The Hong Kong regulator is considering implementing the concept of separating service provision from network operation for 3G services. This means that a service provider need not at the same time be the network operator although a network operator may not be precluded from acting as a service provider. This concept had been implemented in the initial periods of mobile services in the UK. Recently, there is renewed interest in the European countries such as the UK, Denmark, Finland, Norway and Sweden about the introduction of a similar concept known as Mobile Virtual Network Operator (MVNO). The concept is that MVNOs would not have a license to use radio spectrum, but would have access to the radio networks of one or more of the mobile network operators and build and operate parts of the networks not requiring the use of a radio spectrum, such as elements of an intelligent network. These service providers would then be able to offer 3G services to customers without actually operating the radio networks. Separating service provision from network operation in the 3G mobile services would enhance competition in the services market and provide customers with more choice and variety of service and price packages.
Service providers would develop a wider range of value-added and multimedia services such as mobile access to the Internet, innovative data applications over mobile networks etc to customers and customers would be able to enjoy wider geographical coverage if service providers team up with more than one mobile network operators. The Consultation Paper also points to some problems with this approach. If the new 3G mobile network operators are obliged to open up their networks and systems and share use of the spectrum with the service providers, and such interconnection or sharing were based on cost based charges, they would have less commercial incentive to invest and build up their own networks, infrastructure and service coverage. Since the 3G mobile network operators would also be service providers,there would be competition, charging, bill settlement and commercial issues to be tackled among 3G mobile network operators and the service providers. Some regulators are of the view that such matters should best be resolved by commercial negotiations rather than by regulatory intervention. For example, the UK regulator OFTEL, in a statement issued in October 1999, indicated that it did not see the need for regulatory intervention to implement the concept of MVNO for the time being.
USA - adapting spectrum auctions for rural areas
The Communications Act authorizes the FCC to use auctions to promote efficient and intensive spectrum use as well as to promote the development and rapid development of new technologies, products and services for the benefit of the public, including those residing in rural areas. It also requires the Commission to administer the auctions so as to promote economic opportunity and competition, avoid excessive concentration of licenses, and disseminate licenses among a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority groups and women. The FCC has facilitated the delivery of new service to rural and undeserved areas. Auctions have generally provided rural telephone companies with favourable opportunities. To date, rural telephone companies have won about 44 per cent of the 123 rural Basic Trading Area (BTA) licenses in the United States. In the broadband PCS proceeding, the Commission adopted measures allowing rural telephone companiesand others to obtain broadband PCS licenses that are geographically "partitioned" from larger broadband PCS service areas.
Partitioning is the reassignment of licenses by geographic areas other than those used by the Commission in the original assignment process. Licensees do not need to meet specified criteria to define a new geographic area.
Partitioning flexibility creates an opportunity for a rural telephone company, or any other small business, to obtain Commission licenses usually accessible only to larger companies. A rural telephone company may wish to provide service only in the small geographic area in and around the community it serves. Even though this area may be a small subset of the license area offered in an auction, the auction process normally requires that the company purchase a license for the entire area. This is difficult for small companies that may not possess the financial resources to purchase these larger licenses and may not wish to provide service in most of the service areas. Conversely, large operators may wish to provide service only in more densely populated areas where the return on the required investment is greater. This creates a natural market where the large operators who win licenses can sell off portions of their service areas to smaller companies.
Therefore, the flexibility to partition is expected to generate benefits for all parties concerned. The small operator companies, like rural telephone companies, have an opportunity to enter the market. The large operators can generate a return on their investment in a geographical area where they otherwise might not gain any returns. Finally, rural consumers have increased access to modern technologies and the benefits of competition. IN addition to partitioning, the commission allows entities to "disaggregate" a portion of the spectrum assigned to a broadband PCS license. Disaggregation is the assignment of discrete portions, or "blocks," of spectrum licenses to another qualifying entity. These partitioning and disaggregation measures were adopted in part to respond to rural telephone companies' concerns that they effectively would be barred from entering the broadband PCS industry if, they were required to bid on an entire BTA or MTA license to obtain the license which covered their wireline service areas.Rural telecos believed that partitioning would allow them to offer in-region service and would encourage them to take advantage of existing infrastructure, thereby speeding service to rural areas. Recently, the commission extended its broadband PCS partitioning and disaggregation rules to allow entities other than rural telephone companies to obtain partitioned or disaggregated licenses in order to speed service to unserved or undeserved areas.
Conclusions
Spectrum is likely to be a limited resource in the foreseeable future. Even though technological advances have enabled increasing efficiency in the use of spectrum it has also lead to dramatic increases in applications using spectrum. Spectrum rights will, therefore, need to be assigned to a limited number of users. Many countries are using auctions, instead of administrative procedures referred to as "beauty contests", to assign spectrum rights. It is important to bear in mind that what is being auctioned is spectrum rights and not the spectrum. While flexibility in the use of spectrum rights is desirable it is up to the government to decide the degree of flexibility. Generally, greater flexibility may be expected to lead to higher auction revenues. The primary advantage of spectrum auctions, as against the auction of service licenses, is that it focuses attention on the spectrum as the limited and valuable resource. in the case of spectrum auctions there is a direct correspondence between the auction priceand the spectrum being auctioned. With auction for service licence there is only an indirect and imperfect relationship between the auction price and the spectrum being assigned. Spectrum auctions will require a thorough review of existing spectrum allocations and the possibility of relocating defense users. The proceeds from spectrum auctions can be used to partially meet the costs of relocation. The auction process needs to be designed carefully. A companion paper will look at the experience of other countries in designing spectrum auctions and the lessons for India. The author is professor, Centre for Telecom Policy Studies, Indian Institute of Management, Ahmedabad
(Concluded)
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
