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A Concise Model for Liberalizing Spectrum in the 4G Era
1. A Compensation Model
Developed to Liberalize
Spectrum in the 4G Era
Yuntsai Chou
Department of Information Management
Yuan Ze University
ITS 2014 Biennial
Dec 2, 2014
2. Research question
• Limited competition in mobile
communications (3~4 operators in the mature
market)
• Is it a policy problem?
• Competition (anti-trust) law is ex-post
• Ex-ante behavioral regulation is largely
discouraged due to potential cumbersome
regulation
3. Research assumption
• Spectrum allocation assigns the usage rights
to operators and therefore influences the
market values of spectrum they possess.
• Since 4G, multiband uses and spectrum
heterogeneity are typical
• Spectrum allocation as policy tool to create
a level playing field and to encourage
contestable competition
4. Taiwan’s
Telecommunication Market
The numbers of mobile subscription in Taiwan, unit: thousand
Year. Month 4G 3G 2G WBA PHS
2014.10 2,000 24,672 2,625 99 n/a
2013.12 n/a 24,772 4,205 122 n/a
Source: NCC website
5. Taiwan’s
Telecommunication Market
The numbers of mobile subscription in Taiwan, unit: thousand
Year.mont
h
CHT TMT FET VIBO APT WBA
Source: NCC website
operato
rs in
total
2014.10 10,421 7,106 6,998 1,500 1,874 99
2013.12 10,269 7,012 6,864 1,670 2,860 122
6. Spectrum licensing in
Taiwan
-Beauty contest
-
Restricted technology
Restricted service
- Auction
-2.5~2.69GHz
- technology neutrality
- Service neutrality
Digital low-power wireless
Licenses WBA Licenses
2G Licenses
3G Licenses
2G licenses
granted
tender period
tperiod
PHS licenses expire
- Auction
-5 licenses for all area
-800、2100MHz
- restricted technology
- service neutrality
3G licenses expire
-Beauty contest
-900、1800MHz
-restricted technology
- restricted service
,
1900 Mhz
- PHS system
--
2G tender period
expire
1997 1999 2002 2008 2012 2014 2016 2017 2018
2013
4G licenses
auction
- Auction
- 700、900、1800MHz
- technology neutrality
- Service neutrality
- Secondary trading
7. Taiwan’s mobile
licensing License 2G 3G WBA 4G
Band 900/1800
MHz
2100/230
0 MHz
2500~2690 MHz 700/ 900/ 1800
MHz
Year
licensed
1997 2002 2007 2013
Allocation
method
Beauty
contest
Auction Auction
Auction
License fee 2 % of
operating
revenues
Bidding
price
percentages of
operating
revenues
Bidding price
Usage
flexibility
Not
permitted
Service
neutrality
Technology &
service neutrality
Technology &
service
neutrality
Secondary
trading
No No No Yes
8. Conjoint analysis
• It estimates the relative value individuals
place on attributes of a choice;
• It converts qualitative information into
quantitative form
9. Conjoint analysis
• Conducting a survey of pairwise comparison
among stimuli;
• calculating the utility scores and ranking of
each stimulti by regression results.
• respondents: five Wimax operators, two 3G
only operators and three 2G/3G operators, a
total of eight operators in market.
• Execution: May 2013
10. spectrum policy attributes
10
• 1. tender period:
– a. no tender granted after license expiration;
– b. tender period granted;
• 2. spectrum usage right:
– a. technological neutrality;
– b.technological and service neutrality;
– c.technological and service neutrality &
secondary trading;
• .
11. spectrum policy attributes
11
• 3. special treatment for designated entities:
– a. refarming allowed for incumbents;
– b. certain slots reserved for incumbents (new
entrant clause);
– c. spectrum caps.
• 4. recall:
– a. voluntary recall with compensation;
– b.no recall enforced;
– c. recall enforced when failing to meet the
efficiency criteria.
12. Pairwise Survey
Which of following policy stimuli do you prefer?
No granted tender period,
Technology and service neutrality plus secondary
trading,
Incumbents’ refarming, and
Voluntary recall including compensation
Granted tender period,
Technology neutrality,
Certain slots reserved for entrants, and
No recall enforced
Mostly inclined
to the left
stimulus
inclined to
the left
stimulus
indifferent
Which of following policy stimuli do you prefer?
granted tender period,
Technology and service neutrality plus secondary
trading,
Incumbents’ refarming, and
No recall enforced
inclined to
the right
stimulus
No granted tender period,
Technology neutrality,
Certain slots reserved for entrants, and
Voluntary recall including compensation
Which of following policy stimuli do you prefer?
No granted tender period,
Technology and service neutrality plus secondary
trading,
Certain slots reserved for entrants, and
recall enforced when failing to meet the efficiency
criteria
granted tender period,
Technology and service neutrality,
Incumbents’ refarming, and
Voluntary recall including compensation
Mostly inclined
to the right
stimulus
Mostly inclined
to the left
stimulus
inclined to
the left
stimulus
indifferent inclined to
the right
stimulus
Mostly inclined
to the right
stimulus
Mostly inclined
to the right
inclined to
the right
stimulus
inclined to indifferent
the left
stimulus
Mostly inclined
to the left
stimulus
13. Disspiated interests
among market players
clusters coefficient Net increase in coefficient Ratio of increase
1 6.116 1.37 18.27%
2 7.483 1.03 12.10%
3 8.514 5.48 39.17%
4 13.996 1.33 8.70%
5 15.329 3.04 16.53%
6 18.365 4.05 18.07%
7 22.416 2.47 9.94%
15. conjoint analysis results
attributes levels Average utility value
WBA operators 3G only
operators
2G/3G
operators
Tender
period
a.1 No tender period granted -8.896 94.793 4.252
a.2 Tender period granted 8.896 -94.793 -4.252
SURs b.1 Technology neutrality -69.886 37.995 48.497
b.2 Technology and service neutrality -29.671 -25.352 -32.466
b.3 secondary trading in addition to
technical and service neutrality
99.557 -12.643 -16.030
Designated
entity rules
c.1 refarming for incumbents 9.541 32.344 98.923
c.2 licenses reserved for entrants -19.603 -52.962 -12.479
c.3 Spectrum caps 10.062 20.619 -86.444
d. recall d.1 voluntary recall with compensation -38.486 -0.331 4.939
d.2 No recall enforced 22.842 -0.291 -42.108
d.3 Recall enforced when
underperformance
15.644 0.622 37.168
16. conjoint analysis results
• 1. The WBA operators have highest positive score on
SURs, meaning they prefer secondary trading the most.
• 2. the 3G only operators prefer no tender period
granted.
• 3. The 2G/3G incumbents are the mostly supportive of
incumbent refarming.
• 4. the 2G/3G incumbents demonstrate the same
direction in terms of policy preferences with the 3G only
operators but with a different degree of intensity.
17. spectrum policy preferences
17
WBA (Wimax) operators 2G、3G operators
Tender period granted when
licenses are expired
Tender
period
No tender period granted
Secondary trading permitted,
in addition to technological
and service neutrality
SURs Only technological neutrality
Spectrum caps placed
Designated
entity
Refarming allowed for
incumbents
No recall enforced recall
Recall enforced when failing to
meet the efficiency criteria
18. Cluster
harmonized spectrum policy
WBA
operators
3G only
operators
2G/3G
operators
Utility score -53.5967 165.75405 188.83961
Rank 40th 1st 1st
Policy
attribute
Tender
period
No tender period granted
SURs*** Technological neutrality
Entity rules Refarming for incumbents
Recall
Recall enforced when
underperformance
19. Policy outcomes derived
• 1. The 3G only operators have highest stakes against
tender period granted.
• 2. Although the WBAs operators prefer secondary
trading, the others show negative interests in it.
• 3. The 2G/3G incumbents have highest stakes on the
refarming.
• 4. As for recall, the enforced recall when failing to
meet the efficiency criteria is the likely policy
outcome.
20. Cluster
differentiated spectrum policy
WBA
operators
regime
3G only
operators
2G/3G operators
Utility score 115.8457 115.1158 124.3126
Rank 8th 7th 5th
Policy
attribute
Tender
period
No tender period granted
SURs
Technological & service neutral plus
secondary trading
Entity rules refarming for incumbents
recall
Recall enforced when
underperformance
21. regulatory differences of managing
spectrum
3G only operators 2G/3G operators
- Low incentive to switch
to higher efficient uses
- subscribers’ migration
costs
- Low incentive to switch
to higher efficient uses
- subscribers’ migration
costs
Recall enforced when
underperformance
Recall enforced when
underperformance
21
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Limited bandwidth for
service coverage
WBA operators
LLimimitietedd p prrooffitiatabbiliiltiyty Limited bandwidth for
service coverage
- secondary trading
allowed
- secondary trading - -R Reeffaarrmminingg a alllolowweedd
allowed
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problem
policy
adjustment
goal
Notes de l'éditeur
The high HHI and CR4 scores indicate a highly concentrated telecom market.
The high HHI and CR4 scores indicate a highly concentrated telecom market.
Although individual license is developed in Anglo-Saxon countries, we are not used to differential treatments to different players. This usually leaves a great room for regulators’ discretion and thus regulatory uncertainty. However, it is argued regulatory flexibility necessary in promoting service innovation and convergence. Instead, more detailed and specified rules are in need to make differential regulation works.
Although individual license is developed in Anglo-Saxon countries, we are not used to differential treatments to different players. This usually leaves a great room for regulators’ discretion and thus regulatory uncertainty. However, it is argued regulatory flexibility necessary in promoting service innovation and convergence. Instead, more detailed and specified rules are in need to make differential regulation works.
We used conjoint analysis that asks each interviewee to make a series of pairwise comparison among stimuli in order to calculates operators’ preferences. The Wimax operators have highest positive score on secondary trading, meaning they prefer secondary trading the most. Likewise, the 3G operators prefer no renewal of licenses the most, while they oppose it strongly the reserved licenses for entrants. As for the 2G operators, they demonstrate the same direction of preference with the 3G operators but with a different degree of tendency. The 2G operators prefer the most the auto renewal for the incumbent licenses (since they are all incumbents). On the other hand, they oppose enforced recall of spectrum strongly.
As shown in the next slide, WBA operators mostly adopting Wimax standard (licensed in 2006) have disparate different preferences from 2G and 3G operators in every regard of spectrum use.