Measuring the Effects of Spectrum Aggregation Limits: Three Case Studies from Latin America
28 Pages Posted: 27 Oct 2009
Date Written: October 25, 2009
Spectrum is a critical input and a required key ingredient for mobile communications services, one of the most important technologies of the past century in terms of economic impact. As mobile communications evolves from a voice-only service to a broadband connection-a high-speed connection for voice, video, data and more-the amount of spectrum needed to provide this service increases exponentially. Spectrum is truly the lifeblood of the wireless industry. Yet mobile service providers in some countries are constrained, both by a lack of spectrum in the market and by limits on the amount of spectrum that may be held by any one provider. This study examines the potential economic effects of spectrum aggregation limits in three countries: Argentina, Chile, and Colombia. The core costs of building a mobile broadband wireless network in each country are estimated for providers with existing mobile wireless networks. Evaluating spectrum blocks ranging from 2x5 MHz to 2x20 MHz, it is shown that policies such as spectrum aggregation limits that prevent or constrain expansion with larger blocks could double or even quadruple the cost of providing, and thus the price charged for, mobile broadband service. Such a significant increase in prices would likely produce a correspondingly detrimental economic impact on consumers, enterprises and the overall economy. Finally, alternatives to spectrum aggregation limits are reviewed, with the goal of providing policymakers other means to restrict potentially anticompetitive behavior while not thwarting pro-competitive investments in spectrum that make advanced services possible.
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