In developed countries, access to spectrum for mobiles is more of an issue than for developing countries where making spectrum available in developing countries may be less costly and is typically is used less intensively.
A key issue for wireless due to the growth in mobile data traffic is access to more spectrum. Radio Spectrum Management is covered in another Module. Here, we focus on competition and pricing. The choice of spectrum is important because it affects the cost of equipment (and hence the price of services), coverage (universal service objectives) and inter-operability.
In the US and Europe a major source is the spectrum released in the migration from analogue to digital television; the digital dividend. More recently, there has also been interest in making more effective use of broadcast television spectrum with the US being the first country to allow the unlicensed use of white spaces.
Mobile’s need for spectrum is a direct result of the growth in data services; in particular, video which takes up a lot of bandwidth.
Box 6.3: Australian spectrum restrictions
Australia has tried restricting access to spectrum to encourage market entry. The Government gave itself this (‘competition limits’) power in 1997 when Australia already had three established mobile operators (Telstra, Optus and Vodafone).
Although two entrants did emerge, they did not survive: OneTel went into receivership and Hutchison has merged with Vodafone.
The Productivity Commission, which reports to the Treasury, recommended that the power to exclude operators from spectrum auctions should be removed as ‘unnecessary, potentially distortionary and procedurally deficient’. However, the recommendation was rejected by the Government in December 2002.
Source: Productivity Commission, Radio Communications Inquiry Report, 2002
The price of spectrum can also have a bearing on competition because some auctions have crippled operators who paid too much for spectrum. In developing countries, there may be more public benefits in seeing spectrum used well than getting high prices for spectrum; which leads to other methods of allocating spectrum (e.g. ‘beauty contests’ where applicants explain how they would use any allotment of spectrum).
Box 6.4: Awarding 3G licences in Morocco
The regulator in Morocco ran a ‘beauty contest’ in 2006 awarding three 3G licenses. The results were astounding – mobile broadband subscriptions increased 530 per cent between 2007and 2008.
Bidders included Maroc Telecom, Méditel, WANA (Maroc Connect at the time) and Maroc Nejma (a Kuwait-based company). The evaluation was based on four criteria: 1) deployment of infrastructure, 2) service quality engagement, 3) diversity, innovation, and incentive packages to customers, and 4) financial viability of bidder and shareholder relations.
The aspiring new entrant WANA made a great impression and was ranked first, followed by Maroc Telecom and Méditel. WANA’s launch of its restricted mobility service (branded as Bayn) in 2007 and full mobility service (branded Wana Mobility) in 2008 expanded mobile broadband as well as its own public reach and penetration.
When the company launched WANA mobility using CDMA technology (not the GSM standard that Méditel and Maroc Telecom used), they gave away free phones (two for the price of one). The promotion was so popular that WANA sales exceeded expectations and the company faced two major challenges: 1) a still under-developed infrastructure that could not handle the burden of so many users at once, and 2) technology incompatibility resulting in unexpected roaming issues (most neighbouring countries were using GSM). Eventually, many of the customers switched back to Maroc Telecom and Méditel.
Since 2010, WANA has been recapitalized by the Zain Group, changed management, and adopted a new brand name; INWI which claims the greatest 3G coverage, providing CDMA2000/EVDO for all new customers and 1X (an IMT-2000 technology but slower) where coverage areas have not yet been enhanced with EVDO technology.
Source: Broadband in Morocco: Political Will Meets Socio-Economic Reality, info/DEV October 2011