SpectrumPolicyandRecommendations

Erasmo Rojas
Director, Latin America & Caribbean Erasmo.rojas@3gamericas.org Erasmo rojas@3gamericas org

Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010

LatinAmericachallenges g
No spectrum made available for advanced mobile Nospectrummadeavailableforadvancedmobile broadandservices Governments are promoting new entrants by using Governmentsarepromotingnewentrantsbyusing spectrumcaps High taxes for wireless services and equipment Hightaxesforwirelessservicesandequipment Nospectrumauctionfor4G;likelybandsare2,5 GHz,1.7/2.1GHzand700MHz GHz 1 7/2 1 GHz and 700 MHz Lowbroadbandpenetration(lessthan10%)
Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010
1
2

MobilityMatters y
MobileCommunications=ReachandCostEffectiveness [near5billionwirelesssubscribersworldwide,withhuge [near 5 billion wireless subscribers world wide, with huge economicimpact BroadbandCommunications=GameChangingCapability [highspeedservicesfacilitateseducation,healthcare, publicsafety,basicgovernmentservices,andindividual public safety basic government services and individual productivity] MobileBroadband=TheNextIconicTechnology [maybehuge,combiningbestofbothmobileand broadband]
Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010
1
3

TheBenefitsofMobileBroadband
F Foremergingeconomies:US$300to$400billion i i US $300 $400 billi and10to14millionjobs ForLatinAmerica:$US50to$70billionandan additional1.1to1.7millionjobs(McKinsey2009) additional 1 1 to 1 7 million jobs (McKinsey 2009) A j i t ff t f th Ajointeffortoftheprivatesectorandgovernment i t t d t neededtoincreasebroadbandpenetration
Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010
4

GlobalTrends: MoreUse,BiggerBands More Use Bigger Bands

15minuteswatchingYouTube=1,000minutesvoice communications(bothconsume100MB)(Rysavy2009) ( ) Monthlyuse,includingsmartphonesandlaptops,couldrisefrom 1GBin2009to14GBin2015. 1 GB in 2009 to 14 GB in 2015. (Cisco2009) Anaveragesubscribercouldconsume: 55MBwithemail(permonth) (p ) 200MBwithwebbrowsing 2.7GBwithInternetradio 9GBwithvideo 27GBwithHDmoviedownloads(Rysavy2008)

Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010

SpectrumisaCriticalInput: ITUEstimatesofSpectrumNeeds* ITU E ti t fS t N d*

B 2010 b t By2010:between760and840MHz 760 d 840 MH
760-840 MHz 1720 MHz

1280 MHz

By 2020: between 1280 and 1720 MHz By2020:between1280and1720MHz Thesenumbersdonotaccountformultipleproviders.If p p threeproviders,theestimatedneedin2020increasesby 280MHz Theconservativeestimatefornextyearsneedisthree timesgreaterthantheaverageallocationinLatinAmerica
* ITU-R M.2078 report

Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010

OptionsforNetworkOperators p p
Chargemoreforpeakhourtransmission Encourageuseoffemtocellsbysubscribers Buildmorecellsites Employnewtechnologies(HSPA+,LTE) Usemorespectrum(however.)

Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010

WhyNotHaveGeneralSpectrum AggregationLimits? A ti Li it ?
Very difficult for policymakers to pick the optimal number of Verydifficultforpolicymakerstopicktheoptimalnumberof playersinamarketandtheymaypromoteinefficiententry Limitingspectrumheldbyincumbentsmeanstheymusttrade offbetween2G/3Gandadvancedservices Ifvoiceserviceisdiminished,operatorsrisklosingamain sourceofbusinessandtheirabilitytoinvestinfuture Ifadvancedserviceisdiminished,lessadoptionand opportunitiestoimproveARPU(AverageRevenuePerUser) t iti t i ARPU (A R P U )
Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010
1
8

MeasuringtheEffects:TheModel Measuring the Effects: The Model

Abottomupcostmodelforahypotheticalplayerthatis spectrumconstrainedandinterestedinprovidingan t t i d di t t di idi advancedservice(LTE) Estimatesthecostofprovidingthisserviceunderdifferent scenarios:2x5MHz,2x10MHz,2x15MHzand2x20MHz scenarios: 2x5 MHz 2x10 MHz 2x15 MHz and 2x20 MHz Assumes zero monopoly profits Thus Assumeszeromonopolyprofits.Thus, highcosttoprovideservice=highpricetoconsumer lowcosttoprovideservice=lowpricetoconsumer low cost to provide service = low price to consumer
Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010
1
9

ParametersoftheModel
Interestratepaidbythefirm(basedonUSFcases) p y Geographicarea(largestmetroareas) ( p p , , Datasubscribers(basedonpopulation,marketshare, wirelesspenetration,datapenetration) ( ) Cellsitecosts(construction,installation,maintenance) Userspersitefordifferentspectrumallocations p p y y Capitalexpensesinyears01andyears45 Operatorhitsbreakevenbyendofyear8

Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010

10

ApplicationandResults pp

Themodelisappliedtothreecountries: Argentina,ChileandColombia Argentina Chile and Colombia We find that strict aggregation limits > higher costs Wefindthatstrictaggregationlimits>highercosts We estimate that higher costs > higher prices Weestimatethathighercosts>higherprices

Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010

11

MinimumMonthlyCostofLTEServiceUnder DifferentSpectrumAllocations iff ll i

2x20MHz2x15MHz2x10MHz2x5MHz $X$1.3X$2X$4X Ingeneral,acrossallmarketsstudied,adecreasein spectrumavailablefrom2x20MHzto2x10MHzresults inadoublingofthecost. Afurtherdecreaseintheamountofspectrumfrom2x10 MHzto2x5MHzdoublescostagain. MHz to 2x5 MHz doubles cost again.
Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010
1
12

AlternativestoSpectrumLimits p
I. SetAsides

Oftenaccompaniedbyseriousproblems,suchas
pricedistortions(winnerspayinglessthanmarketvalue) collusion

IntheU.S.,the1995PCSCBlockfailure I C d th AWS InCanada,theAWSauction,withnonewentrantnationwideandwith ti ith t t ti id d ith seriouspricedistortions InPeru,25MHzweresetasideinthe1900MHzbandforanew providerinSeptember2008;ithasbeenauctionedtwicesincewithno winner

Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010
1
13

AlternativestoSpectrumLimits p
II.AntitrustPolicy Shouldbemarketspecific.TheFCCapproach: considerhowatransactionwillaffectcompetition bydefiningrelevantmarket,lookingatmarket powerofincumbents,analyzebarrierstoentryand potentialcompetitors,analyzeefficiencies t ti l tit l ffi i i P li Policymakersmustbalancepotentialformarket k b l i lf k poweragainstpotentialforefficiencygains
Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010
14

AlternativestoSpectrumLimits p
III.AuctionSpecificRules
Itiscriticalthatpolicymakersrecognizetheneedsoflikely bidders.Forex.,spectrumblocksizesneedtosufficientlylarge fornewservices. f i Maybe limit number of blocks that may be acquired by any one Maybelimitnumberofblocksthatmaybeacquiredbyanyone bidder,keepinginmindtheabovepoint. DigitalBritainReportprovidesamodel:combine2.6GHzand 800MHz(TheBigAuction),witha2x65auctioncap.
Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010
15

SelectedSpectrumCapsinLatinAmerica
Country Argentina g Spectrum Spectrum Cap,MHz 50 Comments Secomhasannounceditwilllicense1.7/2.1GHzbandin 2010? Increasedfrom50to85fortheendof2007 3Gspectrum auction.Planningauctionstructureof2.6GHzbandbased onpublicconsultationcommentsreceivedbyAnatel on public consultation comments received by Anatel Twooperatorsgot90MHz;Nextel(60MHz)andVTR(30 MHz).Planningstructureof700MHzand/or2.6GHzband forLTE for LTE Incumbents excludedfrom2.5GHz60MHzauctionthat shouldtakeplacebymid2010 should take place by mid 2010 Twosimultaneousauctions:30MHzin1900MHzand90 MHzin1.7/2.1GHzwilltakeplacemostlikelybymid2010 MHz in 1 7/2 1 GHz will take place most likely by mid 2010
1
16

Brazil

85

Chile

60

Colombia

60

Mexico

80

Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010
Source: Telefonica, National Regulators Websites, Comision Federal de Competencia (Mexico) ; Arthur D Little Spectrum Report, April 2010

Updateon2.6GHzbandinLatinAmerica
Country Brazil Estimated auction 2012/13 Comments
Anatelproposed to allocate 140MHz(2x70MHz)for mobile services.2x60MHz would be assigned towards theend of2012and2x10MHzin2015.Local operadoresplanto launch LTEbefore 2013. Subtelsuggested to auction this bandin2010.Subtelhasalready channelized the2.6GHzbandbased on ITU O i 1 (2 i d bl k f 76MH h 2 6GH b d b d ITUOption 1(2paired blocksof76MHzandone bl k d block of42MHzTDD). CofetelandSCTevaluate therenewal ofthelicense ofMultivision MMDS operator asthewhole bandhasbeen underutilized.Regulators estimate that they will get a big chunk of this band free to auction it in 2010 following ITU abig ofthis bandfreeto in2010following ITU Option 1recommendation. MINTICis auctioning 60MHzinthis bandBUT haschosen option 3ofITU recommendation andhasestablished anewcap of60MHzto preclude imcumbents of participating ofparticipating.

Chile Chil

2010

Mxico

2010/11 /

Colombia

2010

Chileanplanfor2.6GHzband (Resolutions479/05and733/07):
B1: 76MHz B2: 42MHz B3: 76MHz

2.496MHz

2572MHz

2614MHz

2690MHz 1
17

Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010

Summary
Spectrumisacriticalinputformobileservices;demand faroutstripscurrentsupply. Lackofspectrumhindersnewadvancedservices. Spectrumaggregationlimitsimposeseriouscostson existingproviders,whicharepaidbyconsumers. Inmarketswithconstrainedproviders,consumersmay p y paytwiceasmuchforLTEifspectrumislimitedtoonly p y 2x5MHzascomparedto2x10MHz,andfourtimesas muchascomparedto2x20MHz.
Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010
1
18

Obrigado!
Erasmo Rojas
Director, Latin America & Caribbean Erasmo.rojas@3gamericas.org

Mobile Broadband Outlook for the Americas, Rio de Janeiro, 26 April 2010