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The production function methodology for estimating the value of spectrum

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  • Prasad, Rohit

Abstract

The estimation of production functions for wireless communications markets presents particular challenges including the lumpy nature of spectrum use, and the presence of significant upfront investment. In this paper a systematic study of production functions for wireless markets is undertaken, using data from India. The efficacy of two major functional forms, the Cobb Douglas and the translog functions, are compared by benchmarking the values of spectrum they yield against the values generated by the intuitive but data-intensive cash flow method, and the prices revealed in two auctions. The comparisons allow us to conclude that factoring the lumpy nature of spectrum use by considering ‘effective spectrum’ data rather than raw spectrum data, and relaxing the assumption of constant elasticity of substitution are useful in obtaining accurate estimates of spectrum value.

Suggested Citation

  • Prasad, Rohit, 2015. "The production function methodology for estimating the value of spectrum," Telecommunications Policy, Elsevier, vol. 39(1), pages 77-88.
    • Handle: RePEc:eee:telpol:v:39:y:2015:i:1:p:77-88
    DOI: 10.1016/j.telpol.2014.12.007
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    1. Sridhar, Varadharajan & Casey, Thomas & Hämmäinen, Heikki, 2013. "Flexible spectrum management for mobile broadband services: How does it vary across advanced and emerging markets?," Telecommunications Policy, Elsevier, vol. 37(2), pages 178-191.
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    Cited by:

    1. Thornton Matheson & Patrick Petit, 2021. "Taxing telecommunications in developing countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(1), pages 248-280, February.
    2. Bielov, Constantine & Mitomo, Hitoshi & Hämmäinen, Heikki, 2022. "Efficiency frontier of OECD MNOs: Multinational vs Domestic," Telecommunications Policy, Elsevier, vol. 46(5).
    3. 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).
    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).

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