1

The Impact of Spectrum Management Policy on the Penetration of 3G

Technology

Moinul I Zaber, Marvin Sirbu{miz, sirbu}@cmu.edu

Department of Engineering and Public PolicyCarnegie Mellon University, Pittsburgh, PA, USA

The 6th Communications Policy Research south (CPRsouth6)

December 9-10, 2011

1

22

Overview

Regulators take policy decisions on whether they should be Mandating a single mobile technology Mandating a specific band of spectrum for specific technology Auctioning the spectrum as an award process

Do these policies affect generation take up of mobile telephony? We try to answer this question in light of 3G take up across the

world

33

Mandating a single technology standard Pro

Economies of scale in equipment Avoid excess inertia while consumers wait to see which technology

will dominate ( HD-DVD vs Blu-ray) Global roaming

Con Avoid premature adoption of inferior technology By adopting GSM, EU missed benefits of cdmaOne Technological competition can lead to lower prices, faster innovation

Fig 1. 3G per 100 pop world wide (Single standard vs Multiple standard)

44

Mandating specific spectrum band Pro

Economies of scale in equipment Global roaming

Con Forces 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)

55

Spectrum Award ProcessAuction, Hearing or Re farming? Regulators favor Auction

Speed (comparative hearings or lotteries might take months or years!) Transparency Money for the treasury

Market Players (mostly incumbents) do not like it High spectrum cost reduces capital available for plant investment New entrants lead to higher auction price

Fig 3. Average 3G per 100 pop world wide (Auction vs non auction)

66

Methodology

Logistic model of technology diffusion to ascertain the effects of spectrum management policies on 3G adoption

Regression 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

77

Data and Variables

The dataset is composed of variables from National 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

88

Result of the econometric Analysis Presence of multiple standards delays countries from reaching

the peak adoption rate

99

Result of the econometric Analysis Limiting 3G to a single frequency band promotes faster roll out,

but in the long run can slow down the growth

1010

Result of the econometric Analysis Using auctions rather than other methods to allocate spectrum

helps countries to reach peak adoption rate faster Countries which conducted 3G auction were the first to reach

the inflection point

1111

Result of the econometric Analysis

Other interesting results High GDP per capita is associated with earlier attainment of the 50%

adoption rate Higher 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 !

1212

Conclusion

Multiple standards is associated with delayed attainment of peak adoption rate

Mandating band might promote faster roll out but can slow the growth of 3G diffusion in the long run

Countries using spectrum auctions reached peak adoption rate sooner

1313

Questions ?

1414

Thank You

1515

Reference

1. Harald 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.

2. 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.

3. ITU2010. (2010, Dec.) http://www.itu.int/ITU-D/ict/publications/world/ world.html.

4. DotEcon2010. (2010, Dec.) http://www.dotecon.com/. 5. GSMA, GSM World. (2010, Dec.) http://www.mobileworldlive.com/maps/ 6. CDG, CDMA development group. (2010, Dec.)

http://www.cdg.org/worldwide/index.asp