Research Notes

How can governments best distribute the digital dividend?

– Should they give a license to one mobile operator, or distribute the licences between many market players?
In connection with the digitalisation of television signals, governments around the world have initiated a number of tenders or auctions to allocate the digital dividend to a number of companies, in order to be able to deliver more broadband access to inhabitants in a country. The purpose of the tenders are to ensure that inhabitants in areas that often have little or no high-speed Internet access, will be ensured future access.

Around the world we can currently see that many governments are choosing various different ways to offer these licenses, which is quite different from when the original 3G licences were offered, and where most countries chose to use auctions to decide who would get the 3G licences.

There are many reasons why different countries are using different methods to decide how to distribute the digital dividend. Each country has a number of factors they need to take into consideration, including:

1.    What is the country’s current broadband situation and what types of broadband do inhabitants have access to?

2.    What is the topography of the country – are there are large areas with few inhabitants or mountainous areas that make it expensive and difficult to expand broadband access to thinly populated areas?

3.    What is the current mix of broadband technology in the country – fixed line versus mobile products?

4.    How willing are existing telcos to invest in this area and are there any new market players that would like to enter this market with a greenfield operation?

5.    How many mobile operators are currently in the market and how will the distribution of the digital dividend influence the market in the short, medium and long term.

So the big question is which business model will be best for each individual country’s inhabitants and for the telco industry and how can you ensure that your business models take all the relevant factors into consideration and thereby ensure that there will also be an industrial willingness to invest in telco infrastructure in the future – telco infrastructure that is so enormously important to our current and future society.

Strand Consult has been working for the past two years on a large project where we have been examining and analysing these challenges. We are pleased to announce that next week we will publish a new report that examines in detail the challenges that both the telco industry and the political/regulative authorities are facing. Basically it all boils down to society having three possible choices:

1.    Allocate the whole spectrum to a carriers carrier that is only allowed to sell wholesale traffic, thereby ensuring that the customers are the existing mobile operators and MVNOs that want to offer broadband products.

2.    Allocating the whole spectrum to one individual market player that then is bound by a carriers carrier terms and must sell traffic to the other market players in the market at more less regulated prices.

3.    Divide the spectrum into smaller units that are then offered to two or more market players that have to comply to certain terms and conditions.

We believe there will be vast differences on how different countries handle this task. But we also believe that having a sound knowledge and understanding about the mobile industry is extremely important, before politicians make any decisions.

It is important that the authorities do not just examine how they can distribute the spectrum in a financially attractive manner, but also how they can ensure that the companies that acquire the spectrum can achieve a satisfactory network economy from the infrastructure they will need to build.

In practice, distributing the digital dividend among many different market players will result in the end-user product that customers get in sparsely populated areas will be far inferior than originally planned and expected in those types of areas, and furthermore the on-going expansion will be similarly limited by a poor spectrum or network economy.

We are living in a world where an increasing number of mobile operators have discovered the financial advantages of sharing networks and mobile spectrum. In this type of world it is natural to view the digital dividend in a new modern light, instead of repeating how mobile licences were distributed in the past.

If you would like to learn more about some of the important areas that should be taken into consideration in connection with distributing the digital dividend, please do not hesitate to contact us. Strand Consult has spent a great deal of time researching this subject across many countries and continents and would be happy to share our knowledge and information with you.
More information:
How mobile operators can reduce cost for mobile masts and improve mast regulation Strand Consults Strategic Workshops

Successful Strategies for the Mobile Broadband Market

OneAPI – Next Generation Value Added Services in the Mobile industry

Show me the money – The future Business models for mobile Broadband Services

How MVNO´s can get success in the Mobile Broadband market

How media companies can get success on the mobile broadband market

How to get success with Value added services on the Mobile Broadband market

How can a Wimax operator survive in a world full of WCDMA

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