Economic aspects of configuring cellular networks

Abstract

This paper addresses economic aspects of configuring cellular networks. Major components of costs and revenues and the major stakeholders are identified and a model is developed to determine the system configuration (e.g. cell size, number of channels, etc.) which will maximize the annual expected net revenues to the system operator. Key properties relating the various parameters of interest are derived. The results of computational experiments are presented and their implications are discussed. The computational results show that the optimal net revenue curves have a saw-tooth structure with two types of teeth; Large ones that come from switching between cellular technologies, and smaller jumps come the discretenes of base stations. The importance of capturing a high fraction of potential users, in early stages of cellular system introduction is investigated. Finally, the cost of competition and its implications for the regulatory agency and the cellular service providers are analyzed. It is shown that by dividing the available frequency spectrum between too many system operators, the overall value of the cellular system is reduced when compared to an approach which uses division of the overall service area into a larger number of service areas, each with only two system operatos. The above results have profound implications on public policies for frequency spectrum allocation.