Institutions and Spectrum Allocation: The Empirical Study of Property Right & Policy Credibility
Author: Yuntsai Chou
Abstract / Chinese PDF Download
This paper applies the transaction cost theoretic approach to examine theimpacts institutions have on the spectrum allocation policy. Due to the risks incurredto businesses during investment, spectrum allocation cannot be implementedefficiently unless government takes into account the institutional effects. This paperargues that the firms’ expected profits from telecommunications investment couldincrease with the institutions constituted during spectrum allocation that are able toreduce firms’ managerial risks. In this sense, they are more willing to bid for wirelesslicenses. The paper also performs an econometric model to testify the institutionalimpacts. The empirical results show that the firms’ willingness to bid the licensesand the auction prices increase as the spectrum property right is specified and theallocation policy is credibly committed. As a conclusion, the paper suggests that, inorder to succeed the allocation policy, (1) the terms and conditions of spectrumallocation must be written into legislation, and (2) the spectrum property right isuniversal and transferable.