Competition in Mobile Communications and the Allocation of

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scarce_resources.doc 27.09.02 15:51

Economic Advisory Group Telecommunications, DG Competition

Competition in Mobile Communications and the Allocation ofScarce Resources: The Case of UMTS

Jörn Kruse

Preliminary Draft, September 11, 2002

Comments are welcome : [email protected]

Content1 Introduction

2 The Economics of cellular networks and services

2.1 Network architecture in GSM and UMTS

2.2 Scale Economies and the Significance of spectrum availability

3 The Economics and Methods of Spectrum Allocation

3.1 Intramodal Spectrum Allocation (within specific bands)

3.2 Intermodal Spectrum allocation

3.3 Methods for the Allocation of Scarce Resources

3.4 Auction Methods

4 Spectrum Allocation in European Mobile Communication

4.1 GSM-Spectrum and License allocation in European Countries

4.2 UMTS-Spectrum Auctions

5 Competition in European Mobile Communication

5.1 Fierce Competition or Collusion?

5.2 Empirical Evidence

5.3 The Case for UMTS Infrastructure Sharing

Literature

Annex A1: Assignment of analogue, GSM 900 and 1800 spectrum

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Competition in Mobile Communications and the Allocation ofScarce Resources: The Case of UMTS

Jörn Kruse

Preliminary Draft, September 11, 2002

1 Introduction

In the decade of the 1990s, mobile communication in Europe was a tremendous successstory in terms of technical and economic developments. Prices declined and penetrationrates grew surprisingly. To allow these socially desirable developments, private companiesheavily invested in communication infrastructures.

These developments were accompanied by (and not independent from) a comparativelylow level of regulation � with the very significant exception of spectrum licencing.Governments' licensing predominantly shaped the industries and market structures in theindividual countries.

Since spectrum is a scarce resource under the governance of the nations' authorities, itsallocation is a very important element for the procedures and for the efficiency results ofcompetition in mobile communications. Spectrum is not only a technically essentialresource. The availability of more or less spectrum (and what kind of spectrum) is ofprimary importance for the economic success of a mobile operator. Adequate spectrumallocation is a crucial factor, if a mobile sector will be competitive and efficient or not.Since national governments were (and are) using different methods of spectrum allocation,this raises questions for the competition issue on the European level.

The governments' licencing in mobile communication is (from the economic viewpoint)only justified by the relevance of spectrum allocation. But governments decisions andinfluencing were going much beyond that. They basically predetermined the number of themarkets players, usually on a step-by-step-basis over time, and they often chose the playersthemselves, by the visible hand of governments' committees. Also, they mostly decidedtoward a high degree of vertical integration, instead of leaving these issues to the market.

Governments' decisions seem to be responsible for some of the problems

the mobile communication industry had to deal with recently, especially with respect toUMTS. Although UMTS may be technically quite different from GSM, its economic andcompetitive developments heavily depend on earlier GSM market structures.

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2 The Economics of cellular networks and services

2.1 Network architecture in GSM and UMTS

Both GSM and UMTS networks consist of (1) core networks (CN) and (2) radio accessnetworks (RAN).

The RAN performs the radio coverage of the specific geographic area in order to connectthe mobile users. In GSM, this is done by BTSs (base station transceivers) and BSCs (basestation controllers), which are connected to MSCs (Mobile Switching Centers). MSCs aredoing the switching job, which means routing outgoing calls to their destination in fixed ormobile networks. In UMTS, the equivalent terms are Node B and RNC (Radio NetworkController). The radio networks require about 75 percent of the investments and is the realmobile part of the communication system.

The core systems in GSM and in UMTS include the network intelligence and the operatingmanagement, the home and visitor location registers, service platform, connection to ISDNand IN-networks etc. The core systems are most crucial for the competitive strategies of themobile network operators.

The most significant feature of UMTS is the mobile availability of general or specificservices (like MMS and internet access) and content (news, games, music, video etc.). Forthese value added services, which are supposed to generate most of the UMTS revenue,third party suppliers (from the media and from the e-commerce sector) are entering thepicture, asking for about 90 percent of their content revenue.

2.2 Scale Economies and the Significance of spectrum availability

Spectrum is in an essential resource for the radio based transmission of data and voice froma transmitter to one or more receiving stations. The term spectrum is often used assynonym with frequency or radio channel. It is defined by a specific range of megahertz(band) in the overall electromagnetic spectrum in a specific area.

Spectrum is not only absolutely necessary for mobile network operators. The amount ofavailable spectrum also influences significantly the production costs of a cellular operator.Let us assume that a certain number of GSM base stations is needed to secure radiocoverage of a desired or regulatorily required percentage of population with a minimumnumber of traffic channels. If airtime minutes increase, the same base stations will beequipped with more transceiver stations, operating with a given stock of spectrum. Sinceincremental costs are low, the resulting average cost function BACA in figure DG4-23 isstrongly degressive.

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TACAICBAC

AIC1

AIC2

AIC3

TrafficQ1 Q2 Q3 x

TAC1

TAC2

TAC3

BACA

Fig. DG4-23: Mobile Operators' average costs with different available spectrum

If increasingly more traffic has to be handled by the network, the given stock of spectrumoccurs to be the limiting factor. This will be first noticed in city areas, since the blocking-rate will increase, particularly in peak hours. To avoid quality deterioration, the networkhas to be remodeled by cell-splitting, which increases the reuse-factor of the availablespectrum, increases the number of base stations, and reduces the signal power and the areasof cells. This incurs additional costs for investments in base stations, wired and wirelessconnections, and for additional operating costs. The resulting average incremental costs areshown by AIC.

If a specific number of frequencies (GSM-channels) allows no more traffic than Q1, AIC1shows the additional average costs of cell splitting. If the network operator would havemore spectrum available, the respective cost functions could be AIC2 or AIC3. The totalaverage cost functions TACi in figure DG4-23 (sum of BACA + AICi) demonstrate that anetwork with more available spectrum has significant cost advantages, whereas a networkwith only few frequencies will be forced to limit its growth or will be subject to qualitydeterioration (higher-blocking rate) or higher average cost.

For a UMTS-system, the functional relationships are somewhat more complex, due todifferent technological methods of spectrum use and different responses to increasingtraffic volume. But, holding quality (data rate) constant, basicly the same relationshipbetween spectrum availability, usage quantity, and costs apply.

Thus, the allocation of spectrum is significant for the competitiveness of a specific networkoperator and may also be relevant for the competition and the efficiency of the wholeindustry.

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3 The Economics and Methods of Spectrum Allocation

3.1 Intramodal Spectrum Allocation (within specific bands)

In order to be able to use a specific frequency properly, there should not be any othertransmitters using the same frequency within the same area, which would otherwise causeinterferences. Because of these interferences, the use of spectrum is subject to consumptionrivalry. For reasons of simplicity, we assume here that this is a direct rivalry (Kruse, 1995).

Even if spectrum is costless in the sense that no economic resources have to be spent inorder to make spectrum available, and even if contemporary use will not reduce the amountof spectrum in the future (spectrum is not exhaustible), the opportunity costs of spectrum(resulting from consumption rivalry) are asking for spectrum fees.

The concept "spectrum allocation" is used to refer to the allocation of property rights forthe use of a specific part of the spectrum to a transmitting unit. The allocation of spectrum(dedicated to a specific service) to individual users (transmitters) is called intramodalspectrum allocation.

Consider the networks' demand function for spectrum.1 In figure DG4-31, SD2 representsthe aggregate demand function of network operators for a specific type of spectrum.Suppose, the spectrum available is Q*. The relevant supply function is SS*, i.e. perfectlyprice inelastic. The market equilibrium is at D, with the efficient price P3, which equalsopportunity cost. The price P3 would be the price in a competitive market, as well as theprice resulting from a spectrum auction.

Under competitive conditions (free trade or auction) spectrum would be made available tothose users with the highest willigness/ability to pay. In general, these are expected to bethe most efficient operators. If spectrum is given away free of charge (gratis), spectrum willbe wasted.

The price P3 is a scarcity price. If an auction were held, the government would collect ascarcity rent of Q* · P3 (rectangle OQ*DB). Theoretically, its amount does not (other thanpublic opinion suggest) influence prices and quantities on the telecommunications servicemarket. If the demand for spectrum were SD3 instead, opportunity cost and prices would beP2, and government revenue would be OQ*CA.

Were, instead, the spectrum demand function SD1, opportunity costs and prices would bezero (0). Spectrum were not scarce in this case. The function SD1 might be the result, if theoperators that otherwise demand SD2 would invest in more efficient equipment such thatthey could serve the customers' demanded airtime minutes with less spectrum. An optimalproduction substitution between spectrum and other factors (like investments intransmission and receiving stations) will simultanously be derived by determining efficientspectrum prices.

1 The networks' willingness to pay for spectrum can be derived from the mobile communication costsand demand functions (Kruse, 1993).

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Price

SD3

SD2

SD1

C

SS*

P2A

P3B

0 Q1 Q* QG Spectrum

D

Q4

Fig. DG4-31: Intramodal spectrum Allocation

This creates a general economic theoretical case for a competitive market approach inspectrum allocation, if a specific amount of spectrum is made available by the government.But it does not determine the specific procedure (i.e. auction method) to apply under realworld conditions (see 3.4) nor the number of licences to be issued. Nor does it say, howmuch spectrum would be adequate for the specific services (see 3.2), if different services(at least potentially) "rival" for spectrum (intermodal competition for spectrum).

3.2 Intermodal Spectrum allocation

Intermodal spectrum allocation is the allocation of certain parts of spectrum to differentuses and services (for example TV, cellular mobile communication, or military use).2 Therehas never been a market for this allocation problem. Intermodal allocation always has been(and still is) decided on by administative decision making, often with internationalconsultation and standard setting.3 This caused some of the well-known problems thatoccur when market forces are not used for the allocation of resources.

2 Since it is generally possible to use a specific part of spectrum for mobile communication or otherservices, the question arises, if GSM and UMTS were supplied with enough (or too much?) spectrum.

3 International standards (for example GSM-900) define the amount of megahertz needed for a singlechannel and, therefore, the number of channels for a given amount of megahertz.

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Spectrum PriceSpectrum Price

E

SDA

T

SDH

D

S

SDJ

U

V

J

R

H

OR0D QH Q* QS QJ

P2

Ps

PJ

P1

B

C

F

SDB

Fig. DG4-32: Intermodal Spectrum Allocation (different services)

Let us consider two services A and B (lets say, television and cellular) which might use thesame spectrum. In figure DG4-32, ODOR denotes the quantity available for intermodalspectrum allocation decision making. Let SDA be A�s demand function for spectrum(where quantity is shown in the usual way, starting from OD to the right). For service B,quantitives are shown right-to-left, starting at OR. This shows the direct consumptionrivalry between both services.

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If spectrum allocation between A and B were performed by a market (either second handtrade or auction), point S would indicate the equilibrium with price PS and quantity ODQSfor A and ORQS for B.

Lets assume that regulatory authorities were discretionarily granting the quantity ODQ* toservice A, leaving ORQ* to B. At the borderline Q*, the value of the frequency is P2 for Aand P1 for B (with the difference of P2 � P1). The welfare loss equals the area of the triangleDRS. Efficiency could be enhanced if the "border" where shifted to the right, until QS.Welfare would then be the sum of ODQSSE (for A) and SQSORT (for B), instead of the sumof ODQ*DE and Q*ORTR. 4

Thus, if we auction off the spectrum quantityODQ* for A (let assume this is UMTS), byintramodal auction, this would result in P2 with a revenue of ODQ*DB for the government.But this will be inefficient in an intermodal allocation picture, since the spectrum price andthe spectrum costs for the networks are too high, if compared to the optimum. Theinstitutional problem then is not the A-auction, but the intermodal failure. Thus, high pricesin spectrum auctions like those for UMTS may also reflect the fact, that governments didnot allocate enough spectrum to UMTS.

In general, this risk might be reduced (1) by intermodal spectrum auction from the verybeginning, or (2) by tradeable spectrum rights. The problem there is that frequencies maynot be fungible, but specifically defined by bands of megahertz in a specific use of astandard.

3.3 Methods for the Allocation of Scarce Resources

Long before economists and industry representatives have looked at licencing and spectrumallocation from an efficiency and competition point of view, governments had useddifferent methods for allocating property rights for frequencies.

If we look at the methods used in European countries in GSM (see Annex A1, column 2)and UMTS (see figure DG4-42, column 3), different methods apply in different countries,and for different bands of spectrum in a particular country. In the following, the mainmethods for allocating scarce ressources are briefly outlined and summarized in figureDG4-337.

1 First-come-first-served (FCFS) is the most traditional method, especially at earliertimes when spectrum had not been scarce yet. In mobile communications, first-come-first-served often meant that the incumbent monopolies got the available spectrum. This wasbasically relevant with respect to the analogue systems (1G). Thus, their market relevancevanishes with growing market shares of digital systems � except in some countries, wherethe first GSM-licences were also issued on a first-come-first-serve basis.

4 The demand function SDH, instead of SDA, denotes the case that more efficient equipment may allowto produce the same services with less spectrum, but with additional costs elsewhere. The operator willthen compare the incremental cost of equipment and spectrum. SDJ, instead of SDB, characterizes thepossibility that service B may as well use other spectrum or even other transmission methods (cableetc.). Incentives to do so will increase with spectrum prices.

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2 Lotteries have been used in a number of smaller US digital markets because thisallowed the regulatory agency to issue the licences quickly and reliable, avoiding timewasting legal fights. They are non-discriminating and transparent, and incur only lowtransaction costs. But efficient use of spectrum is not only not guaranteed. It is not evenlikely, if we neglect the possibility of second hand trade. But this has mostly been outruledby law (although the firms themselves may be traded). The societies' scarcity rents aretreated like gifts to the lotteries' lucky-ones.

3 Auctions are non-discriminatory and transparent. They may incur relatively lowtransaction costs, but which will depend on auction design. The efficient use of spectrum issupposed to be most likely. Efficient spectrum prices foster efficient substitution betweenspectrum use and technology. Auctions do not leave much discretionary control to thegovernments or influence to the lobbyists. They may generate significant contributions tothe countries' budgets.

Efficiency TransactionCostTime

Non-discriminating,

Transparent

Social andfiscal

objectives

GovernmentsInfluence

(from their pointof view)

first come firstserved

-- + -- - -depends

Lottery -- ++ ++ -- --

Auction ++ +depends

++ ++ --

DiscretionaryDecisions

--depends

depends -- depends ++

Beauty ContestCriteria Contest

+depends

-- -depends

depends +

Figure DG4-337 Allocation Methods

4 Discretionary Decisionmaking includes any procedure where the authority has largediscretionary power to grant spectrum to whom it wants to (lack of strictly binding criteria).The results depend on the incentive structure of the (mostly political) decision-makers.They may pick a licencee who may be an efficient user of the spectrum or not. On oneextreme, they may feel that they do it in the best interest of their country. On the otherextreme, they may give the license to partisans or family members or to those who gave thehighest donations to the ruling party. This method is the most discriminating andintransparent one. From the point of view of most economists' it is heavily critizised andregarded as inacceptable.

5 Beauty Contest (or Criteria Contest). These terms cover a whole range ofinstitutional methods, depending on the specific procedures and criteria. Some beautycontests include strict and transparent economic criteria. They may include auctionelements (spectrum fees, population coverage etc). Some of them are performed byindependent commissions on the basis of objective and transparent criteria and valuation.

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Some may look more like a black-box procedure, which could be closer to discretionarydecision-making.

In general, economists strongly advocate auctions. But in practical terms, this very muchdepends on the specific institutional framework and action design.

3.4 Auction Methods

The specific institutional settings and the rules for the auctions may be very different. Theeconomic textbooks classify them into four basic auction methods (auction designs).

The English Auction is an ascending auction starting from a low price, where a bidder mayoverbid the actually prevailing bid in each round. Auction stops when no overbiddingoccurs and the remaining highest bidder is getting the licence, paying his bid price. Thisvery simple and intuitive procedure may become very complex with dozens of rules, whena number of objects is auctioned simultanously, for example for different frequencies(different bands or different regions), since there may be aggregation economies betweenthem.

The Dutch Auction is a descending auction starting from a high price, which isautomatically lowered. The bidder who first stops the desending procedure is getting thelicence at the prevaling price.

In sealed-bid-auctions every bidder is submitting a single (non-renewable) bid. The highestbidder is winning the licence.

In the First-price sealed-bid-auction (FPSB) the highest bidder pays the price of his bid. Inmultiobject auctions (like spectrum auctions with different frequencies) it is also calleddiscriminatory auction, because different bidders may pay different prices, even forequivalent spectrum.

In the Second-price sealed-bid-auction (SPSB) which is also named Vickrey auction, thewinner is paying the price of the second highest bidder, which is the opportunity price. Inmultiobject auctions, each winner is paying the same price which is the bid of the marginwinner.

Although economic auction theory shows that - under some restrictive assumptions -expected prices will be the same for all for methods (equivalence theorem) and equal toopportunity costs, this may not hold under realistic conditions. Here, phenomena likecollusion, valuation uncertainty, risk aversion etc. may prevail.

There is a broad theoretical literature on different auction mechanisms under differentassumptions with more or less respect to real world conditions in licences' and spectrumauctions. These shall not be summarized here.

Under real world conditions, it is generally recognized, that auctions are subject to the riskof explicit or implicit collusion. But this very much depends on the specific auctionmethod, basically because the incentives to cheat against the other bidders (if there shouldbe any collusion) varies.

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In English auctions, incentives for cheating are almost non-existing. Thus, there is acomparatively high risk of collusion (see figure DG4-34). This is surprising, since almostall spectrum auctions have been English auctions.

The same applies with regard to a criterion that may be relevant in a market whereadditional spectrum is auctioned, while incumbents who already supply the market, willhave incentives to make sure that additional companies will not enter the market. Theirchances to overbid any newcomers' bid in case of an entry threat, without committing inoverpaying, are best in Englisch auctions. Therefore, the newcomers' incentives to enter viaspectrum auctions are comparatively low.

Fig. DG4-34 roughly summarizes the basic methods with these two criteria and someothers that may be relevant. The information for the bidders depends on the specificinformation policy, which may be relevant for the forthcoming auctions. The endogenousinformation for the regulator will be valuable for intermodal spectrum allocation and forintramodal allocation of additional spectrum, if available. The informational advantages ofthe second-price sealed-bid-auction refers to the fact that any bidder hat incentives to trulyrepresent his valuation (if he actually knows it) in his bid.

Low Risk ofCollusion

Low Risk ofEntry-Block

EndogenousInformation

for theRegulator

High BidderInformation

and Low Risk-Aversion

Suitability formultiple-object

cases withcomplex cost

and/ordemand

efficiencies

1 2 3 4 5 6

English Auction(ascending A.)

- - - - 0 + + +

Dutch Auction(descending A.)

+ + + + - - - -

First Price SB(discriminating A.)

+ + + + + - -

Second Price SB(Vickrey A.)

- - + + - - -

Fig. DG4-34: Auctions and Criteria

What the contribution of auction theory to explain real world spectrum auctions' outcomesand to design "optimal auctions" is, may be questionable. Industry specific, time specific,country specific, or other real world factors may be even more relevant.

An important aspect is the auctions' objective function, which usually (in theory) is definedby the maximization of revenue. This is most important for the majority of auctions, butnot for spectrum auctions. Here, fiscal revenues should only be a side benefit for the

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government, since the spectrum market is only an auxilliary pre-market for the mobilecommunications "main" market. This is where efficiency really counts. The properfunctioning and efficient outcome of the mobile markets are supposed to be the mainobjectives for the spectrum and licencing auctions. Thus, very high revenues fromspectrum auctions' (like in the UK and Germany, see figure ... ) may be a problem, if theyquestion the financial stability of the respective firms or the whole industry.

Focussing on the mobile market efficiency does not necessarily mean that five licences arebetter than four or three. The "optimal" number of mobile networks in a market willdepend (like in other markets) on scale economies, market volume, technological andcommercial developments, growth rates etc. Thus, any predetermination of the number oflicensees by the regulatory agency includes a severe risk of being wrong. Theses risks maybe less significant (at least theoretically), if the number is determined endogenously by theauction. But the UMTS spectrum auction outcome in Germany and Austria, if compared torecent developments and problems in the mobile industry, raises questions, too.

Important factors for the adequate allocation of spectrum under real-world-conditions willbe (among others):

- Length of licence duration and renewability.- Is the spectrum tradable on a second hand market?- Time schedule of auctions in relation to technological and market developments,5- Step-by-step-licencing or simultanous licencing in the market.6- Advance notification of participation in the auction7

5 This is important for the ability of potential bidders to make sound assessments on the value of thatspecific licence and spectrum.

6 Also: Belong different frequencies (for example GSM-900 and GSM-1800, or GSM and UMTS) tothe same market or to different ones?

7 One strategy has been to merge and/or to build consortia (joint enterprises) before the auction starts.This has been facilitated by the rule that any potential bidder has to be listed well in advance. Nounexpected bidder can show up by surprise, which would make collusion much riskier and lessdesirable. This makes it easier to merge (pre-auction-collusion) and/or to decide on entry blockingstrategies.

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4 Spectrum Allocation in European Mobile Communication

4.1 GSM-Spectrum and License allocation in European Countries

The analogue mobile telephone systems NMT, AMPS, TACS, C-450 etc. which arenowadays comprised under the term "first generation" (1G), have been the beginning ofindividual mobile communication on a large scale (former systems had only very smalluser groups), though their subscriber numbers were still limited if compared to todays'figures.

In most countries, these systems were ran by the traditional telecommunication incumbentson a monopoly basis. The duopolistic competition between Racal Vodaphone and BTCellnet has been an exemption rather than the rule. Spectrum, mostly in the 450 megahertz(and later in 900 megahertz) area, were allocated by traditional administrative procedures(first-come-first-served). See fig. Annex A1, column 2.

The licencing of GSM operators and the allocation of the original GSM spectrum of 2 x 25megahertz offered a unique opportunity to introduce competition and to apply market basedinstitutional mechanisms. It was the beginning of a new market, or at least, of new marketdimensions in mobile telephony.

But disappointingly, quite a number of countries in Europe were still operating thebeginning of GSM, starting 1992, on a monopoly basis (see figure DG4-41). Othersdecided to start with two operators (UK, Germany, Finland, France), with 2 x 12.5megahertz for each operator. It was not really questioned at that time, if more than twolicences in GSM (and only 8 MHz or less spectrum for each operator) could have beenpossible and economically viable.

Spectrum was practically treated as a free (in the sense of costless) resource, althoughdefinitely scarce. Only administrative fees were applied, that did not reflect economicvalue. This can be viewed as a forgiven opportunity to introduce market forces and todetermine the economic value of spectrum. The introduction of spectrum auctions wouldhave been much easier at the starting point, when the firms' technical and marketconditions were relatively more symmetric, than three or five years later.

As GSM-markets started (and even before) it was acknowledged that here was not enoughspectrum available in the 900-megahertz-band to serve the expected large numbers ofsubscribers. Even more important, some regulatory agencies found it desirable to havemore network operators in order to intensify competition.

Additional spectrum in the 1800-megahertz-band was allocated to cellular. This raisedmore problems because of several market asymmetries between incumbents andnewcomers. One is the cost disadvantage of 1800-operators which is significant at thebeginning and tends to fade if more traffic is forcing GSM-900-operators to split cells and

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to increase the number of base stations.8 Another is that the price-inelastic customers withlarge monthly bills had already subscribed to the GSM-900-operators.

90 91 92 93 94 95 96 97 98 99 00 01

Netherlands

Denmark

Germany

United Kingdom

Austria

Sweden

Italy

Hungary

Belgium

Finland

France

Greece

Poland

Portugal

Spain

Switzerland

Ireland

Czech Republic

Iceland

Luxembourg

Norway

90 91 92 93 94 95 96 97 98 99 00 01

1 operator2 operators3 operators4 operators5 and more operators

no operator

Fig. DG4-41: Number of GSM operators in European countries 1990 - 2001

8 For technical reasons of wave propagation they need more base stations in order to cover a wholecountry (approximately 2.5 times more).

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Another problem was to allocate the remaining spectrum out of the 1800-MHz-band. TheGSM-networks usually had a strong interest in getting 1800-spectrum, because they hadcapacity problems in city areas (and some other hot spots) and intented to build 1800-MHzinfrastructure and to use this spectrum only in these areas. Because of their capacityproblems and to avoid further cell-splitting, they valued this spectrum most highly. SomeNRAs chose to auction at least part of the remaining 1800-megahetz-spectrum.

4.2 UMTS-Spectrum Auctions

The UMTS-licensing was another chance to introduce market forces into mobile spectrumallocation - with the assumption, that mobile markets will start over. But this assumption isnot totally justified, since 2 G-operators with already existing infrastructure, sales relationsand customers will have significant advantages over total newcomers.

Anyway, economists were much happier with the UMTS licence procedures, since someNRAs used auctions for spectrum allocation (see figure DG4-42).

A number of countries (Finland, Sweden, Norway, Spain, Portugal, Poland and France)still relied on beauty contests for UMTS licencing allocation. They mostly chose (orplanned) to issue four UMTS licences with 2 x 15 MHz of paired spectrum and anadditional 5 MHz of unpaired spectrum. In France, only two applicants were willing to paythe fee the government had set discretionarily.

Other countries (like UK, Germany, Italy, Netherlands, Austria, Belgium, Switzerland)used auctions, which were English simultanous auctions. This method is subject to the riskof entry blocking. The UK decided to issue five licences and reserved the most valuablefrequency package for a newcomer.

Two other countries (Germany and Austria) used an auction design which did not requireto determine the number of licences in advance, but endogenously determined the numberof licences (in the range of four to six). In both cases, the result was that six licences wereissued, including two newcomers to the respective markets (in Austria even three, if wecount Mannemann 3G separately, after Vodaphone having sold Tele.ring to WesternWireless).

If we look at the spectrum fees, it is remarkable that they are extremly different amongcountries (especially among those with auctions). This can not be explained by differentaverage income of the respective countries. It was, even at that time, significant that thefirst auctions, in the UK in April 2000 and in Germany in August 2000, resulted inincredibly high fees (37 billion Euro in the UK and 50 billion Euro in Germany).

It is questionable, if these results and the differences between countries can besatisfactorily explained by auction design theory. It had probably more to do with industryspecific factors and unique conditions. Some explanatory reasons are:

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Country Month Method Number oflicences

SpectrumFees

(Euro perpopulation)

Cost-Indexper

populationper license

1 2 3 4 5 6United Kingdom April 2000 Auction 5 648 32.40

Germany August 2000 Auction 6endogenous

610 36.60

Italy October 2000 Auction 5 212 10.60

Netherlands July 2000 Auction 5 171 8.55

France February 2001 Beautycontest

2 169 3.38

Austria November2000

Auction 6endogenous

103 6.18

Poland December2000

Beautycontest

3 51 1.51

Belgium March 2001 Auction 3 44 1.32

Portugal December2000

Beautycontest

4 40 1.59

Switzerland December2000

Auction 4 19 0.76

Spain March 2000 Beautycontest

4 13 0.53

Norway December2000

Beautycontest

4 11 0.44

Sweden December2000

Beautycontest

4 0.0 0.00

Finland March 1999 Beautycontest

4 free -

Fig. DG4-42: UMTS Spectrum allocation in Europe

(1) Auctions took place almost at the top of a year-long mobile succes story (with everincreasing penetration rates, and even increasing growth rates of subscriber numbers). Inaddition, a general feeling was prevailing, which was then and later be referred to as the"internet hype". This is especially relevant with respect to the capital markets and theinvestors' behavior. Investment money for mobile and internet projects was abundent.

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(2) The UK and Germany were considered two out of a few European core countries,where you have to be present, if you want to be a European (or even world) mobile andtelecommunications player.

(3) UMTS auctions have not been greenfield events, since UMTS does not create a totallynew market, but enlarges the already existing product lines, the services offered, theusability of mobile handsets etc. (mostly for later periods). It is expected that in thebeginníng of UMTS, most revenues will be generated by voice (with data revenues' shareincreasing over the years).

Thus GSM market structure is very relevant for the UMTS auctions, and the individualbidding companies' position and strategy is most important. In general, every GSMincumbent could be expected to fight for a UMTS licence, in order to protect its businessand its corporate future. Any potential newcomer will calculate its chance to get areasonable licence with regard to the number of incumbent operators, the number oflicences offered and the auction design.

If the number of incumbents and licences equal, it is (since English auctions have beenused) relatively easy for the incumbents to block entrants. And those will anticipate that. InUMTS, the number of licences (n+1) often exceeded the number of incumbents (n) by one.

(4) The situation will be partly different, if the number of licences is (or could be) higher,either exogenously (like in the UK) or endogenously (like in Germany and Austria). Here,potential newcomers my feel encouraged by the expectation that the incumbents would notinvest into a costly fight for a market strcture that would not really change the competitiveintensity in the mobile market.

In Germany, these considerations went wrong. Vodafone and T-Mobile (the GSM marketleaders in Germany) have been blamed for their attempt to keep newcomers out of themarket (which failed). It is not under consideration here, if their bidding has beenmotivated by market structure objectives (which is not very likely if we look at theirpositions and those of the potential newcomers) or by the intent to get 2x15 megahertz ofspectrum which was considered essential for service quality and/or cost reduction.

Even more noticeable (than the incumbents' bidding strategy), and somewhat surprising, isthe bidding behavior (the amount of 8,5 billion Euro for 2x10 megahertz of UMTSspectrum) of the newcomers (France Telecom/Mobilkom and Telefonica from Spain)which will have to develop networks and customer bases almost from scratch (except a partof Mobilkom's service provider's customers). This can (probably only) be explained by theabove mentioned reasons (1) and (2), hype situation and the strategy as a European player.

(5) The financial results of the UMTS auction in the UK in April 2000 caused a shock inthe European telecommunications industry. Avoiding these extraordinary spectrum feeswas a major topic in the industry in the respective European countries in the followingmonths.

One method to put this in practice is to build consortia in order to reduce the number ofbidders. This has been facilitated by the NRAs by (1) choosing the English auction design,and (2) by the rule that any potential bidder had to notify its application well in advanceand being accepted as a bidder. Even if there have been good reasons for earlynotifications, this facilitated pre-auction agreements.

18


It has been argued that the very different spectrum fees in different European countriesconstitute competitive disadvantages to companies in some member states. With theassumption of efficient capital markets, this argument is not convincing, since the UMTS-marktes are basicly national markets. But under imperfect capital markets and companiesoperating in different countries, these concerns may indeed be relevant.

It has also been argued that high licence fees will lead to high mobile communicationsprices for the customers. This is not convincing either, since licence fees are fixed costs forthe operators (and also sunk). Thus, they are not a part of marginal costs. Since license feesare fixed and sunk, high fees provide incentives to (even aggressively) increase the numberof customers and also their usage quantity, in particular by reducing prices below those ofother firms, by advertising etc. Thus, high fees will intensify competition and may lowerthe consumers' communications prices. High license fees are solely at the expense of theshareholders.

But, if license fees are high enough to question the financial stability of the companies andto lower its capital market ratings, it will reduce further investments and innovation.Therefore, "too high" licence fees (as in the UK and Germany) actually do have an impacton mobile markets.

The main problem for the "European competition level" is the fact, that some countrieswere still using beauty contests with rather intransparent criteria. These procedures willalways be under the suspicion that national governments are using them to discriminateagainst foreign companies.

5 Competition in European Mobile Communication

5.1 Fierce Competition or Collusion?

As a result of licencing and spectrum allocation in GSM in Europe: Is there fiercecompetition or collusion in the European mobile communication markets? Let�s have ashort look at the structural factors.

There is no straightforward economic theory telling us, if in a specific few-players-marketthere will be collusion and collective dominance, and therefore not too much competitionintensity, or not. But there are several structural factors that make collusion more or lesslikely.

In the following (fig. DG4-511), eight structural criteria will be applied to European mobilecommunication markets and roughly assessed for the mid 1990s, and for 2002, andaccompanied by a forecast for the future (when UMTS markets will have started).

Since mobile communication markets are mostly national markets which differ to a certainextent, this requires a somewhat more general look over several countries at the same time,not allowing judgements on specific national markets.

(1) Number of Operators and Concentration. If there are only two (instead of more) firmson the supply side, collusion is easier, more favourable and thus more likely (although not

19


securely predictable), with competition intensity being reduced. More firms are makingfierce competition more likely. The same can be expected, if the market concentration isreduced.

Fig. DG4-511 : Factors of Competition in Mobile Communications1995 2002 future

StructuralFeature/Factor

Assess.Relevancefür high (+)

+ low (-)competition-

Intensity

Assess.Relevanz

für high (+)+ low (-)

competition-Intensity

Assess.Relevanz

für high (+)+ low (-)

competition-Intensity

a b c d e f g1 Number of

Operatorssmall - relatively

small+ mediu

m+

Concentration veryhigh

- high o

2 Entry Barriers high - - high - high o

3 Fixed Costs veryhigh

+ + veryhigh

+ + veryhigh

+ +

4 Sunk Costs veryhigh

o veryhigh

+ veryhigh

+

5 Elasticity ofMarketDemand,

Substitution

low - high + very high

+ +

6 Homogeneityund

Transparency

high + + high + + high + +

7 Switching Costs medium

o medium - low +

8 Technical andEconomicDynamics

high - medium + low ++

9 Total moderate relativelyhigh

high

In the beginning of GSM, there have mostly been only two networks (plus several serviceproviders in some countries) which haave been often structurally dominant in the mid1990ies. Concentration was pretty high (for HHI see figure DG4-512) The more networkswere coming in (see figure DG4-41), competition was intensified. Today we see that thenumber of suppliers has significantly increased and concentration has decreased. In UMTSwe have mostly four operators licensed (in UK, Germany and Austria even more).

20


Fig. DG4-512 : Herfindahl Indices for Mobile Communications Markets 1992-2001

(2) Entry barriers. The existence of significantly high entry barriers is a necessary, but not asufficient condition for collusion. In mobile communication, entry barriers are verysignificant because of the scarcity of spectrum and the licencing of the regulatory agencies.But the relevance for competition intensity has decreased because of the increased numberof networks and other factors being changed.

(3) Fixed Costs. The cost structure is a very important element for competition. The higherthe fixed costs (as compared to variable costs) are, the more profit is gained by extras sales(since marginal costs are low), thus generating incentives for price reductions. In mobilecommunication, most of the costs are fixed, because of the network investments. In UMTS,in some countries, high licence fees added to extraordinary cost fixity.

(4) Sunk Costs. Most of the investments (and most licence fees in UMTS) are also sunk,resulting in high exit barriers. Thus, a small company loosing market shares would reduceprices rather than leaving the market.

(5) Elasticity of Market Demand. For collusion to be successful, the relevant part of thedemand function has to be inelastic.9 This actually was the case when GSM started, due towealthy and business customers. The more mobile telephony grew into a mass market,market demand became more and more elastic. In addition to that, intermodal substitutionis becoming relevant (GSM, UMTS, Wireless LAN).

9 If market demand were elastic, higher prices would not (so much) increase profits, since quantitiessold were reduced. Additionally, the incentives for individual cheating were higher, and collusion wereless likely to occur or to be stable.

Abb. AS-6-3: Herfindahl-Index für diverse Länder im Zeitablauf

0

2000

4000

6000

8000

10000

1.Hj. 1994

2.Hj. 1994

1.Hj. 1995

2.Hj. 1995

1.Hj. 1996

2.Hj. 1996

1.Hj. 1997

2.Hj. 1997

1.Hj. 1998

2.Hj. 1998

1.Hj. 1999

2.Hj. 1999

1.Hj. 2000

2.Hj. 2000

1.Hj. 2001

01.09.2001

Schweiz

Österreich

Deutschland

Frankreich

Italien

Niederlande

Spanien

Schweden

Großbritannien

Finland

21


(6) Homogeneity und Vertical Market Transparency. GSM telephony has mostly been anearly homogenous product (with the exception of newly started networks with smallerregional coverage, especially in the 1800-megahertz-band). Vertical market transpareny(which is transpareny for the consumers) has mostly been pretty high due to extensivemedia coverage. Although in some cases, horizontal market transpareny (for the othersuppliers) may foster collusion, vertical transpareny for the consumers intensifiescompetition in most cases.

(7) Switching Costs. If customers switching costs are high, this may reduce competition.This may have gained some relevance with growing penetration rates over the years. Butswitching costs are (or will be) reduced by the introduction of MNP (mobile numberportability).

(8) Technical and Market Stability. If technological and market conditions are stable,markets are more likely to be collusive. Stability was basically true for the first years ofGSM. Now, technology, supply, and demand is more uncertain for the network operators.This holds especially for UMTS, since the vertical relationship to third party service andcontent providers still need to be established.

(9) Summing up the economic factors, figure DG4-511 shows that several values havechanged towards increased competition. The prospects for UMTS are such that competitionintensity in the mobile markets is likely to be further increased.

The main problem for UMTS in European markets is that there will not be enoughcustomers and services, such that revenues will increase quickly enough to encouragefurther service developments. Indeed, because of the large outlays for UMTS networks(and sometimes also for licence fees) the network operators will have to struggle forcustomers and revenues.

5.2 Empirical Evidence

depending on available space:

Fig. DG4-521/522:

Prices and Price changes in European Countries

Competition may concentrate on different parameters in different countries, due to differentconsumer preferences and behavior (reaction elasticity toward different elements of thetariff structure). For example, handset subsidies by the networks (and by the serviceproviders, if applicable) are different, as can be seen in figure DG4-519, relying on anOFTEL benchmark study. The ranking of the five countries (and the respective indexvalues) with and without handset prices (left side versus right side of table DG4-519) showthat handy subsidies are very significant for the consumers �effective prices�.

22


Fig. DG4-519 : International Benchmark for Mobile Services (Oftel)10

Handset included Handset not included

Baskets / Minutes Baskets / Minutes

245 468 1133 3812Average

245 468 1133 3812Average

Italy 128 130 125 127 122 120 129 124 110 116

Sweden 99 98 82 104 108 126 118 102 101 144

UK 100 100 100 100 100 100 100 100 100 100

France 102 97 99 89 94 145 148 118 86 141

Germany 85 94 95 104 91 172 164 136 105 146

5.3 The Case for UMTS Infrastructure Sharing

One of the most disputed regulatory problems in UMTS, so far, is �infrastructure sharing�.In fact, this has a lot to do with the specific licencing policies of the regulatory agencies.

For GSM, the prevailing philosophy was the �fully integrated networks and services� idea.Since future mobile subcribers, traffic volume, scale economies etc. where still unknown atthe time of first GSM licencing, the regulatory agencies acted very cautious by issuing onlytwo licences in the 900-megahertz-band.11 When GSM was successful, they adopted a step-by-step procedure, leaving the third and fourth operator with 1800-megahertz-frequencies(which were less valuable in the beginning of the system). Thus GSM market asymmetrieswere, to a large extent, regulation-made.

With UMTS, the NRAs changed their procedural approach and issued all licencessimultanously. This implied that they had to decide about the number of licences12 (andthus the market structure) from the very beginning.

10 Vgl. OFTEL (2001). Prices for August 2001, UK = 100. Details on the methodoligy of the Oftel-studyand for the different baskets can be found inhttp://www.oftel.gov.uk/publications/research/benc1200.htm).

The baskets include a varying number of minutes, voice mail, and SMS. The averages in the fable arefor all Oftel baskets.

11 They tried to avoid "too small frequency-bands" for each network and were worried about ruinouscompetition among them.

12 Except Germany and Austria where this was left to be determined by the auction processendogenously.

23


Since UMTS is technologically quite different from GSM and because the non-voicedemand is totally uncertain, they do not know much more about scale economies andtraffic volume than was the case for GSM ten years before. Whether the decision for(mostly four) networks turns out to be adequate will be seen in five or ten years.

Another problem is that in most infrastructure based services (in utilities, transportationand communications), as in other industries as well, scale economies are different for eachproduction level. Some may be natural monopolies, some may allow a small number ofoperators and some may allow hundreds of competitors (especially in services). If thesector is fully competitive, the vertical structure (and the horizontal market structure aswell) will almost automatically be adjusted to these conditions. In regulated industries thisremains to be a problem.

In UMTS, the �service and content level� may allow for hundreds of players. The corenetwork may exhibit moderate scale economies, such that six networks (which is thelargest number in any European country) should not be a problem. This also has to do withthe fact that several players use part of their GSM-GPRS core network also for UMTS.

For the radio access networks (RAN), four parallel UMTS-networks may already be awaste of resources. If we only look at the �voice market�, four GSM RANs plus fourUMTS RANs, add up to eight parallel networks.

If the number of four (or even six) UMTS networks were a waste of resources, this isquantitatively significant, since the RANs require about 75 % of total investment forUMTS.

Since the regulatory agencies probably did not really consider these issues,13 they shouldadjust their policies by allowing infrastructure sharing of the RAN.

The advantages of UMTS infrastructure sharing are most significant in off-city areas and inthe first years of rollout and market development. Infrastructure sharing can make rolloutquicker and cheaper and allows a wider regional coverage (Kruse, 2002).

As a result, the services will have a broader market, providing incentives for services andcontent developments and marketing. This is especially relevant for those services that aresubject to non-rivalry in consumption inferring zero marginal costs and significantdegression of average costs.

The question for the NRAs and antitrust authorities will be: Are there significant risks forcompetition from infrastructure sharing? The answer is no.

In the beginning of UMTS, networks will desparately fight for subscribers (for reasonsoutlined above). The shared part is the most expensive one, but not the most significant forthe efficency of the market. The �intelligent� part of the network, which is embedded in thecore networks, will be operated separately. And the services and the content will not onlybe offered by the network operators themselves, but also by numerous third parties (fromthe media and IT-sector etc.).

13 And because everybody was too optimistic during the mobile and internet hype of the years 1999 und2000.

24


6 Conclusions

7 Literature

BINMORE, Ken and P. KLEMPERER (2002), The Biggest Auction Ever: The Sale of theBritish 3G Telecom Licenses, in: The Economic Journal 112, C74-C96

DOYLE, Chris and P. McSHANE (2001), On the Desgn and implementation of the GSMauction in Nigeria - the world's first ascending clock spectrum auction, Paper, ITSEuropean Regional Conference, Dublin

GRIMM,V.; F. RIEDEL and E. WOLFSTETTER (2001), Low Price Equilibrium in Multi-Unit Auctions: The GSM auction in Germany, Diskussionspapier

GRIMM,V.; F. RIEDEL and E. WOLFSTETTER (2001), The Third-Generation (UMTS)Spectrum License auction in Germany, Diskussionspapier

HAUCAP, Justus and J. KRUSE (2002), Verdrängungswettbewerb auf liberalisiertenTelekommunikationsmärkten, Diskussionspapier, Institut für Wirtschaftspolitik,Universität der Bundeswehr Hamburg, August

KLEMPERER, Paul (2001), What really matters in auction design, paper, NuffieldCollege, Oxford

KLEMPERER, Paul (2001), How (not) to run Auctions: The European 3G TelecomAuctions, draft paper, (forthcoming in European Economic Review 2002)

KRUSE, Jörn (1993), Lizenzierung und Wettbewerb im Mobilfunk, Springer Verlag,Heidelberg

KRUSE, Jörn (1995), Zugang zum Frequenzspektrum, in: Ernst-Joachim Mestmäcker(Hrsg), Kommunikation ohne Monopole II, Baden-Baden (Nomos Verlag), 449-472

KRUSE, Jörn (1996), Frequenzvergabe im digitalen zellularen Mobilfunk in derBundesrepublik Deutschland, Studie für das Bundesministerium für Post undTelekommunikation, Bonn, erschienen als Diskusionsbeitrag 174 desWissenschaftlichen Instituts für Kommunikationsdienste, Bad Honnef,

KRUSE, Jörn (1997), Marktbeherrschung auf dem deutschen Mobilfunkmarkt,Diskussionspapier Nr. 159, Institut für Volkswirtschaftslehre der UniversitätHohenheim, Dezember 1997

KRUSE, Jörn (2002), Ein gemeinsames Funknetz für UMTS in der Schweiz, hrsg. v.Avenir Suisse, Zürich

KRUSE, Jörn (2002), Regulierung der Verbindungsnetzbetreiberauswahl im Mobilfunk,Diskussionspapier, Institut für Wirtschaftspolitik, Universität der BundeswehrHamburg, August

LENHARD, Erik (2002), Die Regulierung des Mobilfunks dritter Generation, DeutscherUniversitätsverlag, Wiesbaden

25


McMILLAN, John (1995), Why auction the spectrum, in: Telecommunications Policy, vol.19, 191-99

MELODY, William (2001), Spectrum auctions and efficient resource allocation: Learningfrom the 3G experience in Europe, in: Info, vol. 3, no 1, 5-10

OFTEL (2001), International benchmarking study of mobile services, issued by theDirector General of Telecommunications, London, 7 november 2001

RUHLE, Ernst-Olav (2001), UMTS Network Sharing im internationalen Vergleich, in:Kommunikation und Recht, 1-15

WHALLEY, Jason (2001), 3G, Auctions and Changing Collaborative Patterns within theMobile Communications Industry, Strathclyde Business School, Working Paper2001/16

WOLFSTETTER, Elmar (2001), The Swiss UMTS Spectrum Auction Flop: Bad Luck orBad Design, Diskussionspapier

26


Annex A1: Assignment of analogue, GSM 900 and 1800 spectrum

Method ofassignment

Spectrum assignedmegahertz band/system

Initialassignment

DurationSpectrum/Operations

1 2 3 4 5 6

AUSTRIAMobilcom Austria First come first served 2x 11

8analogue,

900Nov. 1990,since 2000

15 years

First come first served 2x 8 900 Jan. 1994 20 yearsExtension of GSM 2x 5 1800 Aug. 1999 as GSMAuction 2x 10 1800 May 2001

Max. Mobil Beauty contest witheconomic criteria

2x 8 900 Jan. 1996 20 years

Extension of GSM 2x 5 1800 Aug. 1999 as GSMAuction 2x 3.2 1800 May 2001

Connect Austria Beauty contest withAuction elements

2x 16.8 1800 Aug. 1997 20 years

Auction 2x 6 1800 May 2001Tele.Ring Beauty contest with

Auction elements2x 14.8 1800 May 1999 20 years

BELGIUMFirst come first served 2x 12 900 Apr. 95 15 yearsBelgacomExtension of 900 2x 4.4 1800 May 99 as 900

Mobistar Beauty contest 2x 12 900 Nov.95 15 yearsKPN-Orange Beauty contest 2x 15 1800 Sep. 98 15 yearsDENMARK

First come first served 2x 4.5 NMT Jan 82, Dec 95 10 years2x 5.8 NMT Jan 87, Feb 97 10 years

First come first served 2x 8.8 900 Nov. 1991 10 years

TeleDenmark

Beauty contest 2x 14.4 1800 Mar. 1997 10 yearsSonofon Beauty contest 2x 8.8 900 Sep. 1991 10 years

Beauty contest 2x 7.2 1800 Mar. 1997 10 yearsTelia Beauty contest 2x 14.4 1800 Mar. 1997 10 yearsMobilix Beauty contest 2x 14.4 1800 Mar. 1997 10 yearsFINLANDSuomen 2 G Oy First come first served 2x

2x2.18.6

900GSM + E

Aug. 2000Jan. 2001

20 years

Finnet Group/Suomen 2 G Oy

First come first served 2x 7.2 1800 Jun. 1996 20 years

Oy Radiolinja First come first served 2x 9 900Helsinki

Feb. 1996 20 years

First come first served 2x 8.4 900rest of Finn

First come first served 2x 7.2 1800 Jun. 1996 20 yearsSonera OyJ First come first served 2x

2x4.52.1

NTM 450NTM 900

19811986

20 years

First come first served 2x

2x

12.4

11.6

Helsinki900

rest of Finn

Feb. 1990 20 years

First come first served 2x 7.2 1800 Jun. 1996 20 yearsTelia Mobile Finland First come first served 2x 7.2 1800 Jun. 1996 20 yearsAlands Mobiltelefon First come first served 2x 8.2 900 Aland Feb. 1993 20 yearsFRANCEFrance Telecom Mob Ext. of analogue 2x 10.8 900 Mar. 1991 15 years

27


Method ofassignment


Initialassignment


1 2 3 4 5 6

Ext. of analogue 2x 13.2 1800 Nov. 1998 as 900SFR Ext. of analogue 2x 10.8 900 Mar. 1991 15 yearsMobiles Ext. of analogue 2x 13.2 900 Nov. 1998 as GSMBouygues Telecom Beauty contest 2x 3.1 900 Nov. 1998 15 years

Beauty contest 2x 23.2 1800 Dec. 1994 15 yearsGERMANYT-Mobil First come first served 2x 5.6 C-450 1986 20 years

First come first served 2x 12.5 900 Feb. 1990 20 yearsAuction 2x 5.0 1800 Oct. 1999 10 years

Mannesmann Beauty contest 2x 12.5 900 Feb. 1990 20 yearsAuction 2x 5.0 1800 Oct. 1999 10 years

E-Plus Mobil Beauty contest 2x 22.5 1800 May 1993 19.5 yearsViag Interkom Beauty contest 2x 22.5 1800 May 1997 19.5 yearsGREECEPanafon Beauty contest 2x 10 900 Sep. 1992 20 yearsTelestet Beauty contest 2x 10 900 Sep. 1992 20 yearsCosmote Direct allocation 2x 25 1800 Dec. 1995 25 yearsIRELANDEircell First come first served 2x 10 analogue Dec. 1985 15 years

First come first served 2x 7.5 900 Jul. 1993 15 yearsjustify requirement 2x 14.4 1800 Jan. 2000 15 years

Esat Digifone Beauty contest 2x 7.5 900 May 1996 15 yearsjustify requirement 2x 14.4 1800 Jan. 2000 15 years

Meteor Beauty contest 2x 4.8 900 Jun. 2000 15 yearsBeauty contest 2x 14.4 1800+ Jun. 2000 15 years

ITALYTIM First come first served 2x 11.8 analogue Jul. 1990 15 years

First come first served 2x2x

8.22.3

in largecities 900

1994 15 years

Extension of GSM 2x 4.8 1800 Jul. 1999 as GSMOPI Beauty contest 2x

2x8.2

2in large

cities 9001994 15 years

Extension of GSM 2x 4.8 1800 Jul. 1999 as GSMWIND Beauty contest 2x 4.8 out of large

cities 900Jul. 1999 15 years

2x 9.8 1800 Jul. 1998 15 yearsBlue Beauty contest 2x 9.8 1800 Aug. 1999 15 yearsLUXEMBOURGEnterprise P. et T. Beauty contest 2x 11.6 900 Jun. 1993 15 years

Beauty contest 2x 9.8 1800 May 1998 15 yearsMillicom Beauty contest 2x 11.6 900 May 1998 15 years

Beauty contest 2x 9.8 1800 May 1998 15 yearyNETHERLANDSKPN-Mobile B.V. First come first served 2x 16 900 Sep. 1994 15.6/15 yrs

Auction 2x 16.2 1800 Feb. 1998 15/13 yearsLibertel Beauty contest 2x 7.4 900 Apr. 1995 15 years

Auction 2x 9 1800 Feb. 1998 15 yearsDutchtone Auction 2x 14.8 1800 Feb. 1998 15 years

Auction 2x 5 1800 Feb. 1998 as DCSTelfort Auction 2x 16.8 1800 Feb. 1998 15 years

Auction 2x 6.2 E-GSM 900 Feb. 1998 as DCS

28


Method ofassignment


Initialassignment


1 2 3 4 5 6

Ben Netherlands Auction 2x 15.6 1800 Feb. 1998 15 yearsPORTUGALTMN Direct allocation 2x 8 900 Mar. 1992 15 years

Extension of GSM 2x 6 1800 Apr. 1998 as GSMTelecel Beauty contest 2x 8 900 Oct. 1991 15 years

Extension of GSM 2x 6 1800 Apr. 1998 as GSMOptimus Beauty contest 2x 7.8 900 Nov. 1997 15 years

Contextual to GSM 2x 6 1800 Nov. 1997 as GSMSPAINTelefonica Movil First come first served 2x 16.6 analogue Dec. 1991 15 years

First come first served 2x 11.8 900 Feb. 1995 15 yearsBeauty contest 2x 13.4 1800 Jul. 1998 25 years

Airtel Movil Beauty contest 2x 11.8 900 Dec. 1994 15 yearsBeauty contest 2x 13.4 1800 Jul. 1998 25 years

Retevision Movil Beauty contest 2x 13.4 1800 Jul. 1998 25 yearsSWEDENTelia First come first served 2x 4.5

1.9NTM 450NTM 450

19811986

till 12/2004till 12/ 2000

First come first served 2x 7.2 900 1992 10 yearsBeauty contest 2x 15 1800 Feb. 1995 10 years

Europolitan Beauty contest 2x 7.2 900 1992 10 yearsBeauty contest 2x 8.4 1800 Feb. 1996 10 years

Tele 2 Beauty contest 2x 7.2 900 1992 10 yearsNetcom Beauty contest 2x 8.4 1800 Feb. 1996 10 yearsUNITEDKINGDOMOne2One Beauty contest 2x 30 1800 Mar. 1993 25 yearsOrange PersonalComm.

Beauty contest 2x 30 1800 Feb. 1994 25 years

Vodafone Beauty contest 2x 8.2 TACS Jul. 1992 25 yearsBeauty contest 2x 12.2 900 Jul. 1992 as TACSExtension of licence 2x 5.8 900 Jul. 1996 as TACS

BT Cellnet Beauty contest 2x 8.1 TACS Jul. 1992 25 yearsBeauty contest 2x 12.2 900 Jul. 1992 as TACSExtension of licence 2x 5.8 1800 Jul. 1996 as TACS

Documents

Competition in Mobile Communications and the Allocation of