Basics of Spectrum
Workshop on
Spectrum Management
India International Centre, New Delhi
29.4.2013
Discussion Points
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What is ‘Spectrum’?
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Characteristics of Radio Spectrum.
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Is Radio Spectrum a ‘scarce resource’?
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Uses of Radio Spectrum.
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Value of Radio Spectrum
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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:

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Radio wave, Microwave, Infrared, Visible region (Light)
Ultraviolet, X-rays, Gamma rays
What is ‘Radio Spectrum’?

Radio spectrum is classified by wavelength into:
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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.


Radio spectrum is not consumed upon its usage.

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This requires the application of complex engineering
tools to ensure interference free operation of various
wireless networks.
Radio spectrum can be re-used.
Different waves have different characteristics.
GSM Network
MSC
BSC
n BTS
BSC
BSC
n BTS
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

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

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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.

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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:



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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:

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Configuring licenses to be efficient and value maximizing.
Determining when to reallocate spectrum.
Designing revenue maximizing auctions.
Estimating auction receipts.
For Users:

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Deciding whether to buy or build.
Negotiating fair price.
Value of Spectrum

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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.

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Mobile communications (wireless broadband, satellite)
Fixed communications (broadcasting, microwave
backhaul)
Detection applications (Radar)
Location applications (GPS)
Value of Spectrum

Factors affecting value of spectrum:

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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

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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:

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The spectrum valuation is based on comparable assets traded in
the market.
Bottoms-up Approaches:

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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