Spectrum auctions, pricing and network expansion in wireless telecommunications
Johannes M. Bauer

TL;DR
This paper investigates how spectrum licensing fees impact pricing, market entry, and diffusion of mobile services, revealing that higher fees increase costs but market concentration can enhance supply efficiency.
Contribution
It develops and tests an empirical structural model linking license fees, market structure, and supply-demand dynamics in wireless markets.
Findings
Higher license fees increase supply costs.
Market concentration positively influences overall supply.
License fees impact market development through cost and structural channels.
Abstract
This paper examines the effects of licensing conditions, in particular of spectrum fees, on the pricing and diffusion of mobile communications services. Seemingly exorbitant sums paid for 3G licenses in the UK, Germany in 2000 and similarly high fees paid by U.S. carriers in the re-auctioning of PCS licenses early in 2001 raised concerns as to the impacts of the market entry regime on the mobile communications market. The evidence from the GSM and PCS markets reviewed in this paper suggests that market entry fees do indeed influence the subsequent development of the market. We discuss three potential transmission channels by which license fees can influence the price and quantity of service sold in a wireless market: an increase in average cost, an increase in incremental costs, and impacts of sunk costs on the emerging market structure. From this conceptual debate, an empirical…
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Taxonomy
TopicsICT Impact and Policies · Consumer Market Behavior and Pricing · Digital Platforms and Economics
