3Rd Generation (3G) Mobile Telecommunication Services
Total Page:16
File Type:pdf, Size:1020Kb
_________________________________________________________________________Swansea University E-Theses 3rd generation (3G) mobile telecommunication services :Examining the effect of spectrum licence administration procedures on investment, pricing, and the regulatory environment from a national and pan-European perspective. Mackley, James Richard Keith How to cite: _________________________________________________________________________ Mackley, James Richard Keith (2009) 3rd generation (3G) mobile telecommunication services :Examining the effect of spectrum licence administration procedures on investment, pricing, and the regulatory environment from a national and pan-European perspective.. thesis, Swansea University. http://cronfa.swan.ac.uk/Record/cronfa42487 Use policy: _________________________________________________________________________ This item is brought to you by Swansea University. Any person downloading material is agreeing to abide by the terms of the repository licence: copies of full text items may be used or reproduced in any format or medium, without prior permission for personal research or study, educational or non-commercial purposes only. The copyright for any work remains with the original author unless otherwise specified. The full-text must not be sold in any format or medium without the formal permission of the copyright holder. Permission for multiple reproductions should be obtained from the original author. Authors are personally responsible for adhering to copyright and publisher restrictions when uploading content to the repository. Please link to the metadata record in the Swansea University repository, Cronfa (link given in the citation reference above.) http://www.swansea.ac.uk/library/researchsupport/ris-support/ James Richard Keith Mackley Swansea University 2009 3rd generation (3G) mobile telecommunication services: Examining the effect of spectrum licence administration procedures on investment, pricing, and the regulatory environment from a national and pan- European perspective. Submitted to the University of Wales in fulfilment of the requirement for the Degree of Doctor of philosophy. l i b r a r y ProQuest Number: 10801717 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a com plete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. uest ProQuest 10801717 Published by ProQuest LLC(2018). Copyright of the Dissertation is held by the Author. All rights reserved. This work is protected against unauthorized copying under Title 17, United States C ode Microform Edition © ProQuest LLC. ProQuest LLC. 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106- 1346 Summary The European 3G mobile phone spectrum administrations, which took place between 1999 and 2002, used a variety of different methods for allocating licences. The total value of licence fees raised by auctions tended to be significantly higher than those achieved in countries which adopted a ‘beauty contest’ approach for assessing bidders. Post-administration, many of the licence-winning firms experienced financial distress. There were suggestions at the time that the firms that won licences through auction procedures had suffered a ‘winner’s curse’. There was a certain amount of support for this proposition; licence winners across Europe delayed the roll-out of 3G network infrastructure and, in a number of cases, handed back their licences or had them revoked. By pooling data across European spectrum administrations, this thesis presents an empirical analysis of how much was paid for licences and who won them. The analysis provides evidence for the proposition that administrators raised considerably higher revenues with auctions than was the case with beauty contests. In addition to this, the analysis also finds that a number of key revenue-raising factors were out of the control of the administering authorities. The second part of this thesis seeks to identify a winner’s curse through a comparative event study of the German auction and the Swedish beauty contest. This analysis provides clear support to the proposition that some firms that won licences through auction procedures suffered a winner’s curse. The final part of the thesis examines the role of regulation and regulatory bargaining in the mobile telecommunications industry. Through the application of real option theory, it can be shown that a high licence fee can cause delay in network infrastructure investment. A simple two stage Nash bargaining model can then be used to show how this may affect regulatory behaviour. Declaration/Statements DECLARATION This work has not been previously accepted in substance for nay degree and is not concurrently submitted in candidature for any degree. Signed .........................................................................(candidate) D ate............................................................................. STATEMENT 1 This thesis is the result of my own investigation, except where otherwise stated. Where correction services have been used, the extent and nature of the correction is clearly marked in a footnote(s). Other sources are acknowledged by footnotes giving explicit references. A bibliography is appended. Signed ......................................................................... (candidate) D ate............................................................................. STATEMENT 3 I hereby give consent for my dissertation, if accepted, to be available for photocopying and for inter-library loan, and for the title and summary to be made available to outside organisations. Signed (candidate) CONTENTS Volum e I Acknowledgements i List of Tables and ii Figures Abbreviations v 1 Introduction 1 1.1 The Beginnings of 3G 1 1.2 Thesis Structure 2 1.2.1 Part 1. Who, Why and How Much? 3 1.2.2 Part 2. Was a W inner's Curse Present? 4 1.2.3 Part 3. Regulation and the Post-administration Environment 6 Parti 8 Allocating Spectrum Licences 9 2.1 Methods of Administering Spectrum 9 2.1.1 Lotteries 10 2.1.2 Beauty Contests 10 2.1.3 Auctions 12 2.2 Development of Spectrum Auctions 15 2.2.1 The FCC Auctions 16 2.3 On to the 3G Administration 19 2.3.1 Differences between licences 20 2.4 The Size and Distribution of Revenues 22 2.4.1 Theoretically Important Factors 23 2.4.2 Other Empirical Studies 26 3 A Review of the European Licence Administration Process and the Post- 29 administration Market 3.1 Problems in the European Procedures 29 3.2 Auction Procedures 31 3..2.1 United Kingdom 31 3.2.2 Netherlands 32 3.2.3 Germany and Austria 34 3.2.4 Italy 36 3.2.5 Switzerland 38 3.2.6 Belgium 39 I I t 3.2.7 Greece 40 3.2.8 Denmark 41 3.3 Beauty Contests 42 3.3.1 Finland 42 3.3.2 Spain 44 3.3.3 Norway 45 3.34 Sweden 46 3.3.5 Portugal 48 3.3.6 France 49 3.3.7 Luxembourg 50 3.3.8 Ireland 50 3.4 Discussion 52 Empirical Analysis of the 3G Administration 57 4.1 Introduction 57 4.2 Modelling the Winners and how much they paid 58 4.2.1 Bidding Units' Highest Observed Bid 58 4.2.2 Modelling the Probability of Winning 60 4.3 The Model and Description of Variables 60 4.3.1 Description of Variables 63 4.3.2 Descriptive Statistics 67 4.4 Empirical Results 69 4.4.1 Total Data Set 69 4.4.2 Auction Data Set 71 4.4.3 Beauty Contest Data Subset 73 4.4.4 Probability of Winning Equation 73 4.5 Assessment 74 Tables 78 Part 2 95 The Winner's Curse and 3G Auctions 96 5.1 Introduction 96 5.2 Concept of the Winner's Curse 97 5.3 Experimental Evidence 99 5.4 Field Data 100 5.5 The 3G W inner's Curse 103 5.5.1 How can the winner's curse be present? 104 5.6 Other Attempts to Identify a Winner's curse 106 5.7 Does a Winner's Curse Matter? 108 6 Event Study Methodology 114 6.1 Efficient Markets and Event Studies 115 6.1.1 Foundation of the Efficient Market Hypothesis 116 6.1.2 Challenges to the Efficient Market Hypothesis 118 6.1.3 Behavioural Finance 118 6.1.4 Unanticipated Events and Confounding Effects 120 6.2 Modelling Normal Returns 121 6.2.1 Statistical Models 121 6.2.2 Economic Models 122 6.2.3 Returns Data 123 6.3 Estimating the Normal Returns 124 6.4 Event Specific Problems 126 6.5 Conducting an Event Study 128 6.6 The Thin Trading Problem and Clustering 130 A Comparative Event Study: Germany and Sweden 133 7.1 Introduction 133 7.2 The Swedish and German Procedures and Post-administration 136 Difficulties. 7.3 Data Description 140 7.4 Empirical Results 141 7.4.1 German Results 141 7.4.2 Sweden Results . 146 7.5 Conclusion 150 Tables 153 Figures 171 Volum e II Part 3 204 A Review of regulation in the European mobile telecommunication 205 market. 8.1 The focus of this chapter 205 8.2 Why Regulate the Telecommunication Industry? 207 8.2.1 General Principles 207 8.2.2 Market Failures in the Mobile Telecommunication Industry 209 8.2.3 Methods for Regulating the Mobile Telecommunication Sector 210 8.3 Telecommunications regulation in practice 211 8.3.1 Mobile Telecommunication Development and Institutions 211 8.3.2 Recent Developments in European Regulation 212 8.4 Specific Mobile Telecommunication Regulation 214 8.4.1 Market Entry and Licensing Conditions 214 8.4.2 Spectrum Trading 216 8.4.3 Mobile Virtual Network Operators 220 8.4.4 Network Sharing 222 8.5 Non-licence Regulatory Issues 224 8.5.1 Competition and Concerns over Significant Market Power 224 8.5.2 Termination Charges 225 8.5.3 European Roaming Fees 230 8.5.4 Other Regulatory