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2. Systematic Assessment of Spectrum Policy and Mobile Market Structure Özkan Demirbilek Supervisor : Prof. Heikki Hämmäinen MSc. in Communications Ecosystem Comnet Research Team – Instructor : Arturo Basaure Master’s Thesis Presentation June 13, 2013

3. Agenda o Background o Research Goals o Methods o Studied Mobile Markets o Market Analysis o Spectrum Policy o Market Structure o Results and discussion o Conclusions and Recommendation for Future Work 3

4. Background Open Industry Decentralized Spectrum Licensing Policy 1.Number of licenses for mobile services (<3) 2.Level of liberalization of usage rights 3.Service/ Technology neutrality Industry Structure Policy 1.Switching Costs 2.NO/SO separation 3.MNP and SIM-locking 4.Roaming and interworking between systems 5.Unbundling of services Source: Basaure et al. (2012)

5. Research Goals o Development of quantitative metrics to phase diagram for mobile telecom regulations o Applying the metrics to multiple mobile markets 5

6. o Literature review o Theoretical frameworks o Data collection on mobile markets o Data sources  Regulator, mobile operator and consultancy company websites o Combination of theoretical frameworks with state-of-art mobile market situation 6 Methods

7. Studied Mobile Markets

8. o Spectrum-HHI o Market-based approaches are the most common o Finland, only market with symmetrical spectrum distribution o Japan, China  only beauty contests o Australia, USA, India  regional licenses 8 Spectrum Policy Analysis (1)

9. Spectrum Policy Analysis (2) 9 Reselling RightsNot AvailablePartly AvailableAvailable Mobile MarketsChile, Turkey, India, Japan, China FinlandSweden, UK, USA, Australia, New Zealand o Reselling Rights o Auctions  Effective spectrum allocation o Sustaining the efficiency over time? o Regulator intervention or re-assigning of spectrum by market forces? o Technology Neutrality / Harmonization o What is the driver? Let the market decide or coordinate the market? Technology FrameworkHarmonizationNeutrality (regulator), Harmonization (market) Neutrality Mobile Markets Finland, Turkey, China*Chile, New Zealand, Australia, Sweden, UK USA, India, Japan

10. Spectrum Policy Analysis (3) 10 o Market-HHI o China; incumbent 66% market share o India very fragmented 13+ MNO o Sweden, UK, US, India > 3 MNO o Chile, just accepted two more MNO Mobile MarketsMarket HHI China4952 New Zealand3883 Turkey3839 Japan3653 Chile3608 Australia3514 Finland3346 Sweden2951 United Kingdom2610 United States2540 India1360

11. Market Structure Analysis (1) Existence of multinational MNO YesNo Mobile MarketsUK, US, Turkey, New Zealand, Australia, Finland, Sweden, India, Chile China, Japan 11 o Multinational MNOs o Foreign direct investment (FDI) o Managerial expertise and breaking protectionism o Macro-economic environment should be suitable for entry  PESTEL o Investment o Persistent level of investment based on o Technological innovation, spectrum fees and market development o Prices o One of the marketing mix element o Different pricing schemes available: flat, block, unit based

12. Market Structure Analysis (2) 12 Mobile Markets Investments/ Subscriptions (€) Japan96 Australia57 Chile49.8 United States48.4 New Zealand35.08 Sweden26.13 UK23.9 Finland23.8 China20.2 Turkey15.9 India10.1 Mobile MarketsMobile Tariffs Japan0,81 Australia0,64 New Zealand0,55 Turkey0,40 United Kingdom0,31 Chile0,29 United States0,25 China0,15 Sweden0,08 Finland0,07 India0,06

13. Market Structure Analysis (3) 13 o ARPU o Tracking revenue growth o Market development in India  rural areas Mobile Markets Monthly ARPU ($) Japan84 Australia48 United States47 Finland32 New Zealand21 Sweden18 United Kingdom17 Chile16,36 Turkey11 China9.82 India1.6 Mobile marketsPrepaid Ratio (%) Finland13 Chile71 Sweden31 Turkey63 United Kingdom50 China87 India95 New Zealand66 Australia38,3 United States25 Japan2,0 o Switching costs o Prepaid ratio o Mobile Number Portability o Except China, available in the rest

14. Market Structure Analysis (4) 14 o Churn rate o Closely linked to switching cost o Fluctates based on dynamics o India the highest, Japan the least o Network Operator / Service Operator Separation o Increased market competition o Hit and escape Countries Monthly churn rate (%) Finland1.20 Chile1.50 Sweden1.10 Turkey3.38 United Kingdom2.9 China3.5 India6 New Zealand0.83 Australia1.8 United States1.10 Japan0.62 NO / SO separationYesNo Mobile marketsFinland, Sweden, United Kingdom, New Zealand, Australia Chile, Turkey, China, India, United States, Japan

15. Results (1) 15 o Spectrum policy explaining factor o Spectrum-HHI o Spectrum holdings in different bands possess differences o Reselling rights o Secondary trading markets not roll-out yet o Technology neutrality /harmonization o determines service offerings, influences market shares o Spectrum has clear effect on competitiveness (Lungborg)  Market shares o The spectrum policy explaining factor is market-HHI

16. Results (2) 16

17. Results (3) 17 o Market structure explaining factor o Prepaid subscriptions  lower switching costs, high churn rate

18. Results (4) I 18 o ARPU correlates with investment per subscriber

19. Results (5) 19 o Market Structure explaining factor o Industry unbundling framework  improve ( price/quality ) ratio o Vertically disintegrated  competition in retail  reduction in prices o Vertically integrated  High level of investment o Prices  Present situation in the industry o Investments  Future direction of the industry  Prices and Investments per Subscriber is the explaining factor

20. Results (6) 20 Spectrum policy Market Structure

21. Conclusions and Recommendation for Future 21 o Explaining factors: o Spectrum policy  market-HHI o Market structure  Prices and Investments per Subscribers o Highlights from the markets o The most open and decentralized market is India o The most closed industry is Japan o European markets are more open than American market o Recommendation for future research o Enhancing the database o Developing the theoretical framework

22. Thank you ! 22 Questions?