Transition Paths to Next-generation Wireless Services

Although communications policy has important repercussions, its direct and indirect effects are rarely considered when crucial decisions are made. In part, this is due to the increasingly diverse environment of the information and communication industries. It is also partly due to the limitations of the traditional static framework for policy analysis in examining the dynamic effects of policy. Moreover, given the prevailing trust in " unregulated " market forces, it is often overlooked that markets need an appropriate legal and regulatory framework to unfold, even if detailed interventions are kept at minimum. Although the options for designing this framework of mobile markets are constrained by the institutional endowment of a country or a region, important aspects of it can be designed by policy-makers. Despite the importance of this overall framework, regulatory theory and practice has paid relatively little attention to it. This paper is a first step toward closing this gap. We approach our theme both theoretically and empirically using the example of wireless communications in the European Union and in the United States. Using a neo-institutional economic approach, we first develop a framework that allows exploring the dynamic interactions of technology, policy, and business strategy under conditions of uncertainty. We then examine how policy choices affect the overall evolution of the wireless industry. Multiple technology platforms for the configuration of next-generation wireless services are available, including 2.5G, 3G, licensed 4G and unlicensed applications, such as WLANs. These platforms differ in important technical and economic characteristics. The mix of technology will be influenced by the legal and regulatory framework of the industry. The most important aspect of public policies towards wireless include: (1) spectrum management (e.g., initial assignment via auction or beauty contest, existence of secondary markets); (2) the specific market design (e.g., permission of network sharing, obligation to provide open access to mobile virtual network operators, ability to use 2G spectrum for 3G services); and (3) the standardization regime (e.g., mandatory or industry-driven). Using this framework, we study the interaction of technology, policy, and business decisions in the 3G and WLAN markets in the European Union and in the United States. The paper contributes to the theoretical and applied policy-research in four areas. First, it develops a dynamic framework for the study of next-generation wireless services. Second, it provides detailed empirical data on the market development strategies in 3G and WLANs in the European Union and the United States …