Mobile value, spectrum and data demand – a bootstrap approach to estimation
| DOI | https://doi.org/10.1108/DPRG-06-2016-0028 |
| Pages | 101-112 |
| Published date | 09 January 2017 |
| Date | 09 January 2017 |
| Author | Brian Williamson,Sam Wood |
| Subject Matter | Information & knowledge management,Information management & governance,Information policy |
Mobile value, spectrum and data demand –
a bootstrap approach to estimation
Brian Williamson and Sam Wood
Brian Williamson is based at
Communication Chambers,
London, UK. Sam Wood is
based at Plum Consulting,
London, UK.
Abstract
Purpose –The purpose of this paper is to integrate mobile supply and demand on an economic basis
and to model the economic value of additional data capacity, spectrum demand and data growth under
a range of parameter and policy assumptions.
Design/methodology/approach –The modelling requires an iterative solution to find an equilibrium
between supply and demand, which allows data demand to be bootstrapped, i.e. determined
endogenously within the model.
Findings –The sensitivity of the model to input parameter changes differs from a modelling approach
where data demand is assumed to be exogenous, whilst in some instances, the sign of the relationship
is reversed, e.g. the response of economic value to mobile site cost changes.
Research limitations/implications –The approach suggests a research agenda to estimate
willingness to pay for data and the price elasticity of data demand, and may also suggest new
explanatory variables to test econometrically in relation to spectrum value.
Practical implications –The approach provides a different route to spectrum valuation and allows
estimation of the economic impacts of a range of policy questions.
Originality/value –This paper provides the integration of supply and demand and endogenous
estimation of data demand and economic value, coupled with quantitative assessment of a range of
policy questions.
Keywords Public policy, Modelling, Mobile communications systems, Radiofrequencies,
Cost benefit analysis
Paper type Research paper
Introduction
Given the economic importance of mobile connectivity and applications (Bresnahan et al.,
2014), placing economic valuation, spectrum demand assessment and broader policy
appraisal on firmer ground is a priority.
The conventional approach to modelling mobile networks and estimating spectrum value
treats data traffic as exogenous, and assumes that data demand is met, irrespective of the
cost. However, data demand is not independent of supply or cost, and additional spectrum
availability or improved technology not only lowers the cost of meeting a unit of demand but
also stimulates additional demand.
The orthodox modelling approach is not realistic: by holding demand constant, it does not
capture the economic value of additional output, and by neglecting willingness to pay on
the demand side, it limits the range of policy questions that can be assessed.
Affordability and profitability have been considered, but as ex post checks rather than as
integral to modelling. Marks et al. (1996) introduced the concept of trading off mobile site
costs with spectrum availability to estimate spectrum value. Johansson et al. (2007),
Ericsson (2010) and NSN (2010) showed that falling unit mobile data costs could support
traffic growth. Real Wireless (2012) applied an ex post check on the affordability of
Received 24 June 2016
Revised 12 October 2016
Accepted 4 November 2016
DOI 10.1108/DPRG-06-2016-0028 VOL. 19 NO. 1 2017, pp. 101-112, © Emerald Publishing Limited, ISSN 2398-5038 DIGITAL POLICY, REGULATION AND GOVERNANCE PAGE 101
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