Predictive study on the economic value of radio spectrum in China

Abstract

Increasing popularity of spectrum-based services brings the striking contradictions between the limited spectrum resource and its increasing demands. This paper puts forward an approach to forecast the future spectrum demand and its economic value, so as to offer a scientific basis for spectrum regulators to resolve this contradiction effectively and make a long-term spectrum-use plan. Specifically, this paper analyzes the driving factors of spectrum demand firstly, based on which a forecasting model is constructed to predict the spectrum demand and its deficit/surplus in the next few years. Then, a forecasting model to measure the economic value of spectrum is proposed based on marginal opportunity cost theory, and the indifference curve is introduced to show the economic value generated by additional spectrum. Additionally, an empirical study is conducted to forecast the spectrum demand and its economic value for China in the next 10 years according to the proposed method. The results of this study show that spectrum deficit is a trend in future and releasing additional spectrum will bring China huge economic benefits.

Keywords

Spectrum demand / economic value / marginal opportunity cost / indifference curve

References

[1] Carlo C, Nicola G. Evaluation of the opportunity cost of the spectrum: Application to the digital dividend. Telecommunications Policy, 2011, 35(7): 633-649.

[2] Chris D. The pricing of radio spectrum: using incentives mechanisms to achieve efficiency. In proceeding of ITU Workshop on market mechanism for spectrum management, Geneva, Jannary 22–23, 2007, 2007

[3] Coase RH. The federal communications commission. Journal of Law and Economics, 1959, 2(10): 1-40.

[4] Coleman B. The economic basis of spectrum value: pairing AWS-3 with the 1755 MHz band is more valuable than pairing it with frequencies from the 1690 MHz band, 2011

[5] Covec. Development of price setting equation for commercial spectrum rights at expiry. The Ministry of Economic Development, October 20, 2003, 2003

[6] Devi AJ, Lalitha T, Kadhar Nawaz GM. Methods for spectrum assignment, pricing and access in dual technologies. International Journal of Computer Applications in Engineering Sciences (IJCAES), 2011, 1(1): 49-52.

[7] Dixit S. A distributed framework with a novel pricing model for dynamic spectrum access to secondary users in infrastructure based wireless networks, 2010

[8] Ellen PG. Spectrum equity. Journal on Telecommunications & High Technology, 2005, 4(101): 193-225.

[9] IDEPEN. 2004 report on an economic study to review spectrum pricing. Aegis Systems and Warwick Business School, 2004

[10] Kevin R, Elias A, Milind MB. A new pricing model for next generation spectrum Access. TAPAS’06 First International Workshop on Technology and Policy for Accessing Spectrum, Boston, MA, United States, August 5, 2006, 2006

[11] Kris VB. Estimating the value of spectrum, 2003, London: Spectrum management

[12] Li GY, Song QZ, Li Y, Lv TJ. Discussions on collusion strategies of bidders in spectrum auction and collusion problems in multi-band auction. China Communications, 2009, 11: 45-50.

[13] Martin C, Chris D, Webb RW. Essentials of modern spectrum management, 2007, Cambridge: Cambridge University Press

[14] Martin C. Review of radio Spectrum management. Study for Department of Trade and Industry and HM Treasury, March 2002, 2002

[15] NERASmith. Study into the use of spectrum pricing, 1996

[16] Nozdrin V. Pricing spectrum. Radio Communication Seminar, Lusaka, Zambia, Sep 29–Oct 3, 2003, 2003

[17] Peter C. Spectrum auctions. Hand book of Telecommunications Economics, 2002, 14: 605-639.

[18] Sun J, Lv TJ, Wang HX. Analysis of spectrum’s contributions to the national economy based on the Cobb-Douglas function. Journal of Beijing University of Posts and Telecommunications, 2011, 13(4): 57-60.

[19] William L. Economic case for dedicated unlicensed spectrum below 3GHz, 2004, Boston, Massachusetts, USA: Massachusetts Institute of Technology

[20] Yang KJ. Research progress of economic value of radio spectrum. China Radio, 2005, 8: 11-14.

[21] Yan JJ, Lv TJ. Evaluation system of economic value of radio spectrum. Journal of Beijing University of Posts and Telecommunications, 2011, 13(4): 51-56.

[22] Zhang Z. Marginal opportunity cost pricing-theoretical frame of natural resource pricing. Journal of Natural Resources, 1996, 11(2): 107-112.

[23] Zhu XL, Huang XQ. The empirical analysis of the contribution of spectrum input to economic growth. Paper presented at the communication development strategy and business management innovation Conferennce Prceeding, Zhu Hai, China, 2006 147-152.