Basics of Spectrum Workshop on Spectrum Management India International Centre, New Delhi 29.4.2013.

Basics of Spectrum

Workshop on

Spectrum ManagementIndia International Centre, New Delhi

29.4.2013

Discussion Points

What is ‘Spectrum’?

Characteristics of Radio Spectrum.

Is Radio Spectrum a ‘scarce resource’?

Uses of Radio Spectrum.

Value of Radio Spectrum Factors affecting value of spectrum Upper and Lower Bounds of spectrum value Valuation Approaches

What is ‘Spectrum’?

A rainbow spans a continuous spectrum of light (visible electromagnetic waves).

The electromagnetic spectrum is the collection of all possible frequencies of electromagnetic radiation.

All Use Some Part of

Spectrum

What is ‘Spectrum’?

EM radiation is classified by wavelength into: Radio wave, Microwave, Infrared, Visible region

(Light) Ultraviolet, X-rays, Gamma rays

What is ‘Radio Spectrum’?

Radio spectrum is classified by wavelength into: VLF, Long wave, Medium wave, Short wave VHF, UHF, EHF

Characteristics of Radio Spectrum

Radio frequency spectrum does not respect geographical boundaries.

Use of radio spectrum is susceptible to overlapping interference. This requires the application of complex

engineering tools to ensure interference free operation of various wireless networks.

Radio spectrum is not consumed upon its usage. Radio spectrum can be re-used.

Different waves have different characteristics.

GSM Network

n BTS n BTS

BSC BSC BSC

MSC

Frequency Re-use

Is spectrum a ‘scarce resource’?

Theoretically, spectrum is not scarce. Spectrum available for telecommunications

depends on state of technology. Earlier mobile communications used VHF now they use

UHF.

Practically, spectrum is ‘scarce’. Radio waves have different properties and not all

waves are suitable for communications. Availability of technology for different

applications.

Users of Radio Spectrum Defense Communications. Commercial Radio. Television. Mobile Telephony: GSM & CDMA. Satellite Telephony. Maritime Communications. Others: Police, Civil Aviation, HAM, etc.

Importance of Spectrum For Government:

Allocating spectrum to different users. Source of revenue.

US auctioned 3G spectrum (62 MHz) for about $ 20 billion in 2006.

India auctioned 3G spectrum for Rs. 67718.95 cr. Fostering competition. Economic development.

Importance of Spectrum For Telecom Companies:

Roll-out of mobile services. Quality of service Providing more value added services. ‘Spectrum Hoarding’ for subsequent sale.

Significance of Spectrum Valuation

For Public Policy: Configuring licenses to be efficient and value

maximizing. Determining when to reallocate spectrum. Designing revenue maximizing auctions. Estimating auction receipts.

 For Users: Deciding whether to buy or build. Negotiating fair price.

Value of Spectrum Radio spectrum has no inherent value. The economic value of the radio spectrum

lies in its capacity to carry information thus enabling provisioning of services. Mobile communications (wireless broadband,

satellite) Fixed communications (broadcasting,

microwave backhaul) Detection applications (Radar) Location applications (GPS)

Value of Spectrum Factors affecting value of spectrum:

Regulatory restrictions Spectrum band location Geographic location Competitive situation Size of spectrum band Cost of alternates

Value of Spectrum Upper and Lower bounds of spectrum

value: Upper Bound

The value of a spectrum license to the user is the present value of future profits earned from the services deployed.

Lower Bound A users’ willingness to pay for a spectrum license is

determined by the relative value of alternative assets to provide the same services.

Value of Spectrum Valuation Approaches:

Market Comparables: The spectrum valuation is based on comparable assets

traded in the market. Bottoms-up Approaches:

Discounted Cash Flow: Present value (PV) of future cash flows is estimated by applying an appropriate discount rate.

Cost-savings Approach: PV of cost savings achieved by using the asset, as compared to the next best alternative is estimated.

Econometric Approach: Statistical estimate of relationship between number of explanatory factors and a sample of assets.

Thank You