Migration to 3G wireless broadband internet and real options: The case of an operator in India

The paper focuses on third generation wireless technologies and on alternative technologies for wireless local area networks. The authors present the evolutionary migration path from second to third generation systems. Technological, economic and behavioral factors related to decision-making towards the migration are proposed. As an example, the paper studies the case of the national incumbent operator of India. It analyzes qualitatively the migration problem from the perspective of the operator, the equipment manufacturer and the users. For the quantitative analysis, real options are used to value the investment decisions. The analysis suggests that the initial (sunk) investment cost, the average revenue per user, the growth of the subscriber base and the volatility of the markets are the key factors in the investment process.

[1]  Patrick Herbst,et al.  Real Options Valuation of Highly Uncertain Investments: Are UMTS-Licenses Worth their Money? , 2001 .

[2]  Nalin Kulatilaka,et al.  Real Options: Managing Strategic Investment in an Uncertain World , 1998 .

[3]  Peter A. Forsyth,et al.  Managing capacity for telecommunications networks under uncertainty , 2002, TNET.

[4]  P. A. Forsyth,et al.  Wireless Network Capacity Investment , 2003 .

[5]  L. Trigeorgis.  Real Options: Managerial Flexibility and Strategy in Resource Allocation , 1996 .

[6]  Apostolis K. Salkintzis,et al.  WLAN-GPRS integration for next-generation mobile data networks , 2002, IEEE Wirel. Commun..

[7]  Marcello Basili,et al.  The option value of the UK 3G Telecom licences: Was too much paid? , 2003 .

[8]  James Alleman,et al.  A new view of telecommunications economics , 2002 .

[9]  THIRD GENERATION MOBILE GAMES – An application of real competition options , 2004 .

[10]  James Alleman,et al.  MODELLING REGULATORY DISTORTIONS WITH REAL OPTIONS , 2002 .

[11]  P. Klemperer.  How (Not) to Run Auctions: The European 3g Telecom Auctions , 2001 .

[12]  Strategic Options for Managing Technology Evolution in Wireless Industry , 2004 .

[13]  Stephen C. Dennett,et al.  The 3GPP and 3GPP2 movements toward an all-IP mobile network , 2000, IEEE Wirel. Commun..

[14]  A. Damodaran.  Investment Valuation: Tools and Techniques for Determining the Value of Any Asset , 1995 .

[15]  Nicholas Economides.  Real Options and the Costs of the Local Telecommunications Network , 1999 .

[16]  S. Yazbeck.  The US road to 3G: an overview of telecom regulations, carrier strategies, and the consumer market , 2003, 10th International Conference on Telecommunications, 2003. ICT 2003..

[17]  L. Trigeorgis.  Real options and interactions with financial flexibility , 1993 .

[18]  Eduardo S. Schwartz,et al.  Real Options and Investment under Uncertainty: Classical Readings and Recent Contributions , 2004 .