Three New Empirical Reports from Strand Consult: Mobile Mergers, Infrastructure, and 5G

Strand Consult´s three latest reports provide empirical research on three specific important areas: mobile mergers, infrastructure (middle mile economics in wireline broadband networks), and the economic value of licensed spectrum for 5G.

This reports provide valuable insight  to engage in policy discussions and offer a smart way to save time and resources. Review the reports below and contact Strand Consult to purchase a report and presentation.

Understanding 4 to 3 mobile mergers

This report reveals what needs to be done to consolidate the telecommunications market.

Around the world, telecom operators have had difficulty to consolidate the telecommunications market, especially when reducing the number of mobile operators from 4 to 3. Strand Consult has studied this topic for 20 years. Its first report featured South Korea with its 5 to 3 merger in 2000. A lot has happened since then, and Strand Consult has produced “the report of reports” which combines and summarizes all the knowledge about these mergers.

Strand Consult is intrigued why some attempts to create 4 to 3 mobile markets succeed while others fail. Together with leading telecom and competition experts, Strand Consult has collected, analyzed, and distilled this knowledge into practical and actionable steps for operators.  This includes the relevant legal, regulatory, historical, and technological aspects of different countries and markets.

The purpose of the report “Understanding 4 to 3 mobile mergers” is to help operators save time and money. This report does not eliminate the need to hire lawyers to conduct the transaction, but it will help save time and improve communication with key stakeholders wherever they are: the investment community, political/regulatory systems, the media, employees, suppliers, academia, and so on.  This is also the report for the CEO which has never led a 4 to 3 merger, which is most CEOs.

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Middle Mile Economics: How streaming video entertainment undermines the business model for broadband

The pandemic has heightened the importance of braodband with policymakers and increased the urgency of closing the digital divide, particularly in the US as FCC data shows that 22% of rural Americans, about 13 million people, lack high speed wireline internet of 25/3 Mbps or higher. The Biden Administration recently called for $100 billion in broadband subsidies. Lack of sufficient broadband in rural areas is also an issue for Europe and other regions.

While many online applications have experienced a surge in traffic under the COVID-19 pandemic, the infrastructure requirements to support streaming video entertainment cost significantly more than applications for work, school, and healthcare. These latter applications are socially important, but their total traffic volume is very small compared to streaming video entertainment provided by Netflix, YouTube (Alphabet/Google), Amazon Prime, Disney+/Hulu, and Microsoft Xbox. This report describes the challenge of four rural broadband providers operating fiber to the home networks to recover the middle mile network costs of video streaming entertainment. It quantifies the amount the current and future shortfall. The rural broadband providers are located in four distinct rural regions of the United States, have an average of 20,000 customers each, and have network footprint averaging 4800 square kilometers, areas between the size of Montenegro and Cyprus. The high fixed costs of a broadband access network means that providers must carefully manage prices to be able to generate sufficient revenue from a given area subject to a set of advertised prices. The report also discusses why flat and uniform pricing (for a given level of service) presents special challenges to all broadband providers and specifically why this is a problem in high-cost and underserved areas.

The report provides microeconomic analysis based upon data provided by the rural broadband providers from 2017-2020. This details prevailing prices for broadband and streaming video entertainment services, the cost of middle and last mile networks, and the level and type of traffic in rural broadband networks, categorized by type of service and video streaming entertainment provider. The analysis estimates the cost implications of the growth in consumption of video streaming entertainment for the rural providers by considering data transport statistics for the providers and allocating part of their reported cost to video streaming services. This is compared to the estimated revenue that streaming service providers realize from broadband subscribers.

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Understanding the 5G vs. Wi-Fi Debate: The Global Push for Unlicensed Spectrum

This report offers an important comparison between 5G and Wi-Fi, two important technology which compete. The FCC declares that 5G and Wi-Fi are complementary technologies, but there is an intense competition between 5G and Wi-Fi provider policy to secure finite radio spectrum for these technologies. While consumers may experience the “seamlessness” enabled by wireless technologies, there are important economic, spectrum, and security differences between 5G and Wi-Fi which have policy implications. 5G spectrum is acquired by a competitive bidding or other market process (e.g., auction or secondary transaction); Wi-Fi spectrum is designated by the FCC’s administrative decree and does not require a license. The former frequently involves a sizable payment to the Treasury for usage rights while the latter does not. The technical elements of 5G and Wi-Fi have different security vulnerabilities in protocols, infrastructure, encryption, authentication, and equipment. The FCC has limited statutory authority to address security issues, but its spectrum allocation decisions have inherent security implications, particularly when it can deem an entire band for licensed or unlicensed use.

To demonstrate the differences and the policy implications, the report reviews the FCC’s C-band auction for 280 MHz for 5G and the FCC’s 6 GHz proceeding for 1200 MHz for unlicensed use, though Wi-Fi is considered the leading application. The C-band auction drove $94 billion in gross proceeds, the net proceeds of which, $81 billion, are deposited to the Treasury. One projection is that economic value derived from the C-band spectrum will bring $191.80 billion over 7 years.  For the 6 GHz proceeding, this amount contrasts with zero which is realized by the Treasury through unlicensed spectrum, though over 6 years the spectrum brings $153.76 billion in direct and indirect economic benefits. The C-band spectrum provides 4.5 times more economic value per MHz than Wi-Fi in the 6 GHz band. 

This report providers valuable insights for compagnies to engage in the evolving policy discussion about the social costs and benefits of spectrum policy. This report is a smart way to save time and resources when planning for the future as well as means for organizations to think outside the box.

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