Market-based Radio Spectrum Reforms

Southeast Asian countries, such as Thailand and Vietnam, are considering whether to make spectrum available for wireless broadband services this year. In recent meetings with Thai, Vietnamese, and the Asia-Pacific Telecom Wireless Forum, I had a chance to make Intel’s case for using market-based spectrum policies–and the cost of doing nothing.

In the past governments used a “command and control” approach in Allocating frequencies to particular uses, Alloting channel sizes and Assigning licenses to particular entities. While this approach may still be appropriate for certain governmental uses, increasingly governments around the world are using more flexible and market-based approaches to accomplish the three “A’s” of spectrum management.

The principal disadvantage of the old approach is that it locked in old uses and old technologies. In today’s fast changing world, impeding innovation and business change has become extraordinarily costly. This presentation,

Cost of Doing Nothing Background Approach blog.ppt, draws on economic research and analysis to illustrate the importance of getting spectrum in the marketplace flexibly and expeditiously.

The real cost of delaying new wireless services is denying consumers the net benefits they get from more minutes, lower prices and new capabilities. This net benefit (that is, the benefit in excess of the cost of the service) is called “consumer surplus.” In the case of mobile services, the net present value of the consumer surplus generated by these services indefinitely into the future has been estimated to range from 10 to 20 times the revenues raised in auctioning these frequencies. Indeed, delaying a new wireless broadband service such as WiMAX by three years may waste 25% of the total value of the spectrum, probably billions of dollars in lost consumer surplus.

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