases. Primary sources of data include interviews with key decision makers in TRAI and the operators. These were supplemented by secondary data such as court judgments, media reports and journal articles. Based on this, we develop a framework for spectrum management both in terms of the institutional structure and market mechanisms that would enable developing countries to manage spectrum and develop more market based and innovative strategies. In relation to the increasing gap in broadband deployment and adoption between emerging economies and developed countries, it is important to review the policy and regulatory frameworks in emerging economies that could accelerate broadband growth. This paper contributes by contextualizing institutional roles and instruments in emerging economies in spectrum management, and in addition, by doing a comparative study, we believe this study makes a unique contribution, especially as there a few studies based in emerging economies.

Regulator flexibility and the administrative allocation licensing of 3G spectrum

Globally, most nations assign radio spectrum to provide 3G mobile services during the period 1999–2007. While there is consensus among most economists that auctions are the preferred assignment mechanism, the assignment mode is split, more or less, equally (in terms of the number of licences issued) between administrative allocations and auctions. With auction procedures tending to raise more revenue for governments (Cartelier, 2003) the question that naturally arises is: why are administrative allocations so popular a method to assign spectrum? McMillan (1995) conjectures that administrative allocations provide additional ‘flexibility’. Accordingly, this study examines the performance of 3G assignments in terms of an econometric analysis of a unique sample of national 3G spectrum administrative allocations. These outcomes are modelled as depending on spectrum package attributes, and post-award network deployment requirements.

3G spectrum auction aftermarket network deployment

This study empirically examines national 3G spectrum assignments for the years 2000–2007 to identify the sources and inhibitors of aftermarket network deployment. The analysis reveals that variables controlled by regulators have conflicting impacts on the deployment probability. In particular, placing more than one licence bid and stringent minimum prices enhance deployment. Conversely, encouraging entry and mandating infrastructure sharing discourage deployment. These findings should inform regulators' calculus in designing future 4G spectrum auctions.

Fear of losing in a clock auction

We examine bidding behavior in a clock auction in which price is set by the lowest-accepted bid and provisional winners are reported each round (the LABpw auction). This format was used in the India 3G spectrum auction. In the standard theory, the auction performs poorly. In particular it yields lower revenues and is less efficient than the more standard clock auction with exit bids and highest-rejected-bid pricing (the HRB auction). However, the LABpw auction performs well in the lab, achieving higher revenues than the HRB auction. We show how fear of losing provides one motivation for the overbidding that causes higher revenues in the LABpw auction.

Entry into 3G mobile telecommunications markets

National regulatory authorities (NRAs) attempt to encourage participation in spectrum assignments by enhancing entrants’ likelihood of success. The question this study addresses is: can NRA policy tools really affect the probability an entrant wins a 3G spectrum licence? In particular, the econometric analysis allows consideration of whether licence concession or mode of assignment encourages entry. The study finds that auction assignment processes only slightly increase the probability of entry, whilst price and quantity concessions have no impact.

Is Faster Necessarily Better? 3G Take-Up Rates and the Implications for Next Generation Services

Most countries have allocated 3G spectrum and are in the process of allocating advanced wireless services and 4G spectrum, both of which promise subscribers significantly faster broadband speeds. Operators anticipate that subscribers will adopt these services swiftly thereby justifying the large investments. Yet, why is it the case that only two countries in the world have more 3G than 2G subscribers? This study examines the drivers behind 3G diffusion using linear probability models and qualitative choice (logit) analysis. Time series diffusion models show that diffusion patterns follow an s-curve pattern, favoring the Gompertz curve.

Spectrum Auction and Investment in Telecom Industry: A Suggested Policy

Recently, Indian telecommunication industry has passed through an auction process of 3G spectrum, which has enabled the government to collect hefty license fees. The successful bidders are expected to borrow this bid amount from the commercial banks and repay from the revenue to be generated from the new services. This paper looks at this issue theoretically. The telecommunication firms operate on the basis of acquisition of airwave space, which is licensed by the government. The usual policy practice is to distribute the available spectrum by an ascending auction. As per the economic theory, auction has two merits. Firstly, auction ensures that spectrum goes to the most efficient firm, which is by definition the firm that makes the maximum profit among all. This firm by virtue of their maximum profit bids the highest amount in the auction and gets the spectrum. Secondly, spectrum auction ensures revenue maximization of the government. This result of efficiency optimization however holds under the assumption of perfect information and no uncertainty. Uncertainty and irrationality like over-optimism can lead to problems like ‘winners‘ curse' or ‘broke winners’ under auction. Still auction is market-based and less controversial than discretionary distribution. However, this paper argues that high amount of auction bid can result in several deficiencies in the telecom industry. An issue of debate is whether high auction bid will result in higher price for the services. Under the assumption of infinite time horizon, high license fee is a sunk cost and therefore does not raise price. But this paper shows that a high license fee can raise the lending bank�s interest charge for which not only price rises but the infrastructural investment in the telecom industry suffers. After the acquisition of spectrum through auction the industry needs infrastructural investments to roll out the quality services. Inadequate investment in infrastructural activities like procurement of quality equipments, erection of tower, etc., may result in lower quantum of services with degraded qualities. This is in fact a reality in India where not only rural telecom infrastructure is vastly inadequate, the urban telecom infrastructure is also under severe stress. In this paper, using the tool of game theory we show how capacity and quantity choice game of firms ends up in high auction bid and sub-optimal investment on infrastructure. Then how can the social planners simultaneously achieve the twin objective of growth and revenue maximization? The paper shows that these objectives are realized if a part of the license fee is spent for the subsidization of infrastructural investment in the telecom industry.

Mobile Infrastructure Sharing - An Indian Scenario

The paper focuses on the emerging trend on the Infrastructure Sharing Business of the Telecom Industry in the India Domain. Initially, all the telecom towers were maintained by the operators themselves, but now the trend is changing and the independent companies are coming up with the sole business of lending infrastructure and support to the telecom operators. This trend has changed the pattern of Initial Capital expenditure as well as the Operating expenditure of the operators. The paper also describes the auction policy of the Government of India for the 3G and BWA spectrum. The operators operating at the various circles along with various frequency bands are also taken care of. The actions of the regulatory bodies like the Telecom Regulatory Authority of India(TRAI) and the Department of Telecommunication has been controlling the regulatory issues and the way in which Indian Telecom will move in the future is much dependent on these apex bodies. Moreover, the synchronization of Indian regulatory issues with that of the International one is a must for the future. The study tries to find out the need of tower sharing in India along with the effort to find the future tower demands. The distinct functionalities of the Independent and the Operator owned tower companies will be vital for India's Telecom growth and their requirements are looked into. Finally, focus has also been given towards the various advantages and disadvantages of the infrastructure sharing pattern evolving in India and the future course of action in that domain.

Mobile Infrastructure Sharing - An Indian Scenario

The paper focuses on the emerging trend on the Infrastructure Sharing Business of the Telecom Industry in the India Domain. Initially, all the telecom towers were maintained by the operators themselves, but now the trend is changing and the independent companies are coming up with the sole business of lending infrastructure and support to the telecom operators. This trend has changed the pattern of Initial Capital expenditure as well as the Operating expenditure of the operators. The paper also describes the auction policy of the Government of India for the 3G and BWA spectrum. The operators operating at the various circles along with various frequency bands are also taken care of. The actions of the regulatory bodies like the Telecom Regulatory Authority of India(TRAI) and the Department of Telecommunication has been controlling the regulatory issues and the way in which Indian Telecom will move in the future is much dependent on these apex bodies. Moreover, the synchronization of Indian regulatory issues with that of the International one is a must for the future. The study tries to find out the need of tower sharing in India along with the effort to find the future tower demands. The distinct functionalities of the Independent and the Operator owned tower companies will be vital for India's Telecom growth and their requirements are looked into. Finally, focus has also been given towards the various advantages and disadvantages of the infrastructure sharing pattern evolving in India and the future course of action in that domain.

3G Spectrum Auctions in India: A Critical Appraisal

The spate of controversy and the flurry of charges surrounding the allocation of spectrum for the second generation (2G) mobile telephony services on a First Come First Served (FCFS) basis stands out in stark contrast to the near universal acclaim for the allocation of spectrum for the Third Generation (3G) and Broadband Wireless Access (BWA) services by an open and a transparent auction process. Prima facie, the obvious inference is that auction should be a preferred route to allocate scarce resources such as spectrum. However, such an unqualified conclusion warrants an important caveat: that this is conditional upon getting the auction design right. There have been several instances of ill-designed auctions that had unintended consequences of allocating resources at throwaway prices or having fetched such high revenues as to impede the roll-out of services, besides endangering the financial health of the entire sector. Thus the strategic choices made in the auction design have an important bearing on the ends that one seeks to achieve vide the auctions viz. revenue realization, efficient allocation, a more competitive post auction market structure resulting in lower cost of access for the consumers.In this paper, we analyze the design employed in the auctions for spectrum to roll out Third Generation mobile services (3G) & Broadband Wireless Access services (BWA) in India and its success or otherwise on the above mentioned parameters. We find that while the auction has been successful in mobilizing revenue for the government, has created little adverse impact for the consumers by maintaining the level of competitiveness in the mobile services market but the gains seem to have been partially offset by compromising the efficiency parameter. It is argued that, in making the Lowest Accepted Bid as a preferred pricing rule, the Government accorded primacy to the revenue realization motive over maximization of allocational efficiencies although the reverse has been stated as policy objective in going for the auction. A few alternative design elements have been suggested that would have served the stated objective of enhancing allocational efficiencies better

Does spectrum auctioning harm consumers? Lessons from 3G licensing

Although the auctioning spectrum is generally considered to be highly successful, many countries still rely on beauty contests to assign spectrums. This is often attributed to the negative perceptions about the potential problems that auctions may cause, such as high licensing fees, high consumer prices, a lower incentive to invest in infrastructure, and concerns about market concentration. To address these negative perceptions, this paper estimates the effects of the auctions and the licensing fees for the 3G spectrum on consumer prices, the timing of a new service launch, and the market structure using data from the mobile markets of 21 OECD countries. Although our study uses a relatively small sample and a simple methodology, the results are meaningful since it examines a single service (3G) in OECD countries. Some of these countries have adopted auctions while others have used the traditional beauty contest approach. This combination provides a natural experiment to evaluate the impact of auctions on the mobile telecommunications market. The estimation results show no evidence to support claims of negative effects of spectrum auctions in the mobile communications market. This study calls for more positive action toward spectrum auctions in many countries who seek to improve the efficiency and transparency of spectrum assignment.

Indian Rbi Credit Policy - an Attempt of 'Austerity' to Get 'Prosperity' - July, 2010

RBI has increased Repo rate by 25 bps and Reverse Repo by 50 bps. And, they have kept CRR unchanged. This is a commendable policy decision, to strike a balance between the inflation and growth. With no doubt, the “inflation containment” is on top of their mind while taking this decision. Surely, RBI would have liked to hike CRR as well. However, the recent 3G and BWA spectrum auctions have helped to suck-out about Rs 1,06,000 Crores from the system. This has naturally given breathing space to RBI to postpone the decision on hiking CRR. Technically speaking, the 3G and BWA auctions have acted like a “proxy CRR hike”. Further, the RBI actions are clearly suggesting the seriousness with which they are trying to handle the inflation. The “liquidity stimulus” is more like a high-calorie food. The high-calorie food will have a natura side-effect of “extra body weight”, which is more like “inflation”. To contain the “extra body weight”, one needs to concentrate on diet and gym. Hiking the interest rates are such measures. In that context, RBI is working out well.

3G Spectrum Auctions in India: Have We Learnt the Right Lessons?

India’s telecom sector can justifiably be classified as a success story judged by standards of rapid but inclusive growth and industry competitiveness. The Indian government has recently announced an auction to award licenses for the spectrum enabling rollout of the 3G and Broadband Wireless Access [BWA] in 20 of the 22 telecom circles of India. The use of auctions to enhance allocative efficiency of a scarce resource such as telecom spectrum is indisputable. However, the desired efficiencies shall not be realized unless the auction design and spectrum management policies are both optimal. This paper critically examines whether the design of the proposed auction for the 3G/BWA spectrum shall prove adequate in meeting the stated policy goals of the Government of India.We conclude that while there are many commendable features in the design opted, but also that there is considerable room for improvement in the design of the auction rules if the stated policy ends of allocative efficiency, post-auction market competitiveness and maximization of auction revenue are to be met.

Pricing Rule in a Clock Auction

We analyze a discrete clock auction with lowest-accepted-bid (LAB) pricing and provisional winners, as adopted by India for its 3G spectrum auction. In a perfect Bayesian equilibrium, the provisional winner shades her bid, whereas provisional losers do not. Such differential shading leads to inefficiency. An auction with highest-rejected-bid (HRB) pricing and exit bids is strategically simple, has no bid shading, and is fully efficient. In addition, it has higher revenues than the LAB auction, assuming profit-maximizing bidders. The bid shading in the LAB auction exposes a bidder to the possibility of losing the auction at a price below the bidder's value. Thus, a fear of losing at profitable prices may cause bidders in the LAB auction to bid more aggressively than predicted, assuming profit-maximizing bidders. We extend the model by adding an anticipated loser's regret to the payoff function. Revenue from the LAB auction yields higher expected revenue than the HRB auction when bidders' fear of losing at profitable prices is sufficiently strong. This would provide one explanation why India, with an expressed objective of revenue maximization, adopted the LAB auction for its upcoming 3G spectrum auction, rather than the seemingly superior HRB auction.