Royalties vs. upfront lump-sum fees in data communication environments

Mobile communications markets worldwide, today, are saturated, the number of mobile network operators (MNOs) in market is declining, mobile revenues are stagnant or falling, MNOs are becoming wireless Internet service providers, and economies of scope are strengthening. This paper challenges existing dominant views on spectrum assignment and license fee payments, estimates spectrum fees that MNOs would have paid under royalties and then compares them with upfront lump-sum fees actually paid by 3G licensees. This paper further proposes that governments need to consider assigning additional spectrum to incumbents as needs arise without using auctions and adopting royalties as a way of collecting spectrum fees should they collect them.

► We derive policy implications from recent changes in mobile communications markets. ► We estimate spectrum fees that MNOs would have paid under royalties and then compare them with upfront lump-sum fees actually paid by 3G licensees. ► We evaluate the validity of using auctions and upfront lump-sum fees in changing environments.