New determinants of spectrum price in a 5G world

The theoretical models presented in the article establish the possibility that reduced congestion in unlicenced bands can reduce the profits of telecommunications operators, and consequently, depress spectrum prices. Further, certain modes of deploying licenced and unlicenced spectrum bands to provide services may render competitive dynamics uncertain, unpredictable, and unstable. Finally, the advent of Content and Application Providers (CAPs) providing substitutes or complements to traditional telecommunications services can also reduce operator profits. On the other hand, benign impacts on operator profits and spectrum prices cannot be ruled out. Given these possibilities, an empirical analysis is carried out to examine the impact of the participation of CAPs and the reduced congestion in unlicenced networks on spectrum prices. The variables of VOIP fixed-line subscribtions and mobile broadband density are used as proxies for the increased usage of unlicenced spectrum and the entry of CAPs as providers of substitutes and complements. These variables are consistently significant in our analysis indicating that there are indeed new drivers determining spectrum prices. Policy implications of the findings are enumerated.