Spectrum allocation and its relevance for competition

Spectrum is one of the most important production factors for mobile telecommunications operators. Spectrum policy is paramount as spectrum is a scarce resource allocated by regulatory authorities. Hence, when allocating spectrum and determining the potential use of spectrum, the regulatory authorities have a significant influence on the competitive situation in mobile markets.Mobile telecommunications services, especially the growing mobile broadband and mobile data business, use different spectrum bands (typically 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2600 MHz). The propagation characteristics of the different bands vary; this has an impact not only on costs for network rollout but also on the relative value of the spectrum, which is expressed in the prices achieved in allocation proceedings such as auctions.In this paper, the impact of spectrum allocation on the network cost is analyzed. The access network costs are considered based on different spectrum allocations and technologies and compared to the acquisition costs of spectrum. Based on economic modeling and previous research, it is possible to demonstrate that the economic differences between spectrum below 1 GHz and above 1 GHz are considerable. As long as these differences are reflected in the prices, no outcomes on competition exist. As spectrum though is allocated and administered by regulatory authorities, this is not on always the case, which might lead to distorted competition. Hence, the finding of the study is that the propagation characteristics of the spectrum is a factor to be considered when allocating spectrum due to its effect on network costs and hence, eventually competition problems due to asymmetric allocation.

► The impact of spectrum allocation on the competition situation is analysed.
► Compared are the spectrum and network costs for different spectrum allocation.
► The differences between spectrum below 1 GHz and above 1 GHz are considerable.
► Authorities allocating spectrum might influence the competition situation.