IDEAS home Printed from https://ideas.repec.org/a/eee/telpol/v38y2014i3p236-247.html
   My bibliography  Save this article

Analysis of spectrum auctions in India—An application of the opportunity cost approach to explain large variations in spectrum prices

Author

Listed:
  • Mölleryd, Bengt G.
  • Markendahl, Jan

Abstract

The remarkable growth of mobile communication has reinforced the significance of the radio spectrum for mobile network operators. The availability of spectrum varies considerably between different countries due to national regulatory decisions. The focus in this paper is on India where operators have access to a limited amount of spectrum. This paper analyses the value of spectrum by estimating the opportunity cost, which is calculated by the savings that can be achieved by acquiring appropriate amount of spectrum rather than investing in additional base stations. The applied approach combines network deployment, user demand levels, cost, and capacity issues, which are integrated in the application in the opportunity cost approach for spectrum. The opportunity cost of spectrum is compared with prices paid at spectrum auctions. The analysis includes a discussion of drivers that determine the willingness to pay for spectrum. The results show that the opportunity cost of spectrum in relation to auction prices is lower than prices operators paid for 3G spectrum in the metro circles (service areas) while the value derived from the opportunity cost is higher than auction prices in the remaining circles.

Suggested Citation

  • Mölleryd, Bengt G. & Markendahl, Jan, 2014. "Analysis of spectrum auctions in India—An application of the opportunity cost approach to explain large variations in spectrum prices," Telecommunications Policy, Elsevier, vol. 38(3), pages 236-247.
    • Handle: RePEc:eee:telpol:v:38:y:2014:i:3:p:236-247
    DOI: 10.1016/j.telpol.2014.01.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0308596114000032
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.telpol.2014.01.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jeremy Bulow & Jonathan Levin & Paul Milgrom, 2009. "Winning Play in Spectrum Auctions," NBER Working Papers 14765, National Bureau of Economic Research, Inc.
    2. Markendahl, Jan & Mäkitalo, Östen & Mölleryd, Bengt G. & Werding, Jan, 2010. "Mobile Broadband Expansion Calls for More Spectrum or Base Stations - Analysis of the Value of Spectrum and the Role of Spectrum Aggregation," 21st European Regional ITS Conference, Copenhagen 2010: Telecommunications at new crossroads - Changing value configurations, user roles, and regulation 26, International Telecommunications Society (ITS).
    3. Mölleryd, Bengt G. & Markendahl, Jan, 2011. "Valuation of spectrum for mobile broadband services: Engineering value versus willingness to pay," 22nd European Regional ITS Conference, Budapest 2011: Innovative ICT Applications - Emerging Regulatory, Economic and Policy Issues 52146, International Telecommunications Society (ITS).
    4. Jan MARKENDAHL & Östen MÄKITALO & Jan WERDING & Bengt G. MÖLLERYD, 2009. "Business Innovation Strategies to Reduce the Revenue Gap for Wireless Broadband Services," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(75), pages 35-56, 3rd quart.
    5. Sweet, R. & Viehoff, I. & Linardatos, D. & Kalouptsidis, N., 2002. "Marginal value-based pricing of additional spectrum assigned to cellular telephony operators," Information Economics and Policy, Elsevier, vol. 14(3), pages 371-384, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ashutosh Jha & Debashis Saha, 2022. "Mobile Broadband for Inclusive Connectivity: What Deters the High-Capacity Deployment of 4G-LTE Innovation in India?," Information Systems Frontiers, Springer, vol. 24(4), pages 1305-1329, August.
    2. Ashutosh Jha & Debashis Saha, 2019. "Examining categorization of Telecom Circles in India using unsupervised k-means clustering on techno-economic indicators," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 46(4), pages 365-383, December.
    3. Ashutosh Jha & Manisha Chakrabarty & Debashis Saha, 2023. "Network Investment as Drivers of Mobile Subscription – A Firm-level Analysis," Information Systems Frontiers, Springer, vol. 25(5), pages 1811-1828, October.
    4. Frias, Zoraida & González-Valderrama, Carlos & Pérez Martínez, Jorge, 2017. "Assessment of spectrum value: The case of a second digital dividend in Europe," Telecommunications Policy, Elsevier, vol. 41(5), pages 518-532.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mölleryd, Bengt G. & Markendahl, Jan, 2012. "The value of spectrum and the impact of the breakthrough for mobile data: The case of India, Sweden and Thailand," 19th ITS Biennial Conference, Bangkok 2012: Moving Forward with Future Technologies - Opening a Platform for All 72479, International Telecommunications Society (ITS).
    2. Kim, Yongkyu & Kim, Kiwon & Jang, Yunjeong & Park, Seungkeun, 2022. "Value of Spectrum for Mobile Communications: Case of Korea," 31st European Regional ITS Conference, Gothenburg 2022: Reining in Digital Platforms? Challenging monopolies, promoting competition and developing regulatory regimes 265642, International Telecommunications Society (ITS).
    3. Ovando, Catalina & Pérez, Jorge & Moral, Antolín, 2015. "LTE techno-economic assessment: The case of rural areas in Spain," Telecommunications Policy, Elsevier, vol. 39(3), pages 269-283.
    4. Rana, Md Sohel & Prasad, Rohit & Yoon, Hyenyoung & Hwang, Junseok, 2020. "Opportunity cost of spectrum for mobile communications: Evaluation of spectrum prices in Bangladesh," Telecommunications Policy, Elsevier, vol. 44(3).
    5. Mölleryd, Bengt G. & Markendahl, Jan, 2011. "Valuation of spectrum for mobile broadband services: Engineering value versus willingness to pay," 22nd European Regional ITS Conference, Budapest 2011: Innovative ICT Applications - Emerging Regulatory, Economic and Policy Issues 52146, International Telecommunications Society (ITS).
    6. Le, Phuong, 2018. "Pareto optimal budgeted combinatorial auctions," Theoretical Economics, Econometric Society, vol. 13(2), May.
    7. Mo Xiao & Zhe Yuan, 2022. "License Complementarity and Package Bidding: US Spectrum Auctions," American Economic Journal: Microeconomics, American Economic Association, vol. 14(4), pages 420-464, November.
    8. Phuong Le, 2017. "Mechanisms for combinatorial auctions with budget constraints," Review of Economic Design, Springer;Society for Economic Design, vol. 21(1), pages 1-31, March.
    9. Burkett, Justin, 2016. "Optimally constraining a bidder using a simple budget," Theoretical Economics, Econometric Society, vol. 11(1), January.
    10. Ghosh, Gagan & Liu, Heng, 2019. "Sequential second-price auctions with private budgets," Games and Economic Behavior, Elsevier, vol. 113(C), pages 611-632.
    11. Thomas W. Hazlett & David Porter & Vernon Smith, 2011. "Radio Spectrum and the Disruptive Clarity of Ronald Coase," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 125-165.
    12. Burkett, Justin, 2015. "Endogenous budget constraints in auctions," Journal of Economic Theory, Elsevier, vol. 158(PA), pages 1-20.
    13. Martínez, Luis & Álvarez San-Jaime, Oscar & Markendahl, Jan, 2015. "Net neutrality principles and its impact on quality of experience based service differentiation in mobile networks," 2015 Regional ITS Conference, Los Angeles 2015 146319, International Telecommunications Society (ITS).
    14. Matinmikko-Blue, Marja & Yrjölä, Seppo & Ahokangas, Petri & Seppänen, Veikko & Hämmäinen, Heikki & Jurva, Risto, 2019. "Value of the spectrum for local mobile communication networks: Insights into awarding and pricing the 5G spectrum bands," 30th European Regional ITS Conference, Helsinki 2019 205199, International Telecommunications Society (ITS).
    15. Le, Phuong, 2015. "Mechanisms for Combinatorial Auctions with Budget Constraints," MPRA Paper 66292, University Library of Munich, Germany.
    16. Peter Cramton, 2013. "Spectrum Auction Design," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(2), pages 161-190, March.
    17. Kazumori, Eiichiro & Belch, Yaakov, 2019. "t-Tree: The Tokyo toolbox for large-scale combinatorial auction experiments," Journal of Behavioral and Experimental Finance, Elsevier, vol. 24(C).
    18. Lawrence M. Ausubel & Justin E. Burkett & Emel Filiz-Ozbay, 2017. "An experiment on auctions with endogenous budget constraints," Experimental Economics, Springer;Economic Science Association, vol. 20(4), pages 973-1006, December.
    19. Gary Madden & Erik Bohlin & Paitoon Kraipornsak & Thien Tran, 2014. "The determinants of prices in the FCC's 700 MHz spectrum auction," Applied Economics, Taylor & Francis Journals, vol. 46(17), pages 1953-1960, June.
    20. Jonathan Levin & Andrzej Skrzypacz, 2014. "Are Dynamic Vickrey Auctions Practical?: Properties of the Combinatorial Clock Auction," NBER Working Papers 20487, National Bureau of Economic Research, Inc.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:telpol:v:38:y:2014:i:3:p:236-247. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/30471/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.