Dear Editor,
In writing in the April 24 issue on the absurdly high bids for U.K. 3G licenses, “U.K. Prices: Up, up and away,” RCR states:
“But the United Kingdom’s four incumbents must [each] win a [3G] license at any cost. If they lose, they face destroyed business cases.”
This is certainly the perspective of incumbent network operators. It stems from what we have called, “operator paranoia”-the perception held by operators that if they don’t successfully bid on 3G spectrum, their competitors will and, in so doing, gain competitive advantage.
However, this perception is false. Established network operators have the option of not bidding on 3G spectrum and, instead, choosing to resell on the networks of the eventual auction winners. Virgin has already adopted this model by reselling branded Virgin services on the One 2 One GSM network in the United Kingdom. One 2 One seems delighted with the added network traffic.
One may argue that operators will not want to allow their direct competitors to resell on their 3G networks. Perhaps. But with four or five 3G competitors in all major national markets, at least one would see the advantage of such a business relationship.
And, to assure a resale opportunity, the most Machiavellian of established operators could purposefully bid up the spectrum prices with the intention of withdrawing at the last moment. By so doing, that operator would assure that eventual winners would have the financial incentive to consider a mutually beneficial resale arrangement.
We have dealt with these issues extensively in our strategic wireless seminars. I can assure the readers of RCR that more than one international operator has reviewed these issues in this environment.
Herschel Shosteck, Ph.D.
President and CEO
Herschel Shosteck Associates Ltd.
www.shosteck.com
