Strategic Behaviour in Network Industries
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Strategic Behaviour in Network Industries

A Multidisciplinary Approach

Ernst ten Heuvelhof, Martin de Jong, Mirjam Kars and Helen Stout

This in-depth book explains how institutional changes such as the privatization and liberalization of network industries, for example transport, energy or telecommunications, can frequently be disappointing. The expected benefits such as lower prices, innovation and better services fail to materialize, often because the number of competitors is low. The authors demonstrate how strategic actor behaviour of one or more of the firms involved can help explain these disappointing results.
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Chapter 8: UMTS Spectrum Auctions in the EU

Ernst ten Heuvelhof, Martin de Jong, Mirjam Kars and Helen Stout


BACKGROUND: THIRD GENERATION SYSTEMS Universal Mobile Telecommunication System (UMTS) is the European standard for third generation (3G) digital mobile communication systems, indicated by the International Telecommunication Union (ITU) as International Telecommunication System, IMT-2000. Where the second generation (2G) of systems, Global System for Mobile Communications (GSM), only involves voice traffic, UMTS also enables data traffic (wireless broadband multimedia services including the Internet and other services based on the Internet Protocol (I/P)). The GSM network was introduced in the early 1990s. Although, at the end of the 1990s, the capacity of the GSM network in Europe still offered enough room to cope with the growth in users and use in the next few years, people nevertheless realized the risk of an overload in the near future. UMTS offered a solution. UMTS is faster than GSM, while the UMTS network also has more capacity than the GSM network. For the telecom operators, the changeover to UMTS meant making substantial investments. Not only did they have to build expensive new networks, but they also had to reach deep into their pockets to obtain the required frequency licences. Within the UMTS frequency range designated by the ITU, it is for the respective governments to distribute the frequencies at a national level. For EU member states, there is the additional obligation to use the instrument of the licence to do so.1 This ensues from Article 3 (1) of the Decision of 14 December 1998, pursuant to which the member states have to introduce a licence...

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