I know Maurice will like this article....
totaltele.com
Putting a low price on 3G analysts
By David Molony
08 May 2000
Don't listen to the doomsayers who claim third-generation mobile operators in the United Kingdom will be out of business before they can finish their networks.
Professor Ken Binmore will put you right. He is an unreformed advocate of the spectrum auction process which has left five operators with a combined bill of 22.47 billion ($35 billion).
That's because Binmore, professor of economics at University College London, designed the auction, and he's happy it worked.
Binmore has no time for protests that consumers will be milked to recover the cost of the licenses.
He says analysts burning out spreadsheets have made a "naive" assumption that using cost-plus pricing methods means somehow operators can load costs into future charges.
"If you do that you will lose all your business to the operator who offers the service for a lower price than yours," said Binmore.
It does not follow that if the licenses were free, operators would give service for free. They would still charge "what the market will bear," said Binmore.
That insight into network economics has not reassured the markets so far. But Binmore has no time for the number-crunchers.
"The analysts don't know [anything]," said Binmore, "They didn't notice the auction was coming up in the first place. Then when they saw it happening they had no idea how to price it. First it was 5 billion, then 10 billion."
The three-week long auction concluded after 150 rounds of bidding last month, when five of the original 13 entrants were left standing and everybody else had pulled out.
The outcome is that four GSM operators will also be offering broadband data, but they will face new competition from a consortium led by Telesystem International Wireless Inc., based in Montreal.
The 3G auction achieved all its objectives of new market entry, efficient competition and public royalty, according to Binmore.
And he has no time for comparisons with the United States, where corporate failures followed the auction of PCS spectrum.
"The U.S. [PCS auction] wasn't disastrous," he said. "The auction design went well. The problem was the [winning] bidders defaulted."
People who can't pay, it seems, simply should not be allowed to take part in bidding.
And operators with designs on pan-European network had better watch out; Binmore is advising the French government on a possible auction of 28 gigahertz spectrum later this year.
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