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From Experimentation to Citywide Rollout: Real Options for a Municipal WiMax Network in the Netherlands

Author

Listed:
  • Bert M. SADOWSKI

    (University of Technology Eindhoven, The Netherlands)

  • Mathijs VERHEIJEN

    (University of Technology Eindhoven, The Netherlands)

  • Alberto NUCCIARELLI

    (University of Technology Eindhoven, The Netherlands)

Abstract

The paper undertakes a techno-economic analysis of a WiMax network in the unlicensed band (5 GHz) based on a network design for a medium sized, sub-urban community. WiMax (Worldwide Interoperability for Microwave Access) networks based on IEEE802.16 group of standards have been heralded as "serious competitor" and even as a disruptive technology in the local loop at a time when commercial field trials and initial deployment of these technologies unfold throughout Europe. As traditional net present value (NPV) calculation taking the current European regulatory and legislative framework into account showed that high technical and market uncertainty would delay the implementation of a municipal WiMax network, a real options analysis has been undertaken to examine these uncertainties. An expanded NPV calculation, which included the option to expand, provided positive results. Due to licensing fees and coverage performance of base stations, differences in profitability emerged between WiMax networks operating in the unlicensed (5 GHz) and licensed band (2.5/3.5 GHz). The entry of commercial wireless providers in 2008 in the licensed WiMax band is expected to have repercussions for the viability of municipal WiMax networks.

Suggested Citation

  • Bert M. SADOWSKI & Mathijs VERHEIJEN & Alberto NUCCIARELLI, 2008. "From Experimentation to Citywide Rollout: Real Options for a Municipal WiMax Network in the Netherlands," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(70), pages 101-126, 2nd quart.
    • Handle: RePEc:idt:journl:cs7006
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    References listed on IDEAS

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    1. Luiz E. Brandão & James S. Dyer & Warren J. Hahn, 2005. "Using Binomial Decision Trees to Solve Real-Option Valuation Problems," Decision Analysis, INFORMS, vol. 2(2), pages 69-88, June.
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    Cited by:

    1. George Charalampopoulos & Dimitris Katsianis & Dimitris Varoutas, 2022. "Economic replicability tests: an “out-of-the-box” implementation," Netnomics, Springer, vol. 22(2), pages 115-138, October.
    2. Guthrie, Graeme, 2012. "Regulated prices and real options," Telecommunications Policy, Elsevier, vol. 36(8), pages 650-663.
    3. Rebecca Huey-Ming Yen & Ying-Cheng Hung & Guey-Lan Fu, 2019. "Multi-Criteria Analysis on the Strategies to the Telecommunications Development – A Case Study in Taiwan," Eurasian Journal of Social Sciences, Eurasian Publications, vol. 7(1), pages 1-10.
    4. Tahon, Mathieu & Lannoo, Bart & Ooteghem, Jan Van & Casier, Koen & Verbrugge, Sofie & Colle, Didier & Pickavet, Mario & Demeester, Piet, 2011. "Municipal support of wireless access network rollout: A game theoretic approach," Telecommunications Policy, Elsevier, vol. 35(9), pages 883-894.

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    Keywords

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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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