Question

Economics of Telecommunication

1.When the spectrum cap was eliminated in January 2003, what effect do you think this had on the wireless marketplace?

Answer 1

Elimination of spectrum cap, impact on wireless marketplace

FCC announced the sunset of the CMRS spectrum rule in eliminating it effectively in January 2003. The cap was raised to 55 MHz in all markets.

In November 2001, US Federal Communications Commission raised the spectrum cap for individual wireless firms from 45 to 55 MHz in urban markets, to eliminate the cap entirely in January 2003. Raising, and, eliminating the ceiling on the amount of spectrum enables greater concentration in the wireless industry.

Major wireless operators, then, were Cingular, Verizon, Sprint, and, AT&T. The marketplace distinction between PCS, and, cellular service was non-existent. Service was analog rather than digital. Limits are effective at increasing competition. In case of an auction, limits harm efficiency, and, revenues. Spectrum limits are ultimately unsuccessful in increasing competition. Limits that are too stringent may have undesirable effects.

Market concentration has increased after 2003. Providing small businesses with excessively attractive instalment payment terms was a mistake. The policy led to rampant speculative bidding.