Spectrum for new entrants, lessons learned
Regulators must be wary of the conditions under which new entrants can thrive before allocating valuable spectrum. Reserving spectrum for new entrants may not result in effective competition or sustainable market players, while leading to an inefficient use of the resource. This is particularly important in the context of future 4G-suitable spectrum assignments, since 4G services require wider bandwidth.
Spectrum allocation is often seen by regulators as a way to facilitate the entry of new players in a market with a view to stimulate competition. However, our research demonstrates that the majority of new entrants that launched services since early 2010 did not impact the competitive structure of their respective markets, demonstrating that the success and lifespan of new entrants depends on a number of factors that tend to be excluded from the regulatory framework.
Our analysis shows that the number of existing players in the market at the time a new entrant launches services is a significant indicator of its ability to influence the competitive structure, with new entrants’ marginal gains (in terms of connections market share) falling significantly as the number of existing operators in the marketplace increases.