TECHNIQUE OF DETERMINATION OF ADMINISTRATIVE PRICES AND SPECTRUM ROYALTIES Costs ChoiceDefiniti Price Demand of on ofpricing assess pricing determinat ment assessm method goals ion ent s
Spectrum pricing is method used the pricing as a spectrum Administrative pricing management tool.Administrative pricing is form of spectrum pricing in which equipment licence fees or charges for spectrum rights are set by the Spectrum Manager. The aim of Administrative pricing
Types of Administrative pricing Administrative pricing may include such types as: shadow pricing;incentive pricing, where an attempt is made to set prices to promote efficient spectrum use; regulatory pricing, where fees are set unrelated to market considerations, for example, to recover spectrum management costs. Administrative pricing involves the spectrum manager setting the level of licence fees as a surrogate for market forces.
Shadow pricing A form of administrative pricing in which the price is set according to apredetermined formula intended to mimic the effect of market forces by takingspectrum consumption, value and scarcity into account. Parameters commonly used include: ● bandwidth; ● frequency location; ● geographical location; ● coverage area.
Incentive pricingMethod used to set a fee for the right of use of spectrum that reflects a certain value for that spectrum, in order to achieve certain spectrum management objectives. Incentive price is set by the Regulator; is prices charged to license holder (holder of recognized spectrum access (RSA)); is intended to reflect the opportunity cost of spectrum use (provide effective incentives for efficient use of spectrum).
Opportunity cost of spectrum The opportunity cost ofspectrum represents thebenefits that would bederived from the next bestalternative use. The opportunity costrepresents the benefitsforegone from assigningspectrum to the best useinstead of the next best use.
Regulatory pricingRegulatory (administrative) pricingis cost-based pricing method.Administrative spectrum price is set by the Regulator; is charges to license holder; is intended to recover theregulators administrative costsincurred in spectrum management,control and enforcement.
Administrative pricing models Types of single and annual charges The • For the right of accessprinciple of to a spectrum spectrum fees • For direct utilisation of collection spectrum The bodyestablishing Government bodies/ value of spectrum agency charging