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Colloquium: An evaluation of different models for the issuance of licenses for service provision and frequencies

The presentation was done by Payal Malik.

The presentation began by Payal explaining that there is a certain level of abstraction in the topic.

It is excepted by most that deleivering telecom connectivity and services helps development.

The challenge now lies in go beyond voice and to see how the BOP can benefit from connectivity.

Insufficient attention to licencing can mean that radio frequencies are unaffordable and unattenable.

The presentation started by looking at the tradeoffs and incentives created by the mechanisms, and the relative merits and de-merits from and economic and social perspective.

Spectrum is a public good. There is alot of vested commercial interets. Commerrcial players need spectrum. Spectrum has been used speculativly. A ggod allocation method should be used so that spectrum is not squandered.

Possible links between Spectrum and BOP:

BOP has low level textual literacy, therefore more bandwidth requirement. More graphical methods ways may have to be made for BOP.

however, spectrum maybe unavailable, underprices.

If under-priced it can be used by commercial players strategically and to fore close on competiton.

This has a negative effect on the BOP.

Regulators and policy makers have to be mindful that the allocation will have an effect on the availability of wireless technology for the BOP.
Role of Regulators:

Augmentation of spectrum; alot of spectrum is used for defence.

Funding of R&D to bring about real time spectrum exchanges.

Real time spectrum exchanges does not give a dedicated chunk to one operator, so no scrambling. Current methid due to antiquated technology.

This will be a private public partnership.

Government may want to spend money on switching from analogue to digital television for the BOP to free up frequencies. It was done in India, after two failed attempts. Set top boxes now mandotory in metros.

Regulatory Instruments:

Market structure: if market entry is restricted, it lead to higher demand.

Competition rules: The more competitive the markets, spectrum will be better priced.

Allocation based on usage levels: Done in India, but leads to mis-reporting and may lead to opertors concentrating on subscribers bringing in more revenue. But as it is sold at assymentric rate so BOP not perversely affected.

Spectrum Trading: Similar to stock market, gives incentive to stop spectrum hoarding

Incentives for Innovatios:

Standards setting:

Goals of spectrum allocation policy:

Transparent and equitable regime

Allocation based on market demand

Create efficiency

Promote innovation to maximise value

Eliminate technical interferance

Spectrum being available for non commercial use

Approaches:

Command and control method: Beauty contests, used now, useful when allocating for non commercial use such as defence but leads to political determination of spectrum sharing rules, deters innovations, Maybe misused by beneficiries for speculative purposes. In india 3G allocation has been postpones twice.

private rights: Coase Theory, difficult to determine market rate so auctions best.

Commons exempt: Technology decideds, shared frequencies but problems is to deal with interferance and leads to tragedy of commons, cost of change over and easiest to implement where newer technology is used, where incumbancy challenges are not present.

Evaluating Approaches: BOP users’ Perspective

Inclusion:

Affordability:

Innovation:

Service Diversity:

Sustainbulity:

Institutional compatibility: most important in terms of political climate in a country. Admin approach works in a countries that have good governance as opposed to weaker governance. Market approches work in competitive markets. 3G licences in India expected to bring in about 400,000 corores.

Auctions:

Market approaches in a developing country maybe better not becaues it is superior but because it may mitigate the risks faced where there is a large BOP.

BOP mistly in rural areas. Auctions may not be necessary if rural areas are considered seperately. If auctions are necessary, then prices maybe low reflecting low demand.

Auctioning can lead to overbidding, information about secondary trading may lead to mitigating this problem. Cave recommends combination of auctions or market approaches.

Government may seek to maximise revenues from auctions when selling the spectrum. The revenue can then lead to covering other fiscal deficits.

Inadequate attention to auction designs may laed to reduced bidders which in turn deprives BOP consumers.

Giving spectrum in chunks to diverse bidders may laed to probelms in quality, ex. broadband.

Thumb rules in making auctions effective:

Auction larger amiunts of spectrum to reduce perceeption of scarcity

Reserce some spectrum bands for auctions to a different category entrants

Allow spectrum trading to reduse over bidding

Mandate spectrum sharing

Have tougher roll out conditions

Include rewards for efficient usage and penalities for wastage or spectrum hoarding

Final Observations:

Market mechanisans should not under estimated but should avoid a doctrinaire approcah.

market mechanisns work best when entry is open and abuse of market is precented.

Auctions suitable when demand exceeds supply

Careful design has to be done in order to protect the BOP

Spectrum for emergency, safety and other public services, administrative approach should be adequate

Ensure maximum flexibility in the future while allowing sufficient comfort to current investors

Exploit maximum potential; speedy move towards spectrum sharing, spectrum trading

Insist on technology neutrality and service neutrality in regulatory decisions to optimal usage

RS: If seperate policies are implemented for rural and Urban based on the assumption that poor people in rural areas, thenUrban poor would be getting the short end of the stick.

PM: Seperate auctions are needed for urban and rural. If thre is no differnce, then the operators will concentrate in areas where they can get more revenue sooner, which would be the urban areas.

RS: Have a look at early US auctions. Licences were given to native communities. Consortioms were formed after that.

PM: 3G in India will be a nationwide bid.
RS: Why do we have to 3G auctions? There is a possibility that 3G maybe run on 900 MHz.

Could this lead to India restricting the frequecies on which 3G can be run on?

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