A Comparison between the Swedish 3G Beauty Contest and the UK 3G Auction

Introduction : The third generation of mobile phones, based on UMTS technology, is most often referred to as 3G. This is the new system that throughout Europe is just about to replace our second generation mobile phones, which is based on GSM systems. The 3G technology allows us to access the Internet at a very high speed; this enables us to download music, videos and a lot of other things on the Internet directly through our handsets. The new 3G technology was therefore highly regarded at the turn of the millennium and many governments, as well as the operators, were eager to introduce the new 3G technology fast. However, the costs for rolling out 3G were understood to be huge and the frequencies that 3G technology uses were limited. This limited the number of licenses and the governments and regulatory agencies therefore, among other things, had to decide which operators should be allowed to supply 3G technology and foremost how these operators should be chosen.

Abstract

This thesis compares the two different version of public franchise bidding for awarding 3G licenses used in Sweden and the UK, respectively a beauty contest and an auction. The fact is that the Swedish beauty contest has failed to tackle many of the problems discussed in connection with public franchise bidding in an effective way. Sweden has first of all had problems with enforcing the ambitious coverage criteria. The UK has on the other hand succeeded in tackling the problems and raised governmental revenue of £22.5bn through the auction.The conclusion is that this thesis confirms the existing literatures’ critique of the beauty contest. However, this thesis also provides a new perspective to the existing literature. The main conclusion is that the auction has locked the prices at a high level and externalised negative price and investments effects through the international operators’ behaviour onto consumers in other countries.

Contents

LIST OF ABBREVIATIONS AND TERMS
CHAPTER 1 – INTRODUCTION
1.1 – Purpose
1.2 – Limitations
1.3 – Method
1.4 – Definitions
1.5 – Disposition
CHAPTER 2 – THEORY
2.1 – Competition, Natural Monopoly and Oligopoly
2.2 – Possible Solutions to the Natural Monopoly Problem
2.3 – Public Franchise Bidding
2.4 – Beauty Contests and Auctions
CHAPTER 3 – 3G LICENSING IN SWEDEN AND THE UK
3.1 – Mobile Phones and 3G Technology
3.2 – 3G Licensing in Sweden
3.3 – 3G Licensing in the UK
3.4 – Comparison of the Swedish and UK Experience
CHAPTER 4 – DISCUSSION AND ANALYSIS
4.1 – The 3G Net’s Properties as a Natural Oligopoly
4.2 – The Problems and Solutions with the Beauty Contest and the Auction
4.3 – Assessing Effectiveness
CHAPTER 5 – CONCLUSIONS
5.1 – Conclusions from the Thesis
5.2 – Further Research
BIBLIOGRAPHY
APPENDIX

Author: Welin, Erik

Source: Linkoping University

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A Comparison between the Swedish 3G Beauty Contest and the UK 3G Auction