its 2014 biennial 1031202, rio
TRANSCRIPT
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
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
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
Taiwan’s Telecommunication Market
Source: NCC website
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
The numbers of mobile subscription in Taiwan, unit: thousand
Taiwan’s Telecommunication Market
Source: NCC website
Year.month
CHT TMT FET VIBO APT WBA operators 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
The numbers of mobile subscription in Taiwan, unit: thousand
Spectrum licensing in Taiwan
2G Licenses3G Licenses
Digital low-power wireless Licenses WBA 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
-Beauty contest-
,
1900 Mhz- PHS system--
1997 1999 2002 2008 2012 2014 2016 20182017
2G tender period expire
Restricted technologyRestricted service
- Auction-2.5~2.69GHz- technology neutrality- Service neutrality
2013
4G licenses auction
- Auction- 700 、 900 、 1800MHz- technology neutrality- Service neutrality- Secondary trading
Taiwan’s mobile licensing
License 2G 3G WBA 4G
Band 900/1800 MHz
2100/2300 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
Conjoint analysis• It estimates the relative value individuals
place on attributes of a choice;
• It converts qualitative information into quantitative form
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
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spectrum policy attributes• 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; • .
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spectrum policy attributes• 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.
Pairwise SurveyWhich of following policy stimuli do you prefer?
No granted tender period,Technology and service neutrality plus secondary trading,Incumbents’ refarming, andVoluntary recall including compensation
Granted tender period,Technology neutrality, Certain slots reserved for entrants, andNo 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, andNo recall enforced
No granted tender period,Technology neutrality,Certain slots reserved for entrants, andVoluntary 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, andrecall enforced when failing to meet the efficiency criteria
granted tender period,Technology and service neutrality,Incumbents’ refarming, andVoluntary recall including compensation
inclined to the right stimulus
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 stimulus
inclined to the right stimulus
indifferentinclined to the left
stimulus
Mostly inclined to the left stimulus
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%
Attribute preferences by operators
All WBA operators 3G only operators 2G/3G operators
importance
rank importance
rank importance rank importance rank
Tender period 14.60 4 17.92 3 47.39 1 9.47 4
SURs 33.40 1 42.36 1 15.83 3 24.36 2
Designated entity clause
32.33 2 16.23 4 24.81 2 46.34 1
recall 19.65 3 23.47 2 11.95 4 19.81 3
R-Squared 0.93920 0.98622 0.94286 0.96605
conjoint analysis resultsattributes 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
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.
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spectrum policy preferences
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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 placedDesignated
entityRefarming allowed for incumbents
No recall enforced recallRecall enforced when failing to meet the efficiency criteria
WBA (Wimax) operators 2G、 3G operators
ClusterWBA
operators3G only
operators2G/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
RecallRecall enforced when underperformance
harmonized spectrum policy
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.
ClusterWBA
operators3G only
operators2G/3G operators
Utility score 115.8457 115.1158 124.3126
Rank 8th 7th 5th
Policy attribute
Tender period
No tender period granted
SURsTechnological & service neutral plus secondary trading
Entity rules refarming for incumbents
recallRecall enforced when underperformance
differentiated spectrum policy regime
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regulatory differences of managing spectrum
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既有業者執照優先權的保留Providing differentiated incentives for different players
Long-term effectiveness of spectrum management and market competition Long-term effectiveness of spectrum management and market competition
Limited profitabilityLimited profitability Limited bandwidth for service coverage
Limited bandwidth for service coverage
- Low incentive to switch to higher efficient uses- subscribers’ migration costs
- Low incentive to switch to higher efficient uses- subscribers’ migration costs
- Refarming allowed- Refarming allowed- secondary trading allowed
- secondary trading allowed
WBA operators
Recall enforced when underperformance
Recall enforced when underperformance
3G only operators 2G/3G operators
problem
policy adjustment
goal