The Impact of Spectrum Management Policy on the Penetration - PowerPoint Presentation

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The Impact of Spectrum Management Policy on the Penetration of 3G Technology Moinul I Zaber, Marvin Sirbu{miz, sirbu}@cmu.eduDepartment of Engineering and Public PolicyCarnegie Mellon University, Pittsburgh, PA, USAThe 6th Communications Policy Research south (CPRsouth6)December 9-10, 2011

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OverviewRegulators take policy decisions on whether they should beMandating a single mobile technologyMandating a specific band of spectrum for specific technologyAuctioning the spectrum as an award processDo these policies affect generation take up of mobile telephony? We try to answer this question in light of 3G take up across the worldSlide3

Mandating a single technology standardProEconomies of scale in equipmentAvoid excess inertia while consumers wait to see which technology will dominate ( HD-DVD vs Blu-ray)Global roamingConAvoid premature adoption of inferior technologyBy adopting GSM, EU missed benefits of cdmaOneTechnological competition can lead to lower prices, faster innovationFig 1. 3G per 100 pop world wide (Single standard vs Multiple standard)Slide4

Mandating specific spectrum bandProEconomies of scale in equipmentGlobal roamingConForces the operators to go through the spectrum award process to introduce new technology even though they might be capable of reusing their existing spectrum Fig 2. Average 3G per 100 pop world wide (Bandmandate vs non bandmandate)Slide5

Spectrum Award ProcessAuction, Hearing or Re farming?Regulators favor Auction Speed (comparative hearings or lotteries might take months or years!)Transparency Money for the treasuryMarket Players (mostly incumbents) do not like itHigh spectrum cost reduces capital available for plant investmentNew entrants lead to higher auction price Fig 3. Average 3G per 100 pop world wide (Auction vs

non auction)Slide6

Methodology Logistic model of technology diffusion to ascertain the effects of spectrum management policies on 3G adoptionRegression analysis on a cross-national panel dataset compiled from various data sources The dependent variable for the regression model was the logarithm of the ratio of 3G adopters and the potential adopters To ascertain the effect of the policy variables country income and mobile industry variables such as 2G penetration, Internet adoption, and various other variables were controlled The model estimates 71% of the variation on 3G penetration Slide7

Data and VariablesThe dataset is composed of variables fromNational income and mobile industry (from ITU2010 database ) Award process ( from DotEcon2010 database )Different technology standards and band (from CDG and GSMA websites) The dataset has information for 127 countries where wireless broadband has been rolled out [2001-2009]Though some high-income countries started to roll out 3G from 2001, most of the countries rolled out 3G from late 2004. On average the dataset has four years of data regarding 3G user-base Slide8

Result of the econometric AnalysisPresence of multiple standards delays countries from reaching the peak adoption rateSlide9

Result of the econometric AnalysisLimiting 3G to a single frequency band promotes faster roll out, but in the long run can slow down the growth Slide10

Result of the econometric AnalysisUsing auctions rather than other methods to allocate spectrum helps countries to reach peak adoption rate fasterCountries which conducted 3G auction were the first to reach the inflection point Slide11

Result of the econometric Analysis Other interesting resultsHigh GDP per capita is associated with earlier attainment of the 50% adoption rateHigher the number of Internet users per capita, the earlier 3G diffusion reaches the peak adoption rate, though this effect declines at higher levels of Internet penetration The late comers are catching up !Slide12

ConclusionMultiple standards is associated with delayed attainment of peak adoption rateMandating band might promote faster roll out but can slow the growth of 3G diffusion in the long runCountries using spectrum auctions reached peak adoption rate sooner Slide13

12Questions ?Slide14

13Thank YouSlide15

ReferenceHarald Gruber and Frank Verboven, "The evolution of markets under entry and standards regulation- the case of global mobile telecommunications," International journal of industrial organization, vol. 19, pp. 1189-1212, 2001.Sangwon Lee, Sylvia Chan-Olmsted, and Heejung Kim, "The Deployment of Third-Generation Mobile Services: A Multinational Analysis of Contributing Factors," in annual meeting of the Association for Education in Journalism and Mass Communication, The Renaissance, Washington, DC Online, July 2009.ITU2010. (2010, Dec.) http://www.itu.int/ITU-D/ict/publications/world/ world.html. DotEcon2010. (2010, Dec.) http://www.dotecon.com/. GSMA, GSM World. (2010, Dec.) http://www.mobileworldlive.com/maps/ CDG, CDMA development group. (2010, Dec.) http://www.cdg.org/worldwide/index.aspSlide16

Overview of the technology generations2G ( predominantly voice based, with limited data capability) has two prevalent technologies- cdmaOne and GSM3G (with higher data capability ) also has two prevalent technologies – cdma2000 and WCDMA Figure 2. 2G and 3G technology generations

cdmaOne

cdma

2000

GSM

WCDMA

TD-CDMA

TD-SCDMA

2G Generation

3G Generation

China only

Can coexist in same channel

Natural upgrade

Can not coexist

Needs new spectrumSlide17

Previous researchResearchers have shown competition leads to faster 2G diffusionHarald Gruber and Frank Verboven, [2001]3G adoption positively associated with GDP per capita and “Multiple Standards”Lee, S., Chan-Olmsted, S.M., Kim, H., [2009]None of these studies examine the effect of specific spectrum management on 3G adoption Slide18

Brief history of Standardization in mobile telephony1G No de jure technology mandate in Europe, but US mandatedIncompatibility among the technologiesNo leading technology, low growth rate2GEU mandated GSM, US remained technology neutralEurope mandated 900 Mhz and 1800 MHz for GSM GSM became global leader, high growth rate3GITU recommended a set of technologiesGSM operators opted for WCDMA, CDMA operators opted for CDMA 2000Regulations in EU prohibited GSM bands to be used for 3G or any other service ( revised in 2008) Slide19

Spectrum Award ProcessHow much does it cost to acquire spectrum for 3G? 59 countries conducted auctions between 1995- 2010Focus on 2000- 2001Auction : 10 countries conducted auction in 2000-2001Average amount paid for spectrum $164 with standard deviation of $225 (Per MHz per population in license coverage area)Hearing : 5 countries conducted hearings in 2000-2001Average amount paid for spectrum (2000-2001) $35 with standard deviation of $22 (Per MHz per population)RefarmingNo new spectrum neededDoes high cost of auctions hinder adoption?