The impact of bundling licensed and unlicensed wireless service

TL;DR

This paper analyzes how bundling licensed and unlicensed wireless services affects market competition, profits, and social welfare, revealing that bundling can lead to higher profits and welfare compared to separate services.

Contribution

It introduces a model for bundled licensed and unlicensed wireless services, showing that bundling can increase provider profits and social welfare, unlike prior work assuming separate services.

Findings

Bundling leads to higher provider profits.

Bundling can increase social welfare.

Managing customer access to unlicensed spectrum affects welfare.

Abstract

Unlicensed spectrum has been viewed as a way to increase competition in wireless access and promote innovation in new technologies and business models. However, several recent papers have shown that the openness of such spectrum can also lead to it becoming over congested when used by competing wireless service providers (SPs). This in turn can result in the SPs making no profit and may deter them from entering the market. However, this prior work assumes that unlicensed access is a separate service from any service offered using licensed spectrum. Here, we instead consider the more common case were service providers bundle both licensed and unlicensed spectrum as a single service and offer this with a single price. We analyze a model for such a market and show that in this case SPs are able to gain higher profit than the case without bundling. It is also possible to get higher social welfare with bundling. Moreover, we explore the case where SPs are allowed to manage the customers' average percentage of time they receive service on unlicensed spectrum and characterize the social welfare gap between the profit maximizing and social welfare maximizing setting.