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1、Wireless Communications* by Joshua S. Gans, Stephen P. King and Julian Wright1. Introduction In 1895, Guglielmo Marconi opened the way for modern wireless communications by transmitting the three-dot Morse code for the letter S over a distance of three kilometers using electromagnetic waves. From th
2、is beginning, wireless communications has developed into a key element of modern society. From satellite transmission, radio and television broadcasting to the now ubiquitous mobile telephone, wireless communications has revolutionized the way societies function. This chapter surveys the economics l
3、iterature on wireless communications. Wireless communications and the economic goods and services that utilise it have some special characteristics that have motivated specialised studies. First, wireless communications relies on a scarce resource namely, radio spectrum the property rights for which
4、 were traditionally vested with the state. In order to foster the development of wireless communications (including telephony and broadcasting) those assets were privatised. Second, use of spectrum for wireless communications required the development of key complementary technologies; especially tho
5、se that allowed higher frequencies to be utilised more efficiently. Finally, because of its special nature, the efficient use of spectrum required the coordinated development of standards. Those standards in turn played a critical role in the diffusion of technologies that relied on spectrum use. In
6、 large part our chapter focuses on wireless telephony rather than broadcasting and other uses of spectrum (e.g., telemetry and biomedical services). Specifically, the economics literature on that industry has focused on factors driving the diffusion of wireless telecommunication technologies and on
7、the nature of network pricing regulation and competition in the industry. By focusing on the economic literature, this chapter complements other surveys in this Handbook. Hausman (2002) focuses on technological and policy developments in mobile telephony rather than economic research per se. Cramton
8、 (2002) provides a survey of the theory and practice of spectrum auctions used for privatisation. Armstrong (2002a) and Noam (2002) consider general issues regarding network interconnection and access pricing while Woroch (2002) investigates the potential for wireless technologies as a substitute fo
9、r local fixed line telephony. Finally, Liebowitz and Margolis (2002) provide a general survey of the economics literature on network effects. In contrast, we focus here solely on the economic literature on the mobile telephony industry. The outline for this chapter is as follows. The next section pr
10、ovides background information regarding the adoption of wireless communication technologies. Section 3 then considers the economic issues associated with mobile telephony including spectrum allocation and standards. Section 4 surveys recent economic studies of the diffusion of mobile telephony. Fina
11、lly, section 5 reviews issues of regulation and competition; in particular, the need for and principles behind access pricing for mobile phone networks. 2. Background Marconis pioneering work quickly led to variety of commercial and government (particularly military) developments and innovations. In
12、 the early 1900s, voice and then music was transmitted and modern radio was born. By 1920, commercial radio had been established with Detroit station WWJ and KDKA in Pittsburgh. Wireless telegraphy was first used by the British military in South Africa in 1900 during the Anglo-Boer war. The British
13、navy used equipment supplied by Marconi to communicate between ships in Delagoa Bay. Shipping was a major early client for wireless telegraphy and wireless was standard for shipping by the time the Titanic issued its radio distress calls in 1912.1Early on, it was quickly recognized that internationa
14、l coordination was required for wireless communication to be effective. This coordination involved two features. First, the potential for interference in radio transmissions meant that at least local coordination was needed to avoid the transmission of conflicting signals. Secondly, with spectrum to
15、 be used for international communications and areas such as maritime safety and navigation, coordination was necessary between countries to guarantee consistency in approach to these services. This drove government intervention to ensure the coordinated allocation of radio spectrum. 2.1 Spectrum All
16、ocation Radio transmission involves the use of part of the electromagnetic spectrum. Electromagnetic energy is transmitted in different frequencies and the properties of the energy depend on the frequency. For example, visible light has a frequency between 41014 and 7.51014 Hz.2 Ultra violet radiati
17、on, X-rays and gamma rays have higher frequencies (or equivalently a shorter wave length) while infrared radiation, microwaves and radio waves have lower frequencies (longer wavelengths). The radio frequency spectrum involves electromagnetic radiation with frequencies between 3000 Hz and 300 GHz.3 E
18、ven within the radio spectrum, different frequencies have different properties. As Cave (2001) notes, the higher the frequency, the shorter the distance the signal will travel, but the greater the capacity of the signal to carry data. The tasks of internationally coordinating the use of radio spectr
19、um, managing interference and setting global standards are undertaken by the International Telecommunication Union (ITU). The ITU was created by the International Telecommunications Convention in 1947 but has predecessors dating back to approximately 1865.4 It is a specialist agency of the United Na
20、tions with over 180 members. The Radiocommunication Sector of the ITU coordinates global spectrum use through the Radio Regulations. These regulations were first put in place at the 1906 Berlin International Radiotelegraph Conference. Allocation of the radio spectrum occurs along three dimensions th
21、e frequency, the geographic location and the priority of the user with regards to interference. The radio spectrum is broken into eight frequency bands, ranging from Very Low Frequency (3 to 30 kHz) up to Extremely High Frequency (30 to 300 GHz). Geographically, the world is also divided into three
22、regions. The ITU then allocates certain frequencies for specific uses on either a worldwide or a regional basis. Individual countries may then further allocate frequencies within the ITU international allocation. For example, in the United States, the Federal Communications Commissions (FCCs) table
23、of frequency allocations is derived from both the international table of allocations and U.S. allocations. Users are broken in to primary and secondary services, with primary users protected from interference from secondary users but not vice versa. As an example, in 2003, the band below 9 kHz was n
24、ot allocated in the international or the U.S. table. 9 to 14 kHz was allocated to radio navigation in both tables and all international regions while 14 to 70 kHz is allocated with both maritime communications and fixed wireless communications as primary users. There is also an international time si
25、gnal at 20kHz. But the U.S. table also adds an additional time frequency at 60 kHz. International regional distinctions begin to appear in the 70 to 90 kHz range with differences in use and priority between radio navigation, fixed, radiolocation and maritime mobile uses. These allocations continue r
26、ight up to 300GHz, with frequencies above 300 GHz not allocated in the United States and those above 275 GHz not allocated in the international table.5The ITU deals with interference by requiring member countries to follow notification and registration procedures whenever they plan to assign frequen
27、cy to a particular use, such as a radio station or a new satellite. 2.2 The range of wireless services Radio spectrum is used for a wide range of services. These can be broken into the following broad classes: Broadcasting services: including short wave, AM and FM radio as well as terrestrial televi
28、sion; Mobile communications of voice and data: including maritime and aeronautical mobile for communications between ships, airplanes and land; land mobile for communications between a fixed base station and moving sites such as a taxi fleet and paging services, and mobile communications either betw
29、een mobile users and a fixed network or between mobile users, such as mobile telephone services; Fixed Services: either point to point or point to multipoint services; Satellite: used for broadcasting, telecommunications and internet, particularly over long distances; Amateur radio; Other Uses: incl
30、uding military, radio astronomy, meteorological and scientific uses.6 The amount of spectrum allocated to these different uses differs by country and frequency band. For example, in the U.K., 40% of the 88MHz to 1GHz band of frequencies are used for TV broadcasting, 22% for defense, 10% for GSM mobi
31、le and 1% for maritime communications. In contrast, none of the 1GHz to 3 GHz frequency range is used for television, 19% is allocated to GSM and third-generation mobile phones, 17% to defense and 23% for aeronautical radar.7 The number of different devices using wireless communications is rising ra
32、pidly. Sensors and embedded wireless controllers are increasingly used in a variety of appliances and applications. Personal digital assistants (PDAs) and mobile computers are regularly connected to e-mail and internet services through wireless communications, and wireless local area networks for co
33、mputers are becoming common in public areas like airport lounges. However, by far the most important and dramatic change in the use ofwireless communications in the past twenty years has been the rise of the mobile telephone. 2.3 The rise and rise of mobile telephony The history of mobile telephones
34、 can be broken into four periods. The first (pre-cellular) period involved mobile telephones that exclusively used a frequency band in a particular area. These telephones had severe problems with congestion and call completion. If one customer was using a particular frequency in a geographic area, n
35、o other customer could make a call on that same frequency. Further, the number of frequencies allocated by the FCC in the U.S. to mobile telephone services was small, limiting the number of simultaneous calls. Similar systems, known as A-Netz and B-Netz were developed in Germany. The introduction of
36、 cellular technology greatly expanded the efficiency of frequency use of mobile phones. Rather than exclusively allocating a band of frequency to one telephone call in a large geographic area, a cell telephone breaks down a geographic area into small areas or cells. Different users in different (non
37、-adjacent) cells are able to use the same frequency for a call without interference. First generation cellular mobile telephones developed around the world using different, incompatible analogue technologies. For example, in the 1980s in the U.S. there was the Advanced Mobile Phone System (AMPS), th
38、e U.K. had the Total Access Communications System (TACS), Germany developed C-Netz, while Scandinavia developed the Nordic Mobile Telephone (NMT) system. The result was a wide range of largely incompatible systems, particularly in Europe, although the single AMPS system was used throughout the U.S.
39、Second generation (2G) mobile telephones used digital technology. The adoption of second generation technology differed substantially between the United States and Europe and reverses the earlier analogue mobile experience. In Europe, a common standard was adopted, partly due to government intervent
40、ion. Groupe Speciale Mobile (GSM) was first developed in the 1980s and was the first 2G system. But it was only in 1990 that GSM was standardized (with the new name of Global System for Mobile communication) under the auspices of the European Technical Standards Institute. The standardized GSM could
41、 allow full international roaming, automatic location services, common encryption and relatively high quality audio. GSM is now the most widely used 2G system worldwide, in more than 130 countries, using the 900 MHz frequency range. In contrast, a variety of incompatible 2G standards developed in th
42、e United States. These include TDMA, a close relative of GSM, and CDMA, referring to Time and Code Division Multiple Access respectively. These technologies differ in how they break down calls to allow for more efficient use of spectrum within a single cell. While there is some argument as to the be
43、tter system, the failure of the U.S. to adopt a common 2G standard, with the associated benefits in terms of roaming and switching of handsets, meant the first generation AMPS system remained the most popular mobile technology in the U.S. throughout the 1990s. The final stage in the development of m
44、obile telephones is the move to third generation (3G) technology. These systems will allow for significantly increased speeds of transmission and are particularly useful for data services. For example, 3G phones can more efficiently be used for e-mail services, and downloading content (such as music
45、 and videos) from the internet. They can also allow more rapid transmission of images, for example from camera phones. An attempt to establish an international standard for 3G mobile is being moderated through the ITU, under the auspices of its IMT-2000 program. IMT-2000 determined that 3G technolog
46、y should be based on CDMA systems but there are (at least two) alternative competing systems and IMT-2000 did not choose a single system but rather a suite of approaches. At the ITUs World Radiocommunication Conference in 2000, frequencies for IMT-2000 systems were allocated on a worldwide basis. By
47、 2002, the only 3G system in operation was in Japan, although numerous companies have plans to roll out 3G systems in the next few years. The growth in use of mobile telephones has been spectacular. From almost a zero base in the early 1980s, mobile penetration worldwide in 2002 is estimated at 15.5
48、7 mobile phones per 100 people worldwide. Of course, the level of penetration differs greatly between countries. In the United States, there were 44.2 mobile telephones per 100 inhabitants, with penetration rates of 60.53 in France, 68.29 in Germany, 77.84 in Finland and 78.28 in the United Kingdom.
49、 Thus, in general mobile penetration is lower in the U.S. than in the wealthier European countries. Outside Europe and the U.S., the penetration rate in Australia is 57.75, 62.13 in New Zealand, and 58.76 in Japan. Unsurprisingly, penetration rates depend on the level of economic development, so that India had only 0.63 mobile telephones per 100 inhabitants in 2002, with 1.60 for Kenya, 11.17 for China, and 29.95 for Malaysia. The number of mobile phones now exceeds the
