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Basics of Spectrum

Basics of Spectrum . Workshop on Spectrum Management India 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

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Basics of Spectrum

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

  2. 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

  3. 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.

  4. All Use Some Part of Spectrum

  5. What is ‘Spectrum’? • EM radiation is classified by wavelength into: • Radio wave, Microwave, Infrared, Visible region (Light) • Ultraviolet, X-rays, Gamma rays

  6. What is ‘Radio Spectrum’? • Radio spectrum is classified by wavelength into: • VLF, Long wave, Medium wave, Short wave • VHF, UHF, EHF

  7. 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.

  8. MSC BSC BSC n BTS n BTS GSM Network BSC

  9. Frequency Re-use

  10. 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.

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

  12. 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.

  13. Importance of Spectrum • For Telecom Companies: • Roll-out of mobile services. • Quality of service • Providing more value added services. • ‘Spectrum Hoarding’ for subsequent sale.

  14. 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.

  15. 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)

  16. Value of Spectrum • Factors affecting value of spectrum: • Regulatory restrictions • Spectrum band location • Geographic location • Competitive situation • Size of spectrum band • Cost of alternates

  17. 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.

  18. 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.

  19. Thank You

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