The purpose of this paper is to make a critical review of the introduction of first third generation (3G) mobile services and the evolution of market structure. It aims to look for reasons for the poor market performance of 3G.
The study analyses market data from 17 Western European countries and tests propositions with statistical methods.
The paper finds that there is evidence in support of to the “overbidding” hypothesis, i.e. license fees determined in auctions were higher than ultimately compatible with the originally envisaged market structure based on the n+1 rule. 3G markets therefore are more concentrated than 2G markets. The correct design of market structure is crucial for accelerating the speed of introduction of 3G services: the speed increases with the number of licenses granted, but decreases with the number of idle licenses. Auctions are not superior to other methods with respect to speed of innovation.
This is the first study of this kind and should be read by academics or practitioners dealing with regulation, spectrum licensing and technology forecasting.
