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Valuation of spectrum for mobile broadband services: Engineering value versus willingness to pay

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  • Mölleryd, Bengt G.
  • Markendahl, Jan

Abstract

Radio spectrum is a vital asset and resource for mobile network operators. With spectrum in the 800 and 900 MHz bands coverage can be provided with fewer base station sites compared to higher frequency bands like 2.1 and 2.6 GHz. With more spectrum, i.e. wider bandwidth, operators can offer higher capacity and data rates. Larger bandwidths means that capacity can be provided with fewer base station sites, i.e. with lower cost. Operators that acquire more spectrum in existing or new bands can re-use existing sites for capacity build out. Engineering value is one way to estimate the marginal value of spectrum. The calculation of engineering value is based on comparison of different network deployment options using different amounts of spectrum. This paper compare estimates of engineering value of spectrum with prices paid at a number of spectrum auctions, with a focus on Sweden. A main finding is that estimated engineering value of spectrum is much higher than prices operators have paid at spectrum auctions during the last couple of years. The analysis also includes a discussion of drivers that determine the willingness to pay for spectrum.

Suggested Citation

  • 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).
  • Handle: RePEc:zbw:itse11:52146
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    Cited by:

    1. 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.

    More about this item

    Keywords

    Radio spectrum; mobile communications; spectrum valuation; spectrum allocation; mobile broadband; marginal value of spectrum; engineering value;

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management

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