technology.  A better solution is to base the value of the spectrum on the 

 second best  technology, since this provides users of that technology with an 

incentive to use it in the most efficient manner whilst avoiding penalising users 

of the more efficient technology.  This is also in keeping with the approach to 

AIP recently recommended in the UK, which recommended that where there 

is more than one use of spectrum, the valuation should be set towards the 

bottom end of the range between the two highest value uses. 

4.4.1.1.2 Example of applying AIP to Cellular Mobile Service Providers  

4.4.1.1.2.1 Basic 

Principle 

It is possible to define a hypothetical reference GSM network based on typical 

traffic levels, population density and market penetration. The basic principle is 

to calculate the marginal value of the GSM spectrum by taking into account 

the amount of additional network required if the spectrum is not provided. 

Alternatively, the price reflects the amount of savings in infrastructure as a 

result of additional spectrum allocation. 

A minimum number of sites are required to provide coverage and these 

provide a  base  level of capacity.  Adding base stations, having more 

spectrum and additional transceivers at the existing sites or a combination of 

the two, can then provide additional capacity.  The additional capacity is not 

required throughout the network and in some areas the  base  capacity may 

be sufficient.  As the amount of spectrum held by a Service Provider 

increases, the areas where he needs extra spectrum decreases as traffic 

demand varies across the network depending on the geographic area

8

.   

Since it is the marginal value of the spectrum that is calculated it should be 

based on traffic in the denser areas where traffic is highest.  In India usage is 

more concentrated in urban areas and therefore any calculations based on 

total assumed traffic density in a region should assume that a high percentage 

of the demand would come from those areas where there is a need for more 

spectrum.  An alternative approach would be to base the AIP calculations on 

the urban population rather than the total population.   

4.4.1.1.2.2 Methodology 

The Model has two parts. First, it estimates the amount of total traffic that the 

network generates in the busy hour. Using this it estimates the number of 

sectors required in (say) 10 MHz of spectrum allocation. Thereafter, the 

number of sectors required in (say) 12.4 MHz is calculated. The net saving in 

the number of sectors is estimated. Adjustments are made for the cost of 

TRXs, which would be required in both the cases. Finally, using the cost 

differential, the price per MHz is calculated. 

8

 Geographic area can be defined as rural, sub urban, urban and dense urban. 

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