Contents
Information
Project or case title Application of spectrum liberalisation and trading to the mobile sector - Further
consultation
Workbook title Welfare effects
Date workbook last saved 12/20/2011 4:55
Workbook status Approved for release
Workbook author Ofcom
Confidentiality: parties to whom Public
access can be given
Contents
Workbook objective To calculate the effect on welfare of a change in the number of players in the UK
mobile market (ie a change in the level of competition).
Sheet Description
Contents This Contents sheet.
Style Guidelines A guide to the styles used in this workbook
Model Structure A flow chart showing the structure of calculations in this model
Control Key variables which are likely to be changed when running scenarios. Also
contains the results for the current scenario.
Lists A list of used name ranges.
Forecasts Base data on UK mobile market revenue growth, subscribers & prices.
Linear Demand Calculations for the multi-period model for the affected market segment using a
linear demand model, showing the factual and the counterfactual cases, and the
NPV of losses in consumer & producer surplus under different scenarios.
Negative Exponential Demand Calculations for the multi-period model for the affected market segment using a
negative exponential demand model, showing the factual and the counterfactual
cases, and the NPV of losses in consumer & producer surplus under different
scenarios.
OUT A summary of outputs from the four calculation sheets.
Notes
Control
Variable inputs
Proportion of consumers sensitive to changes in quality 50% subscriber_proportion
Proportion of mobile revenues affected 25% mobile_revenue_proportion
Number of players in factual 3 N_f_nat_exit
Number of players in counterfactual 2 N_cf_nat_exit
Length of interim period 3 interim_period
First year of full competition effects 2012 Year_of_exit_nat_exit
Final year of full competition effects 2014 Year_of_re_entry_nat_exit
Diminution Period 0 Dim_period
Elasticity -1.0 Elasticity_nat_exit
Exogenous cost trend Disabled Exog_cost_trend_nat
Price change of substitutes Enabled Price_change
Revenue scenario to use 2 Revenue_Growth
Long run 3G coverage level 2G/3G coverage chosen.coverage.level
Threat of entry constraint 10% Entry_threat_const
Discount Rate Social
Inflation 0.00% Inflation_rate
Discount rate (real) 3.50% real_social_discount_rate
Discount rate (nominal) 3.50% nom_social_discount_rate
Linked Outputs - Linear Demand, Relevant Market
2008
NPV, 2008 values, £millions Consumer surplusProducer surplus Total Welfare
1,047,219,536 -616,011,491 431,208,044
Linked Outputs - Linear Demand, Relevant Market
2008
NPV, 2008 values, £millions Consumer surplusProducer surplus Total Welfare
1,784,790,283 -1,045,257,213 739,533,071
subscriber_proportion
mobile_revenue_proportion
The first year in which the number of players = N_cf_nat_exit
The final year in which the number of players = N_cf_nat_exit
Elasticity_nat_exit
This should normally be disabled.
This should normally be enabled.
Unhide for details
Unhide for details
Unhide for details
If this value is zero then ensure that all inputs are in real terms and at 2008 prices
Source: Treasury Green Book
nom_social_discount_rate
Style Guidelines
Styles
Input assumption 100 An input to the model that it is expected the user will change (change at will)
Input data 100 A piece of real data (only change if you have better data)
Output 100 A key result from this part of the model (in particular one that will be used elsewhere in the model)
Highlight 100 A cell that is highlighted for one of a number of possible reasons, such as uncertainty about the reliability of the figure or the calculation
Note or source Note A note commenting on any aspect of the contents of a cell, or recording the source of data and assumptions (NB smaller than standard font size)
Un-format 100 Going back to default Excel formatting
Checksum 0.00 A side calculation intended solely to cross check a result (and which therefore should not be referenced anywhere else in the model)
Named range Name An Excel Name applying to one or more adjacent cells (use Insert Name Create to actually create the Excel Names)
An example
Company X subscriber numbers
Service Units Notes 2000 2001 2002 2003
Dial-up Subscribers Linear interpolation 1,000,000 1,000,000 1,000,000 1,000,000 Source: Company X Financial Statements
ADSL Subscribers Linear interpolation 100,000 133,333 166,667 200,000
Cable modem Subscribers Linear interpolation 50,000 100,000 150,000 200,000 Note: Data for 2000 need to be checked with Company X
Total Subscribers 1,150,000 1,233,333 1,316,667 1,400,000
Headings
Heading level 1, Arial 18 point
H1 Title
Heading level 2, Arial 14 point
H2 Title
H3 Title Heading level 3, Arial 12 point
H4 Title Heading level 4, Arial 9 point
H5 Title Heading level 4, Arial 9 point, bold italic
H6 Title Heading level 4, Arial 9 point, regular italic
Model Structure Competition
Objective: To calculate the effect on welfare of a change in the number of players in the UK mobile
market (ie a change in the level of competition).
Overview of
methodology:
Key
Control
variables Input
Linear demand model
Total welfare
impact of exit
Negative exponential Calculation
demand model
Subscribers
and revenue
forecasts Output
Forecasts of Subscribers, Revenues & Prices
Mobile subscriber forecasts
Mobile Subscribers
Subscribers (Q) Analysys Mason Western European mobile market: trends and forecasts Data Annex
Growth Rate
Subscribers sensitive to changes in quality
Subscribers (Q)
Growth Rate
Revenue Forecasts
2001 2002 2003 2004 2005
Inflation
http://www.statistics.gov.uk/downloads/theme_economy/FocusonCPI_June_2007.pdf
Inflation (CPI) - annual average, Base Year = 2005 94.2 95.4 96.7 98.0 100.0
Rebasing factor to 2008 Prices 1.14 1.13 1.11 1.10 1.08
UK Mobile Market Revenue
Retail Revenue (£bn) - in 2008 Prices Analysys Mason Western European mobile market: trends and forecasts Data Annex
Real Growth Rate Converted from Euros using Analysys Mason supplied exchange Rate €1.46 to £1
Relevant Market Revenue
Retail Revenue (£bn) - in 2008 Prices Analysys Mason Western European mobile market: trends and forecasts Data Annex
Real Growth Rate
Scenarios - UK retail revenue, £bn, 2008 prices
Relevant Market
1 Real growth GBP
2 Real growth GBP
3 Real growth GBP
4 Real growth GBP
5 Real growth GBP
Scenarios - Prices, £ per sub per year, 2008 prices
Relevant Market
1 Real growth GBP
2 Real growth GBP
3 Real growth GBP
4 Real growth GBP
5 Real growth GBP
72,793,000 76,302,000 78,344,000 80,077,000 81,609,000 82,964,000 84,146,000 85,344,840 86,560,760 87,794,004
4.8% 2.7% 2.2% 1.9% 1.7% 1.4% 1.4% 1.4% 1.4%
36,396,500 38,151,000 39,172,000 40,038,500 40,804,500 41,482,000 42,073,000 42,672,420 43,280,380 43,897,002
4.8% 2.7% 2.2% 1.9% 1.7% 1.4% 1.4% 1.4% 1.4%
2006 2007 2008
102.3 104.7 107.6
1.05 1.03 1.00
18.33 19.21 20.25 20.90 21.37 21.57 21.66
4.8% 5.4% 3.2% 2.3% 0.9% 0.4%
4.58 4.80 5.06 5.22 5.34 5.39 5.41
4.8% 5.4% 3.2% 2.3% 0.9% 0.4%
0 1 2 3 4 5 6 7 8 9
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
4.58 4.80 5.06 5.22 5.34 5.39 5.41 5.41 5.41 5.41
4.58 4.80 5.06 5.22 5.34 5.39 5.41 5.52 5.63 5.75
4.58 4.80 5.06 5.22 5.34 5.39 5.41 5.63 5.86 6.09
4.58 4.80 5.06 5.22 5.34 5.39 5.41 5.68 5.97 6.27
4.58 4.80 5.06 5.22 5.34 5.39 5.41 5.96 6.55 7.21
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
125.90 125.86 129.24 130.49 130.94 129.98 128.68 126.87 125.09 123.33
125.90 125.86 129.24 130.49 130.94 129.98 128.68 129.41 130.14 130.88
125.90 125.86 129.24 130.49 130.94 129.98 128.68 131.94 135.29 138.73
125.90 125.86 129.24 130.49 130.94 129.98 128.68 133.21 137.91 142.77
125.90 125.86 129.24 130.49 130.94 129.98 128.68 139.55 151.35 164.15
89,044,818 90,313,452 91,600,161 92,905,201 94,228,835 95,571,327 96,932,945 98,313,963 99,714,656 101,135,305 102,576,194
1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4%
44,522,409 45,156,726 45,800,080 46,452,601 47,114,417 47,785,663 48,466,473 49,156,981 49,857,328 50,567,652 51,288,097
1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4%
10 11 12 13 14 15 16 17 18 19 20
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
5.41 5.41 5.41 5.41 5.41 5.41 5.41 5.41 5.41 5.41 5.41
5.86 5.98 6.10 6.22 6.34 6.47 6.60 6.73 6.87 7.00 7.14
6.33 6.59 6.85 7.12 7.41 7.71 8.01 8.33 8.67 9.01 9.37
6.58 6.91 7.25 7.62 8.00 8.40 8.82 9.26 9.72 10.21 10.72
7.93 8.72 9.59 10.55 11.60 12.77 14.04 15.45 16.99 18.69 20.56
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
121.60 119.89 118.20 116.54 114.91 113.29 111.70 110.13 108.59 107.06 105.56
131.62 132.37 133.12 133.87 134.63 135.40 136.16 136.94 137.71 138.49 139.28
142.25 145.86 149.57 153.36 157.26 161.25 165.35 169.54 173.85 178.26 182.79
147.80 153.01 158.41 163.99 169.77 175.75 181.95 188.36 195.00 201.88 208.99
178.03 193.08 209.41 227.11 246.31 267.14 289.72 314.22 340.79 369.60 400.85
21.66
29.14
39.00
45.02
90.46
mobile_price_per_sub_per_month
Lists of used name ranges
Years
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
years
NPV components
NPV consumer surplus
NPV producer surplus
NPV total welfare
NPV.options
Constants and labels
1000 thousand
1000000 million
1000000000 billion
OK ok
Error error
Coverage options
90% coverage
95% coverage
99% coverage
2G/3G coverage
coverage.options
Scenario index
1
2
3
4
5
scenario.count
Multi-period model with linear demand
Road map
Number of
years for
calculating NPV
Demand curve Price and quantity,
NPV
with no exit
Cost function Price and quantity,
NPV
with exit
No. of players Price and quantity,
NPV with threat of entry
with and with exit and
without exit threat of entry
Discount rate
Calendar year
Year index
Key drivers
Discount factor
Assumes year end cash flows
Total mobile subscribers (Q forecast)subscribers
Assumed to be continue growing at a rate equal to the rate of growth 2012-2013 from 2013 onwards
Baseline Q subscribers
Total mobile subscribers x 3G coverage
Baseline P GBP
Based on revenue code
Calibration
Calibration inputs
Calibration Q 36,396,500
Calibration P GBP 125.90
No. MNOs 5
Calibration workings and results
Elasticity
%
Change in P used to derive calibration
Q1 (calibration)
P1 (calibration) GBP
a (choke price) GBP
b (slope)
Avg. marginal cost GBP
Base line market development
Calibration check:
Equilibrium Q
Equilibrium P GBP
Implied real market value GBP bn
Number of MNOs
a and b are calibrated in the first year. From next year a is a function of inflation and price of substitutes. B is a function of a, base p and base q.
Elasticity
a (choke price) GBP
b (slope)
Avg. marginal cost GBP
Change in marginal cost %
Elasticity
a (choke price) GBP
b (slope)
Avg. marginal cost GBP
Change in marginal cost %
Elasticity
a (choke price) GBP
b (slope)
Avg. marginal cost GBP
Change in marginal cost %
Elasticity
a (choke price) GBP
b (slope)
Avg. marginal cost GBP
Change in marginal cost %
Consumer surplus GBP
Producer surplus GBP
Total welfare GBP
Factual market development
Elasticity to use -1.0
a GBP
b
Equilibrium Q
Equilibrium P
Number of MNOs
Average marginal cost GBP
Fixed costs GBP
Elasticity
Consumer surplus GBP
Producer surplus GBP
Total welfare GBP
Discounted consumer surplus GBP
Discounted producer surplus GBP
Discounted total welfare GBP
Start point of NPV:
NPV consumer surplus GBP
NPV producer surplus GBP
NPV total welfare GBP
Discounted back to start of 2008 prices
Counterfactual market development
Elasticity to use -1.0
a GBP
b
Equilibrium Q
Equilibrium P GBP
Number of MNOs
Average marginal cost GBP
Fixed costs GBP
Elasticity
Consumer surplus GBP
Producer surplus GBP
Total welfare GBP
Discounted consumer surplus GBP
Discounted producer surplus GBP
Discounted total welfare GBP
Start point of NPV:
NPV consumer surplus GBP
NPV producer surplus GBP
NPV total welfare GBP
Affected market segment - but only the years selected below (5 year, 10 year or 20 y
Factual 2008
NPV consumer surplus GBP 27,015,178,271
NPV producer surplus GBP 18,010,118,848
NPV total welfare GBP 45,025,297,119
Counterfactual 2008
NPV consumer surplus GBP 25,967,958,736
NPV producer surplus GBP 18,626,130,339
NPV total welfare GBP 44,594,089,075
Difference 2008
NPV consumer surplus GBP 1,047,219,536
NPV producer surplus GBP (616,011,491)
NPV total welfare GBP 431,208,044
NPV_diff_linear
Key
Total welfare
impact of exit Input
Total welfare
Calculation
impact of exit
with threat of entry
Output
2007 2008 2009 2010 2011
0 1 2 3 4
1.00 0.97 0.93 0.90 0.87
36,396,500 38,151,000 39,172,000 40,038,500 40,804,500
36,396,500 38,151,000 39,172,000 40,038,500 40,804,500
125.90 125.86 129.24 130.49 130.94
Calibration_Q_nat_exit
Calibration_P_nat_exit
Calibration_N_nat_exit
-0.5 -1.0 -1.5 -2.0 Source: DotEcon
0.10% 0.10% 0.10% 0.10% Source: Assumption
36,378,302 36,360,104 36,341,905 36,323,707
126.03 126.03 126.03 126.03
377.71 251.80 209.84 188.85
0.000006918 0.000003459 0.000002306 0.000001730
75.54 100.72 109.12 113.31
Calibration_nat_exit
50.49
OK
2007 2008 2009 2010 2011
36,396,500 38,151,000 39,172,000 40,038,500 40,804,500
125.90 125.86 129.24 130.49 130.94
4.6 4.8 5.1 5.2 5.3
5 5 5 5 5
on and price of substitutes. B is a function of a, base p and base q.
-0.5
378 378 378 378 378
0.000007 0.000007 0.000006 0.000006 0.000006
75.54 75.49 79.55 81.05 81.59
-0.07% 5.38% 1.88% 0.67%
-1.0
252 252 252 252 252
0.000003 0.000003 0.000003 0.000003 0.000003
100.72 100.67 104.73 106.23 106.77
-0.05% 4.03% 1.43% 0.51%
-1.5
210 210 210 210 210
0.000002 0.000002 0.000002 0.000002 0.000002
109.12 109.06 113.12 114.62 115.16
-0.05% 3.72% 1.32% 0.48%
-2.0
189 189 189 189 189
0.000002 0.000002 0.000002 0.000001 0.000001
113.31 113.26 117.32 118.82 119.36
-0.05% 3.59% 1.28% 0.46%
2007
2,291,198,630
1,832,958,904
4,124,157,534
Elasticity check: OK
4,753,840,949.54 4,988,439,176.45 5,139,285,037.43 5,252,610,006.76
252 252 252 252 252
0.0000035 0.0000033 0.0000031 0.0000030 0.0000030
32,756,850 34,335,900 35,254,800 36,034,650 36,724,050
138.49 138.45 141.50 142.62 143.03
3 3 3 3 3
100.72 100.67 104.73 106.23 106.77
- - - - -
-1.22 -1.22 -1.28 -1.31 -1.31
1,855,870,890 1,946,042,835 1,944,435,198 1,967,197,052 1,997,331,503
1,237,247,260 1,297,361,890 1,296,290,132 1,311,464,701 1,331,554,335
3,093,118,151 3,243,404,724 3,240,725,330 3,278,661,753 3,328,885,838
1,855,870,890 1,880,234,623 1,815,151,064 1,774,299,032 1,740,559,014
1,237,247,260 1,253,489,749 1,210,100,709 1,182,866,021 1,160,372,676
3,093,118,151 3,133,724,371 3,025,251,773 2,957,165,053 2,900,931,691
2007 2008 2009 2010 2011
28,064,234,794 26,208,363,904 24,328,129,281 22,512,978,217 20,738,679,185
18,709,489,863 17,472,242,602 16,218,752,854 15,008,652,145 13,825,786,124
46,773,724,657 43,680,606,506 40,546,882,135 37,521,630,362 34,564,465,309
Elasticity check: OK
252 252 252 252 252
0.0000035 0.0000033 0.0000031 0.0000030 0.0000030
32,756,850 34,335,900 35,254,800 36,034,650 36,724,050
138.49 138.45 141.50 142.62 143.03
3 3 3 3 3
100.72 100.67 104.73 106.23 106.77
- - - - -
-1.22 -1.22 -1.28 -1.31 -1.31
1,855,870,890 1,946,042,835 1,944,435,198 1,967,197,052 1,997,331,503
1,237,247,260 1,297,361,890 1,296,290,132 1,311,464,701 1,331,554,335
3,093,118,151 3,243,404,724 3,240,725,330 3,278,661,753 3,328,885,838
0
1,855,870,890 1,880,234,623 1,815,151,064 1,774,299,032 1,740,559,014
1,237,247,260 1,253,489,749 1,210,100,709 1,182,866,021 1,160,372,676
3,093,118,151 3,133,724,371 3,025,251,773 2,957,165,053 2,900,931,691
2007 2008 2009 2010 2011
27,017,015,258 25,161,144,368 23,280,909,745 21,465,758,682 19,691,459,650
19,325,501,354 18,088,254,094 16,834,764,345 15,624,663,636 14,441,797,615
46,342,516,613 43,249,398,462 40,115,674,091 37,090,422,318 34,133,257,265
selected below (5 year, 10 year or 20 year)
2012 2013 2014 2015 2016
5 6 7 8 9
0.84 0.81 0.79 0.76 0.73
41,482,000 42,073,000 42,672,420 43,280,380 43,897,002
41,482,000 42,073,000 42,672,420 43,280,380 43,897,002
129.98 128.68 129.41 130.14 130.88
Calibration_nat_exit
2012 2013 2014 2015 2016
41,482,000 42,073,000 42,672,420 43,280,380 43,897,002
129.98 128.68 129.41 130.14 130.88
5.4 5.4 5.5 5.6 5.7
5 5 5 5 5
378 374 370 366 363
0.000006 0.000006 0.000006 0.000005 0.000005
80.43 79.62 81.25 82.87 84.49
-1.42% -1.01% 2.04% 2.00% 1.95%
252 249 247 244 242
0.000003 0.000003 0.000003 0.000003 0.000003
105.61 104.55 105.93 107.30 108.68
-1.08% -1.00% 1.31% 1.30% 1.28%
210 208 206 204 202
0.000002 0.000002 0.000002 0.000002 0.000002
114.01 112.86 114.15 115.45 116.74
-1.00% -1.00% 1.14% 1.13% 1.12%
189 187 185 183 181
0.000001 0.000001 0.000001 0.000001 0.000001
118.20 117.02 118.27 119.52 120.77
-0.97% -1.00% 1.07% 1.06% 1.05%
5,307,437,402.95 5,329,091,161.54 5,420,668,752.08 5,514,016,306.98 5,609,168,972.73
252 249 247 244 242
0.0000029 0.0000029 0.0000028 0.0000026 0.0000025
37,333,800 37,865,700 38,405,178 38,952,342 39,507,302
142.16 140.74 141.14 141.56 141.98
3 3 3 3 3
105.61 104.55 105.93 107.30 108.68
- - - - -
-1.30 -1.30 -1.34 -1.38 -1.42
2,046,686,635 2,055,153,378 2,028,737,398 2,001,515,955 1,973,471,803
1,364,457,757 1,370,102,252 1,352,491,599 1,334,343,970 1,315,647,868
3,411,144,392 3,425,255,629 3,381,228,997 3,335,859,926 3,289,119,671
1,723,255,228 1,671,868,597 1,594,569,256 1,519,974,346 1,447,997,384
1,148,836,819 1,114,579,065 1,063,046,171 1,013,316,231 965,331,590
2,872,092,046 2,786,447,661 2,657,615,427 2,533,290,577 2,413,328,974
2012
18,998,120,171
12,665,413,447
31,663,533,618
252 249 247 244 242
0.0000029 0.0000029 0.0000028 0.0000026 0.0000025
33,185,600 33,658,400 34,137,936 38,952,342 39,507,302
154.34 152.80 152.88 141.56 141.98
2 2 2 3 3
105.61 104.55 105.93 107.30 108.68
- - - - -
-1.58 -1.58 -1.63 -1.38 -1.42
1,617,135,119 1,623,824,891 1,602,953,006 2,001,515,955 1,973,471,803
1,617,135,119 1,623,824,891 1,602,953,006 1,334,343,970 1,315,647,868
3,234,270,238 3,247,649,782 3,205,906,012 3,335,859,926 3,289,119,671
1,361,584,378 1,320,982,595 1,259,906,573 1,519,974,346 1,447,997,384
1,361,584,378 1,320,982,595 1,259,906,573 1,013,316,231 965,331,590
2,723,168,755 2,641,965,190 2,519,813,146 2,533,290,577 2,413,328,974
2012
17,950,900,635
13,281,424,939
31,232,325,574
2017 2018 2019 2020 2021
10 11 12 13 14
0.71 0.68 0.66 0.64 0.62
44,522,409 45,156,726 45,800,080 46,452,601 47,114,417
44,522,409 45,156,726 45,800,080 46,452,601 47,114,417
131.62 132.37 133.12 133.87 134.63
2017 2018 2019 2020 2021
44,522,409 45,156,726 45,800,080 46,452,601 47,114,417
131.62 132.37 133.12 133.87 134.63
5.9 6.0 6.1 6.2 6.3
5 5 5 5 5
359 356 352 349 345
0.000005 0.000005 0.000005 0.000005 0.000004
86.10 87.72 89.33 90.94 92.55
1.91% 1.87% 1.84% 1.80% 1.77%
239 237 235 232 230
0.000002 0.000002 0.000002 0.000002 0.000002
110.05 111.43 112.80 114.18 115.55
1.26% 1.25% 1.23% 1.22% 1.21%
200 198 196 194 192
0.000002 0.000001 0.000001 0.000001 0.000001
118.03 119.33 120.62 121.92 123.22
1.11% 1.10% 1.09% 1.08% 1.06%
180 178 176 174 173
0.000001 0.000001 0.000001 0.000001 0.000001
122.02 123.28 124.54 125.79 127.05
1.04% 1.03% 1.02% 1.01% 1.00%
5,706,162,597.71 5,805,033,746.23 5,905,819,712.85 6,008,558,536.94 6,113,289,017.63
239 237 235 232 230
0.0000024 0.0000023 0.0000022 0.0000021 0.0000020
40,070,168 40,641,053 41,220,072 41,807,341 42,402,976
142.40 142.84 143.28 143.72 144.17
3 3 3 3 3
110.05 111.43 112.80 114.18 115.55
- - - - -
-1.47 -1.52 -1.57 -1.62 -1.68
1,944,587,344 1,914,844,625 1,884,225,330 1,852,710,771 1,820,281,881
1,296,391,562 1,276,563,083 1,256,150,220 1,235,140,514 1,213,521,254
3,240,978,906 3,191,407,708 3,140,375,550 3,087,851,285 3,033,803,135
1,378,554,553 1,311,564,618 1,246,948,854 1,184,630,961 1,124,536,999
919,036,369 874,376,412 831,299,236 789,753,974 749,691,333
2,297,590,921 2,185,941,031 2,078,248,090 1,974,384,935 1,874,228,332
239 237 235 232 230
0.0000024 0.0000023 0.0000022 0.0000021 0.0000020
40,070,168 40,641,053 41,220,072 41,807,341 42,402,976
142.40 142.84 143.28 143.72 144.17
3 3 3 3 3
110.05 111.43 112.80 114.18 115.55
- - - - -
-1.47 -1.52 -1.57 -1.62 -1.68
1,944,587,344 1,914,844,625 1,884,225,330 1,852,710,771 1,820,281,881
1,296,391,562 1,276,563,083 1,256,150,220 1,235,140,514 1,213,521,254
3,240,978,906 3,191,407,708 3,140,375,550 3,087,851,285 3,033,803,135
1,378,554,553 1,311,564,618 1,246,948,854 1,184,630,961 1,124,536,999
919,036,369 874,376,412 831,299,236 789,753,974 749,691,333
2,297,590,921 2,185,941,031 2,078,248,090 1,974,384,935 1,874,228,332
Change in number of players
2022 2023 2024 2025 2026
15 16 17 18 19
0.60 0.58 0.56 0.54 0.52
47,785,663 48,466,473 49,156,981 49,857,328 50,567,652
47,785,663 48,466,473 49,156,981 49,857,328 50,567,652
135.40 136.16 136.94 137.71 138.49
2022 2023 2024 2025 2026
47,785,663 48,466,473 49,156,981 49,857,328 50,567,652
135.40 136.16 136.94 137.71 138.49
6.5 6.6 6.7 6.9 7.0
5 5 5 5 5
342 338 335 331 328
0.000004 0.000004 0.000004 0.000004 0.000004
94.16 95.76 97.36 98.97 100.57
1.74% 1.70% 1.67% 1.64% 1.62%
228 225 223 221 219
0.000002 0.000002 0.000002 0.000002 0.000002
116.93 118.31 119.68 121.06 122.44
1.19% 1.18% 1.16% 1.15% 1.14%
190 188 186 184 182
0.000001 0.000001 0.000001 0.000001 0.000001
124.52 125.82 127.12 128.43 129.73
1.05% 1.04% 1.04% 1.03% 1.02%
171 169 167 166 164
0.000001 0.000001 0.000001 0.000001 0.000001
128.32 129.58 130.84 132.11 133.38
0.99% 0.98% 0.98% 0.97% 0.96%
6,220,050,728.97 6,328,884,035.42 6,439,830,107.67 6,552,930,938.73 6,668,229,360.43
228 225 223 221 219
0.0000019 0.0000018 0.0000018 0.0000017 0.0000016
43,007,097 43,619,825 44,241,283 44,871,595 45,510,887
144.63 145.09 145.56 146.04 146.52
3 3 3 3 3
116.93 118.31 119.68 121.06 122.44
- - - - -
-1.74 -1.81 -1.87 -1.95 -2.03
1,786,919,208 1,752,602,906 1,717,312,726 1,681,028,011 1,643,727,684
1,191,279,472 1,168,401,937 1,144,875,151 1,120,685,340 1,095,818,456
2,978,198,681 2,921,004,843 2,862,187,877 2,801,713,351 2,739,546,140
1,066,595,312 1,010,736,457 956,893,141 905,000,155 854,994,308
711,063,541 673,824,304 637,928,761 603,333,437 569,996,205
1,777,658,853 1,684,560,761 1,594,821,902 1,508,333,592 1,424,990,514
228 225 223 221 219
0.0000019 0.0000018 0.0000018 0.0000017 0.0000016
43,007,097 43,619,825 44,241,283 44,871,595 45,510,887
144.63 145.09 145.56 146.04 146.52
3 3 3 3 3
116.93 118.31 119.68 121.06 122.44
- - - - -
-1.74 -1.81 -1.87 -1.95 -2.03
1,786,919,208 1,752,602,906 1,717,312,726 1,681,028,011 1,643,727,684
1,191,279,472 1,168,401,937 1,144,875,151 1,120,685,340 1,095,818,456
2,978,198,681 2,921,004,843 2,862,187,877 2,801,713,351 2,739,546,140
1,066,595,312 1,010,736,457 956,893,141 905,000,155 854,994,308
711,063,541 673,824,304 637,928,761 603,333,437 569,996,205
1,777,658,853 1,684,560,761 1,594,821,902 1,508,333,592 1,424,990,514
2027
20
0.50
51,288,097
51,288,097
139.28
2027
51,288,097
139.28
7.1
5
325
0.000004
102.16
1.59%
217
0.000002
123.82
1.13%
180
0.000001
131.04
1.01%
162
0.000000
134.65
0.95%
6,785,769,060.12
217
0.0000015
46,159,287
147.01
3
123.82
- Source: Assumption of no fixed costs
-2.11
1,605,390,244
1,070,260,163
2,675,650,406
806,814,368
537,876,245
1,344,690,613
217
0.0000015
46,159,287
147.01
3
123.82
- Source: Assumption of no fixed costs
-2.11
1,605,390,244
1,070,260,163
2,675,650,406
806,814,368
537,876,245
1,344,690,613
Multi-period model with negative exponential demand
Road map
Number of
years for
calculating NPV
Demand
Price and quantity,
curve NPV
with no exit
Total welfare
Cost function
impact of exit
Price and quantity,
NPV
with exit
No. of
players
with and
Discount rate
Calendar year
Year index
Key drivers
Discount factor
Assumes year end cash flows
Total mobile subscribers (Q forecast) subscribers
Assumed to be continue growing at a rate equal to the rate of growth 2012-2013 from 2013 onwards
Baseline Q subscribers
Total mobile subscribers x 3G coverage
Baseline P GBP
Based on revenue code
Calibration
Calibration inputs
Calibration Q 36,396,500
Calibration P GBP 125.90
No. MNOs 5
Calibration workings and results
Elasticity
Change in P used to derive calibration %
Q1 (calibration)
P1 (calibration) GBP
a (choke price) GBP
b (slope)
Average marginal cost GBP
Base line market development
Calibration check: OK
Equilibrium Q
Equilibrium P GBP
Implied real market value GBP bn
Number of MNOs
a and b are calibrated in the first year. From next year a is a function of inflation and price of substitutes. B is a function of a, base p and base q.
Elasticity
a (choke price) GBP
b (slope)
Average marginal cost GBP
Change in marginal cost %
Elasticity
a (choke price) GBP
b (slope)
Average marginal cost GBP
Change in marginal cost %
Elasticity
a (choke price) GBP
b (slope)
Average marginal cost GBP
Change in marginal cost %
Elasticity
a (choke price) GBP
b (slope)
Average marginal cost GBP
Change in marginal cost %
Factual market development
Elasticity to use -1.0
a GBP
b
Equilibrium Q
Equilibrium P
Number of MNOs
Average marginal cost GBP
Fixed costs GBP
Elasticity
Consumer surplus GBP
Producer surplus GBP
Total welfare GBP
Discounted consumer surplus GBP
Discounted producer surplus GBP
Discounted total welfare GBP
Start point of NPV:
NPV consumer surplus GBP
NPV producer surplus GBP
NPV total welfare GBP
Discounted back to start of 2007/08 prices
Counterfactual market development
Elasticity to use -1.0
a GBP
b
Equilibrium Q
Equilibrium P GBP
Number of MNOs
Average marginal cost GBP
Fixed costs GBP
Elasticity
Consumer surplus GBP
Producer surplus GBP
Total welfare GBP
Discounted consumer surplus GBP
Discounted producer surplus GBP
Discounted total welfare GBP
Start point of NPV:
NPV consumer surplus GBP
NPV producer surplus GBP
NPV total welfare GBP
Difference
NPV loss in consumer surplus GBP
NPV loss in producer surplus GBP
NPV loss in total welfare GBP
Affected market segment- but only the years selected below (5 year, 10 year or 20 ye
Factual 2008
NPV consumer surplus GBP 72,671,046,947
NPV producer surplus GBP 24,223,682,316
NPV total welfare GBP 96,894,729,263
Counterfactual 2008
NPV consumer surplus GBP 70,886,256,664
NPV producer surplus GBP 25,268,939,528
NPV total welfare GBP 96,155,196,192
Difference 2008
NPV consumer surplus GBP 1,784,790,283
NPV producer surplus GBP (1,045,257,213)
NPV total welfare GBP 739,533,071
NPV_diff_NegExp
exponential demand
Key
Input
Total welfare
impact of exit Calculation
Output
2007 2008 2009 2010 2011
0 1 2 3 4
1.00 0.97 0.93 0.90 0.87
36,396,500 38,151,000 39,172,000 40,038,500 40,804,500
36,396,500 38,151,000 39,172,000 40,038,500 40,804,500
125.90 125.86 129.24 130.49 130.94
Calibration_Q_nat_exit
Calibration_P_nat_exit
Calibration_N_nat_exit
-0.5 -1.0 -1.5 -2.0 Source: DotEcon
0.10% 0.10% 0.10% 0.10% Source: Assumption
36,378,302 36,360,104 36,341,905 36,323,707
126.03 126.03 126.03 126.03
60,007,684 98,935,945 163,117,796 268,935,780
0.003971338 0.007942677 0.011914015 0.015885353
75.54 100.72 109.12 113.31
Calibration_nat_exit
2007 2008 2009 2010 2011
36,396,500 38,151,000 39,172,000 40,038,500 40,804,500
125.90 125.86 129.24 130.49 130.94
4.6 4.8 5.1 5.2 5.3
5 5 5 5 5
and price of substitutes. B is a function of a, base p and base q.
-0.5
60,007,684 62,900,365 64,583,710 66,012,327 67,275,247
0.003971 0.003973 0.003869 0.003832 0.003818
75.54 75.51 77.54 78.29 78.57
-0.04% 2.69% 0.97% 0.35%
-1.0
98,935,945 103,705,170 106,480,536 108,835,927 110,918,131
0.007943 0.007946 0.007738 0.007663 0.007637
100.72 100.68 103.39 104.39 104.75
-0.04% 2.69% 0.97% 0.35%
-1.5
163,117,796 170,980,920 175,556,724 179,440,108 182,873,082
0.011914 0.011918 0.011606 0.011495 0.011455
109.12 109.08 112.01 113.09 113.48
-0.04% 2.69% 0.97% 0.35%
-2.0
268,935,780 281,899,879 289,444,106 295,846,723 301,506,740
0.015885 0.015891 0.015475 0.015327 0.015274
113.31 113.27 116.32 117.44 117.85
-0.04% 2.69% 0.97% 0.35%
Elasticity check: OK
98,935,945 103,705,170 106,480,536 108,835,927 110,918,131
0.0079427 0.0079456 0.0077375 0.0076635 0.0076369
31,853,246 33,388,737 34,282,289 35,040,627 35,711,010
142.69 142.64 146.47 147.89 148.40
3 3 3 3 3
100.72 100.68 103.39 104.39 104.75
- - - - -
0.00 0.00 0.00 0.00 0.00
4,010,391,819 4,202,180,657 4,430,654,843 4,572,420,932 4,676,107,990
1,336,797,273 1,400,726,886 1,476,884,948 1,524,140,311 1,558,702,663
5,347,189,093 5,602,907,543 5,907,539,790 6,096,561,242 6,234,810,653
4,010,391,819 4,060,077,930 4,136,063,705 4,124,061,707 4,074,957,964
1,336,797,273 1,353,359,310 1,378,687,902 1,374,687,236 1,358,319,321
5,347,189,093 5,413,437,240 5,514,751,607 5,498,748,942 5,433,277,285
2007 2008 2009 2010 2011
73,539,562,712 69,529,170,893 65,469,092,963 61,333,029,258 57,208,967,551
24,513,187,571 23,176,390,298 21,823,030,988 20,444,343,086 19,069,655,850
98,052,750,283 92,705,561,191 87,292,123,951 81,777,372,344 76,278,623,401
Elasticity check: OK
98,935,945 103,705,170 106,480,536 108,835,927 110,918,131
0.0079427 0.0079456 0.0077375 0.0076635 0.0076369
31,853,246 33,388,737 34,282,289 35,040,627 35,711,010
142.69 142.64 146.47 147.89 148.40
3 3 3 3 3
100.72 100.68 103.39 104.39 104.75
- - - - -
0.00 0.00 0.00 0.00 0.00
4,010,391,819 4,202,180,657 4,430,654,843 4,572,420,932 4,676,107,990
1,336,797,273 1,400,726,886 1,476,884,948 1,524,140,311 1,558,702,663
5,347,189,093 5,602,907,543 5,907,539,790 6,096,561,242 6,234,810,653
4,010,391,819 4,060,077,930 4,136,063,705 4,124,061,707 4,074,957,964
1,336,797,273 1,353,359,310 1,378,687,902 1,374,687,236 1,358,319,321
5,347,189,093 5,413,437,240 5,514,751,607 5,498,748,942 5,433,277,285
2007 2008 2009 2010 2011
71,754,772,429 67,744,380,610 63,684,302,680 59,548,238,974 55,424,177,268
25,558,444,784 24,221,647,510 22,868,288,200 21,489,600,299 20,114,913,063
97,313,217,213 91,966,028,120 86,552,590,880 81,037,839,273 75,539,090,331
2007 2008 2009 2010 2011
1,784,790,283 1,784,790,283 1,784,790,283 1,784,790,283 1,784,790,283
(1,045,257,213) (1,045,257,213) (1,045,257,213) (1,045,257,213) (1,045,257,213)
739,533,071 739,533,071 739,533,071 739,533,071 739,533,071
cted below (5 year, 10 year or 20 year)
NPV_diff_NegExp
2012 2013 2014 2015 2016
5 6 7 8 9
0.84 0.81 0.79 0.76 0.73
41,482,000 42,073,000 42,672,420 43,280,380 43,897,002
41,482,000 42,073,000 42,672,420 43,280,380 43,897,002
129.98 128.68 129.41 130.14 130.88
Calibration_nat_exit
2012 2013 2014 2015 2016
41,482,000 42,073,000 42,672,420 43,280,380 43,897,002
129.98 128.68 129.41 130.14 130.88
5.4 5.4 5.5 5.6 5.7
5 5 5 5 5
68,392,256 69,366,650 70,354,927 71,357,283 72,373,921
0.003847 0.003886 0.003864 0.003842 0.003820
77.99 77.21 77.64 78.08 78.53
-0.74% -1.00% 0.57% 0.57% 0.57%
112,759,767 114,366,271 115,995,664 117,648,271 119,324,423
0.007694 0.007771 0.007728 0.007684 0.007641
103.98 102.94 103.52 104.11 104.70
-0.74% -1.00% 0.57% 0.57% 0.57%
185,909,426 188,558,104 191,244,519 193,969,207 196,732,714
0.011540 0.011657 0.011591 0.011526 0.011461
112.65 111.52 112.15 112.79 113.43
-0.74% -1.00% 0.57% 0.57% 0.57%
306,512,825 310,879,757 315,308,906 319,801,157 324,357,410
0.015387 0.015543 0.015455 0.015368 0.015281
116.98 115.81 116.46 117.13 117.79
-0.74% -1.00% 0.57% 0.57% 0.57%
112,759,767 114,366,271 115,995,664 117,648,271 119,324,423
0.0076935 0.0077715 0.0077277 0.0076841 0.0076407
36,303,940 36,821,167 37,345,763 37,877,834 38,417,485
147.31 145.83 146.66 147.49 148.33
3 3 3 3 3
103.98 102.94 103.52 104.11 104.70
- - - - -
0.00 0.00 0.00 0.00 0.00
4,718,757,703 4,737,984,542 4,832,744,233 4,929,399,117 5,027,987,100
1,572,919,234 1,579,328,181 1,610,914,744 1,643,133,039 1,675,995,700
6,291,676,938 6,317,312,722 6,443,658,977 6,572,532,156 6,703,982,800
3,973,067,367 3,854,353,477 3,798,493,282 3,743,442,655 3,689,189,863
1,324,355,789 1,284,784,492 1,266,164,427 1,247,814,218 1,229,729,954
5,297,423,156 5,139,137,970 5,064,657,710 4,991,256,873 4,918,919,817
2012
53,134,009,587
17,711,336,529
70,845,346,117
112,759,767 114,366,271 115,995,664 117,648,271 119,324,423
0.0076935 0.0077715 0.0077277 0.0076841 0.0076407
30,730,621 31,168,445 31,612,506 37,877,834 38,417,485
168.97 167.28 168.23 147.49 148.33
2 2 2 3 3
103.98 102.94 103.52 104.11 104.70
- - - - -
0.00 0.00 0.00 0.00 0.00
3,994,342,160 4,010,617,327 4,090,829,674 4,929,399,117 5,027,987,100
1,997,171,080 2,005,308,664 2,045,414,837 1,643,133,039 1,675,995,700
5,991,513,240 6,015,925,991 6,136,244,511 6,572,532,156 6,703,982,800
3,363,128,918 3,262,639,780 3,215,355,145 3,743,442,655 3,689,189,863
1,681,564,459 1,631,319,890 1,607,677,573 1,247,814,218 1,229,729,954
5,044,693,377 4,893,959,670 4,823,032,718 4,991,256,873 4,918,919,817
2012
51,349,219,304
18,756,593,742
70,105,813,046
2012
1,784,790,283
(1,045,257,213)
739,533,071
2017 2018 2019 2020 2021
10 11 12 13 14
0.71 0.68 0.66 0.64 0.62
44,522,409 45,156,726 45,800,080 46,452,601 47,114,417
44,522,409 45,156,726 45,800,080 46,452,601 47,114,417
131.62 132.37 133.12 133.87 134.63
2017 2018 2019 2020 2021
44,522,409 45,156,726 45,800,080 46,452,601 47,114,417
131.62 132.37 133.12 133.87 134.63
5.9 6.0 6.1 6.2 6.3
5 5 5 5 5
73,405,042 74,450,855 75,511,567 76,587,391 77,678,542
0.003799 0.003777 0.003756 0.003735 0.003714
78.97 79.42 79.87 80.32 80.78
0.57% 0.57% 0.57% 0.57% 0.57%
121,024,455 122,748,708 124,497,526 126,271,260 128,070,265
0.007598 0.007555 0.007512 0.007470 0.007428
105.30 105.89 106.49 107.10 107.71
0.57% 0.57% 0.57% 0.57% 0.57%
199,535,593 202,378,405 205,261,719 208,186,112 211,152,170
0.011396 0.011332 0.011268 0.011205 0.011142
114.07 114.72 115.37 116.02 116.68
0.57% 0.57% 0.57% 0.57% 0.57%
328,978,576 333,665,581 338,419,363 343,240,872 348,131,074
0.015195 0.015110 0.015024 0.014940 0.014855
118.46 119.13 119.81 120.49 121.17
0.57% 0.57% 0.57% 0.57% 0.57%
121,024,455 122,748,708 124,497,526 126,271,260 128,070,265
0.0075976 0.0075548 0.0075122 0.0074698 0.0074277
38,964,824 39,519,962 40,083,008 40,654,077 41,233,281
149.17 150.02 150.87 151.72 152.58
3 3 3 3 3
105.30 105.89 106.49 107.10 107.71
- - - - -
0.00 0.00 0.00 0.00 0.00
5,128,546,842 5,231,117,778 5,335,740,134 5,442,454,937 5,551,304,035
1,709,515,614 1,743,705,926 1,778,580,045 1,814,151,646 1,850,434,678
6,838,062,456 6,974,823,705 7,114,320,179 7,256,606,582 7,401,738,714
3,635,723,343 3,583,031,700 3,531,103,705 3,479,928,289 3,429,494,545
1,211,907,781 1,194,343,900 1,177,034,568 1,159,976,096 1,143,164,848
4,847,631,124 4,777,375,601 4,708,138,273 4,639,904,385 4,572,659,394
121,024,455 122,748,708 124,497,526 126,271,260 128,070,265
0.0075976 0.0075548 0.0075122 0.0074698 0.0074277
38,964,824 39,519,962 40,083,008 40,654,077 41,233,281
149.17 150.02 150.87 151.72 152.58
3 3 3 3 3
105.30 105.89 106.49 107.10 107.71
- - - - -
0.00 0.00 0.00 0.00 0.00
5,128,546,842 5,231,117,778 5,335,740,134 5,442,454,937 5,551,304,035
1,709,515,614 1,743,705,926 1,778,580,045 1,814,151,646 1,850,434,678
6,838,062,456 6,974,823,705 7,114,320,179 7,256,606,582 7,401,738,714
3,635,723,343 3,583,031,700 3,531,103,705 3,479,928,289 3,429,494,545
1,211,907,781 1,194,343,900 1,177,034,568 1,159,976,096 1,143,164,848
4,847,631,124 4,777,375,601 4,708,138,273 4,639,904,385 4,572,659,394
2022 2023 2024 2025 2026
15 16 17 18 19
0.60 0.58 0.56 0.54 0.52
47,785,663 48,466,473 49,156,981 49,857,328 50,567,652
47,785,663 48,466,473 49,156,981 49,857,328 50,567,652
135.40 136.16 136.94 137.71 138.49
2022 2023 2024 2025 2026
47,785,663 48,466,473 49,156,981 49,857,328 50,567,652
135.40 136.16 136.94 137.71 138.49
6.5 6.6 6.7 6.9 7.0
5 5 5 5 5
78,785,240 79,907,704 81,046,161 82,200,837 83,371,964
0.003693 0.003672 0.003651 0.003631 0.003610
81.24 81.70 82.16 82.63 83.10
0.57% 0.57% 0.57% 0.57% 0.57%
129,894,900 131,745,532 133,622,529 135,526,268 137,457,130
0.007386 0.007344 0.007303 0.007262 0.007221
108.32 108.93 109.55 110.17 110.79
0.57% 0.57% 0.57% 0.57% 0.57%
214,160,485 217,211,660 220,306,306 223,445,041 226,628,495
0.011079 0.011016 0.010954 0.010892 0.010831
117.34 118.01 118.68 119.35 120.03
0.57% 0.57% 0.57% 0.57% 0.57%
353,090,947 358,121,484 363,223,692 368,398,592 373,647,220
0.014772 0.014688 0.014605 0.014523 0.014441
121.86 122.55 123.24 123.94 124.64
0.57% 0.57% 0.57% 0.57% 0.57%
129,894,900 131,745,532 133,622,529 135,526,268 137,457,130
0.0073858 0.0073441 0.0073027 0.0072615 0.0072206
41,820,738 42,416,564 43,020,878 43,633,803 44,255,460
153.45 154.32 155.19 156.07 156.96
3 3 3 3 3
108.32 108.93 109.55 110.17 110.79
- - - - -
0.00 0.00 0.00 0.00 0.00
5,662,330,116 5,775,576,718 5,891,088,253 6,008,910,018 6,129,088,218
1,887,443,372 1,925,192,239 1,963,696,084 2,002,970,006 2,043,029,406
7,549,773,488 7,700,768,958 7,854,784,337 8,011,880,024 8,172,117,624
3,379,791,726 3,330,809,237 3,282,536,639 3,234,963,645 3,188,080,114
1,126,597,242 1,110,269,746 1,094,178,880 1,078,321,215 1,062,693,371
4,506,388,968 4,441,078,983 4,376,715,519 4,313,284,860 4,250,773,485
129,894,900 131,745,532 133,622,529 135,526,268 137,457,130
0.0073858 0.0073441 0.0073027 0.0072615 0.0072206
41,820,738 42,416,564 43,020,878 43,633,803 44,255,460
153.45 154.32 155.19 156.07 156.96
3 3 3 3 3
108.32 108.93 109.55 110.17 110.79
- - - - -
0.00 0.00 0.00 0.00 0.00
5,662,330,116 5,775,576,718 5,891,088,253 6,008,910,018 6,129,088,218
1,887,443,372 1,925,192,239 1,963,696,084 2,002,970,006 2,043,029,406
7,549,773,488 7,700,768,958 7,854,784,337 8,011,880,024 8,172,117,624
3,379,791,726 3,330,809,237 3,282,536,639 3,234,963,645 3,188,080,114
1,126,597,242 1,110,269,746 1,094,178,880 1,078,321,215 1,062,693,371
4,506,388,968 4,441,078,983 4,376,715,519 4,313,284,860 4,250,773,485
2027
20
0.50
51,288,097
51,288,097
139.28
2027
51,288,097
139.28
7.1
5
84,559,776
0.003590
83.57
0.57%
139,415,502
0.007180
111.42
0.57%
229,857,304
0.010770
120.71
0.57%
378,970,626
0.014360
125.35
0.57%
139,415,502
0.0071798
44,885,974
157.85
3
111.42
- Source: Assumption of no fixed costs
0.00
6,251,669,983
2,083,889,994
8,335,559,977
3,141,876,054
1,047,292,018
4,189,168,072
139,415,502
0.0071798
44,885,974
157.85
3
111.42
- Source: Assumption of no fixed costs
0.00
6,251,669,983
2,083,889,994
8,335,559,977
3,141,876,054
1,047,292,018
4,189,168,072
Linked outputs
NPV loss in welfare
Consumer Producer surplus Total welfare
Linear Demand ########## (616,011,491) 431,208,044
Negative Exponential
########## (1,045,257,213) 739,533,071
Demand
Model Structure Delay
Objective: Calculate the welfare effect of reductions in innovation from reductions in
competition resulting from liberalising the 2G spectrum.
High Level The model assumes that delays in the launch of major enhancements to cellular
Assumptions: mobile services ("4G") are a good proxy for delays in the pace of innovation, and
that delays in the pace of innovation are indicative of the type of dynamic efficiency
loss whi
Methodology: We model the flow of economic benefits over 20 years from 2007/08 - with and
without a one-year delay in the introduction of new innovations. The base case
shows a delay in the launch of "4G" services from 2014/15 to 2015/16.
Overview of
Methodology:
Figure 53 (A10.34)
Control
Input Variables
Base Case Speed of 3G Migration Medium Migration_3G
4G Migration Delay Period 1 years Migration_Delay_4G This should not be changed unless considering a delay longer than one year.
Economic value of GSM £12.99 Ec_Value_2G
Consumer surplus as % of total surplus 50%
Increase in Economic Benefits from Innovation 25% Innovation_Uplift
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16
No. of Years before fast 900MHz Catchup 5 years Catchup_Delay_4G 35% 50% 65% 80% 90% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Reflects no. of years after 4G innovation begins, ie no. of years AFTER the delay
Real Discount Rate 3.5% Disc_Rate
Linked Outputs
1 year delay 6 month delay 3 month delay
NPV Impact of Delayed Migration £344,426,649 £91,105,601 £45,552,800
of which consumer surplus £172,213,325 £45,552,800 £22,776,400
of which producer surplus £172,213,325 £45,552,800 £22,776,400
Migration profile Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23 Year 24
1 Profile 1 Rapid migration 1%
Migration profile from GSM to moderate 2100MHz 5% 6% 20% 44% 64% 76% 85% 90% 93% 96% 97% 98% 99% 99% 99% 100% 100% 100% 100% 100% 100% 100% 100%
2 Profile 2 Med migration 1%
Migration profile from GSM to moderate 2100MHz 5% 6% 14% 25% 44% 62% 75% 84% 90% 93% 96% 97% 98% 99% 99% 99% 100% 100% 100% 100% 100% 100% 100%
3 Profile 3 Slow migration 1%
Migration profile from GSM to moderate 2100MHz 5% 6% 10% 17% 30% 48% 65% 77% 85% 90% 94% 96% 97% 98% 99% 99% 100% 100% 100% 100% 100% 100% 100%
Selected profile
2 1% 5% 6% 14% 25% 44% 62% 75% 84% 90% 93% 96% 97% 98% 99% 99% 99% 100% 100% 100% 100% 100% 100% 100%
Mobile Market Input Data
Quarterly Subscribers From Analy sy s CTM model, updated by SCB Q2
2007/08 Q1 2007/08 2007/08 Q3 2007/08 Q4 2008/09 Q1 2008/09 Q2 2008/09 Q3 2008/09 Q4 2009/10 Q1 2009/10 Q2 2009/10 Q3 2009/10 Q4 2010/11 Q1 2010/11 Q2 2010/11 Q3 2010/11 Q4 2011/12 Q1 2011/12 Q2 2011/12 Q3 2011/12 Q4 2012/13 Q1 2012/13 Q2 2012/13 Q3 2012/13 Q4 2013/14 Q1 2013/14 Q2 2013/14 Q3 2013/14 Q4 2014/15 Q1 2014/15 Q2 2014/15 Q3 2014/15 Q4 2015/16 Q1 2015/16 Q2 2015/16 Q3 2015/16 Q4 2016/17 Q1 2016/17 Q2 2016/17 Q3 2016/17 Q4 2017/18 Q1 2017/18 Q2 2017/18 Q3 2017/18 Q4 2018/19 Q1 2018/19 Q2 2018/19 Q3 2018/19 Q4 2019/20 Q1 2019/20 Q2 2019/20 Q3 2019/20 Q4 2020/21 Q1 2020/21 Q2 2020/21 Q3 2020/21 Q4
Total market subscribers 65,085,182 65,295,768
CTM traf f ic module: inv ariant of scenario 65,506,637 65,717,788 65,870,751 66,021,171 66,171,754 66,322,501 66,438,667 66,559,307 66,680,056 66,800,913 66,900,922 67,000,762 67,100,671 67,200,648 67,287,844 67,375,962 67,464,125 67,552,331 67,632,572 67,713,607 67,794,670 67,875,763 67,951,808 68,028,561 68,105,332 68,182,124 68,255,666 68,329,834 68,404,015 68,478,209 68,550,280 68,622,796 68,695,320 68,767,854 68,838,980 68,910,246 68,981,518 69,052,796 69,123,129 69,193,224 69,263,324 69,333,429 69,402,890 69,471,720 69,540,552 69,609,387 69,677,780 69,745,164 69,812,550 69,879,939 69,947,019 70,012,744 70,078,471 70,144,199
2,824,783 2,996,648 3,169,575 3,376,324
UMTS customers per 3G only operator CTM traf f ic module: medium demand, middle migration f or 3G only operator 3,684,585 4,069,359 4,455,859 4,919,704 5,351,394 5,890,913 6,432,364 7,082,093 7,767,646 8,342,536 8,919,114 9,384,386 9,833,420 10,210,822 10,589,185 10,895,413 11,191,371 11,440,909 11,691,017 11,894,357 12,091,126 12,257,826 12,424,875 12,561,595 12,694,086 12,807,105 12,920,343 13,013,910 13,104,735 13,182,940 13,261,282 13,326,867 13,382,320 13,437,887 13,493,541 13,549,282 13,590,075 13,630,876 13,671,733 13,712,645 13,743,837 13,774,939 13,806,076 13,837,248 13,862,091 13,886,756 13,911,443 13,936,152 13,956,735 13,977,062 13,997,402 14,017,756
These f orecasts are used to produce the data on the proportion of subscribers on UMTS
UMTS customers per 2G/3G operator
Rapid 3,476,601 4,383,350 5,356,843 6,382,339 7,264,877 8,035,391 8,722,508 9,315,636 9,840,806 10,279,695 10,663,716 10,971,729 11,221,437 11,459,129 11,660,743 11,858,099 12,027,406 12,188,859 12,326,690 12,461,514 12,577,959 12,689,159 12,784,883 12,878,499 12,960,066 13,038,147 13,106,083 13,172,550 13,231,111 13,287,362 13,336,963 13,385,544 13,428,934 13,470,780 13,508,265 13,545,045 13,580,500 13,612,806 13,642,252 13,669,122 13,697,193 13,723,133 13,747,198 13,769,573 13,792,710 13,814,353 13,834,767 13,854,073 13,873,860 13,892,550 13,910,434 13,927,591 13,945,053 13,961,657 13,977,733 13,993,332
Medium CTM traf f ic module: medium demand, middle migration f or 2G/3G operator3,306,021
2,036,432 2,420,727 2,806,056 3,887,942 4,547,184 5,285,203 6,002,495 6,713,520 7,394,235 8,067,072 8,634,992 9,118,548 9,566,685 9,957,685 10,325,474 10,648,144 10,947,614 11,209,652 11,456,253 11,673,284 11,875,007 12,052,195 12,219,124 12,366,666 12,504,120 12,625,489 12,740,043 12,841,878 12,937,074 13,021,722 13,101,845 13,173,620 13,241,011 13,301,485 13,358,954 13,413,027 13,462,089 13,506,615 13,547,056 13,587,340 13,624,271 13,658,227 13,689,504 13,720,651 13,749,504 13,776,405 13,801,550 13,826,593 13,850,012 13,872,151 13,893,138 13,914,048 13,933,754 13,952,621 13,970,732
Slow CTM traf f ic module: medium demand, slow migration f or 2G/3G operator 2,012,687
1,215,581 1,446,787 1,694,245 2,381,751 2,798,604 3,264,210 3,780,579 4,349,603 4,946,556 5,581,799 6,192,171 6,785,422 7,399,012 8,006,941 8,569,949 9,068,286 9,525,847 9,930,155 10,304,791 10,637,037 10,942,447 11,212,947 11,463,851 11,686,963 11,892,427 12,075,000 12,244,634 12,396,037 12,535,841 12,660,635 12,776,886 12,881,174 12,977,825 13,064,631 13,145,798 13,221,198 13,289,453 13,351,251 13,407,237 13,461,510 13,511,030 13,556,316 13,597,789 13,638,112 13,675,223 13,709,556 13,741,390 13,772,451 13,801,287 13,828,301 13,853,675 13,878,533 13,901,792 13,923,856 13,944,846
Total Market UMTS Subscribers
Rapid Rapid 16,731,186 20,530,047 24,596,946 28,905,682 32,744,095 36,210,921 39,345,892 42,182,249 44,714,618 47,009,693 49,087,229 50,969,010 52,653,394 54,179,050 55,562,086 56,816,781 57,943,043 58,966,259 59,895,947 60,741,470 61,503,205 62,197,546 62,830,549 63,408,353 63,931,391 64,410,414 64,849,206 65,251,795 65,618,529 65,956,555 66,268,193 66,556,086 66,820,472 67,066,060 67,294,341 67,507,046 67,704,319 67,889,109 68,062,548 68,225,770 68,378,848 68,523,409 68,660,525 68,790,939 68,914,677 69,032,352 69,145,142 69,253,538 69,357,533 69,456,957 69,553,178 69,646,516 69,736,949 69,823,691 69,908,332 69,991,082
Medium Medium 10,970,509 12,679,555 14,393,801 16,600,407 19,236,353 22,258,094 25,596,671 28,929,682 32,205,474 35,467,855 38,700,652 41,622,061 44,241,839 46,609,278 48,749,855 50,686,281 52,425,994 54,001,279 55,427,793 56,720,426 57,884,506 58,940,936 59,899,796 60,770,852 61,557,789 62,274,307 62,926,832 63,521,767 64,061,598 64,555,402 65,007,232 65,421,290 65,799,215 66,146,983 66,467,220 66,762,682 67,034,429 67,286,244 67,520,000 67,737,505 67,939,434 68,127,959 68,304,640 68,470,661 68,626,442 68,772,954 68,911,698 69,043,449 69,168,464 69,286,804 69,400,048 69,508,706 69,612,927 69,712,077 69,807,884 69,900,684
Slow Slow 7,687,107 8,783,795 9,946,557 11,427,071 13,211,591 15,263,775 17,512,698 20,042,019 22,749,806 25,677,136 28,759,559 31,850,776 34,909,334 37,938,585 40,946,878 43,664,183 46,106,566 48,314,211 50,309,807 52,114,576 53,739,517 55,210,696 56,542,805 57,749,762 58,838,979 59,827,533 60,724,874 61,540,130 62,278,232 62,950,470 63,562,882 64,121,453 64,629,431 65,094,239 65,519,807 65,910,060 66,267,114 66,595,700 66,898,546 67,178,229 67,436,114 67,674,996 67,896,996 68,103,802 68,296,287 68,475,832 68,644,302 68,802,806 68,951,896 69,091,904 69,224,647 69,350,854 69,470,867 69,584,230 69,692,828 69,797,138
% of Subscribers on UMTS
Rapid 25.7% 31.4% 37.5% 44.0% 49.7% 54.8% 59.5% 63.6% 67.3% 70.6% 73.6% 76.3% 78.7% 80.9% 82.8% 84.5% 86.1% 87.5% 88.8% 89.9% 90.9% 91.9% 92.7% 93.4% 94.1% 94.7% 95.2% 95.7% 96.1% 96.5% 96.9% 97.2% 97.5% 97.7% 98.0% 98.2% 98.4% 98.5% 98.7% 98.8% 98.9% 99.0% 99.1% 99.2% 99.3% 99.4% 99.4% 99.5% 99.5% 99.6% 99.6% 99.7% 99.7% 99.7% 99.8% 99.8%
Medium 16.9% 19.4% 22.0% 25.3% 29.2% 33.7% 38.7% 43.6% 48.5% 53.3% 58.0% 62.3% 66.1% 69.6% 72.7% 75.4% 77.9% 80.1% 82.2% 84.0% 85.6% 87.0% 88.4% 89.5% 90.6% 91.5% 92.4% 93.2% 93.9% 94.5% 95.0% 95.5% 96.0% 96.4% 96.8% 97.1% 97.4% 97.6% 97.9% 98.1% 98.3% 98.5% 98.6% 98.8% 98.9% 99.0% 99.1% 99.2% 99.3% 99.3% 99.4% 99.5% 99.5% 99.6% 99.6% 99.7%
Slow 11.8% 13.5% 15.2% 17.4% 20.1% 23.1% 26.5% 30.2% 34.2% 38.6% 43.1% 47.7% 52.2% 56.6% 61.0% 65.0% 68.5% 71.7% 74.6% 77.1% 79.5% 81.5% 83.4% 85.1% 86.6% 87.9% 89.2% 90.3% 91.2% 92.1% 92.9% 93.6% 94.3% 94.9% 95.4% 95.8% 96.3% 96.6% 97.0% 97.3% 97.6% 97.8% 98.0% 98.2% 98.4% 98.6% 98.7% 98.8% 99.0% 99.1% 99.2% 99.2% 99.3% 99.4% 99.4% 99.5%
Defined Scenario
Total market UMTS subscribers 10,970,509 12,679,555 14,393,801 16,600,407 19,236,353 22,258,094 25,596,671 28,929,682 32,205,474 35,467,855 38,700,652 41,622,061 44,241,839 46,609,278 48,749,855 50,686,281 52,425,994 54,001,279 55,427,793 56,720,426 57,884,506 58,940,936 59,899,796 60,770,852 61,557,789 62,274,307 62,926,832 63,521,767 64,061,598 64,555,402 65,007,232 65,421,290 65,799,215 66,146,983 66,467,220 66,762,682 67,034,429 67,286,244 67,520,000 67,737,505 67,939,434 68,127,959 68,304,640 68,470,661 68,626,442 68,772,954 68,911,698 69,043,449 69,168,464 69,286,804 69,400,048 69,508,706 69,612,927 69,712,077 69,807,884 69,900,684
% of subscribers on UMTS 16.86% 19.42% 21.97% 25.26% 29.20% 33.71% 38.68% 43.62% 48.47% 53.29% 58.04% 62.31% 66.13% 69.57% 72.65% 75.43% 77.91% 80.15% 82.16% 83.97% 85.59% 87.04% 88.35% 89.53% 90.59% 91.54% 92.40% 93.16% 93.86% 94.48% 95.03% 95.54% 95.99% 96.39% 96.76% 97.08% 97.38% 97.64% 97.88% 98.10% 98.29% 98.46% 98.62% 98.76% 98.88% 98.99% 99.10% 99.19% 99.27% 99.34% 99.41% 99.47% 99.52% 99.57% 99.61% 99.65%
Offset 2 6 10 14 18 22 26 30 34 38 42 46 50 54 58 62 66 70 74 78 82
Year End Subscribers 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Total Market Subscribers 65,506,637 66,171,754
Assumed constant outside of CTM f orecast period 66,680,056 67,100,671 67,464,125 67,794,670 68,105,332 68,404,015 68,695,320 68,981,518 69,263,324 69,540,552 69,812,550 70,078,471 70,078,471 70,078,471 70,078,471 70,078,471 70,078,471 70,078,471 70,078,471
Total Market UMTS Subscribers
Rapid Rapid 24,596,946 39,345,892 49,087,229 55,562,086 59,895,947 62,830,549 64,849,206 66,268,193 67,294,341 68,062,548 68,660,525 69,145,142 69,553,178 69,908,332 69,908,332 69,908,332 69,908,332 69,908,332 69,908,332 69,908,332 69,908,332
Medium Medium 14,393,801 25,596,671 38,700,652 48,749,855 55,427,793 59,899,796 62,926,832 65,007,232 66,467,220 67,520,000 68,304,640 68,911,698 69,400,048 69,807,884 69,807,884 69,807,884 69,807,884 69,807,884 69,807,884 69,807,884 69,807,884
Slow Slow 9,946,557 17,512,698 28,759,559 40,946,878 50,309,807 56,542,805 60,724,874 63,562,882 65,519,807 66,898,546 67,896,996 68,644,302 69,224,647 69,692,828 69,692,828 69,692,828 69,692,828 69,692,828 69,692,828 69,692,828 69,692,828
% UMTS Subscribers Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Rapid Rapid migration 37.549% 59.5% 73.6% 82.8% 88.8% 92.7% 95.2% 96.9% 98.0% 98.7% 99.1% 99.4% 99.6% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8% 99.8%
Medium Med migration 21.973% 38.7% 58.0% 72.7% 82.2% 88.4% 92.4% 95.0% 96.8% 97.9% 98.6% 99.1% 99.4% 99.6% 99.6% 99.6% 99.6% 99.6% 99.6% 99.6% 99.6%
Slow Slow migration 15.184% 26.5% 43.1% 61.0% 74.6% 83.4% 89.2% 92.9% 95.4% 97.0% 98.0% 98.7% 99.2% 99.4% 99.4% 99.4% 99.4% 99.4% 99.4% 99.4% 99.4%
Defined Scenario 2007
GSM only 56,798,163 46,786,730 32,873,674 21,899,606 14,559,931 9,661,384 6,398,179 4,238,024 2,807,557 1,860,099 1,232,484 816,703 541,239 358,725 363,836 369,019 374,277 379,609 385,018 390,503 396,067
UMTS 15,994,837 29,515,270 45,470,326 58,177,394 67,049,069 73,302,616 77,747,821 81,106,816 83,753,204 85,933,904 87,812,334 89,496,749 91,058,921 92,546,476 93,864,999 95,202,307 96,558,668 97,934,353 99,329,638 100,744,802 102,180,127
Total 72,793,000 76,302,000 78,344,000 80,077,000 81,609,000 82,964,000 84,146,000 85,344,840 86,560,760 87,794,004 89,044,818 90,313,452 91,600,161 92,905,201 94,228,835 95,571,327 96,932,945 98,313,963 99,714,656 ########## ##########
Innovation Delay - Calculation of Economic Impact
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Economic benefits per user per month (£)
GSM £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99
Moderate 2100MHz £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24
Fast 900MHz £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30
Migration to moderate 2100MHz (no migration to fast 900MHz)
GSM 56,798,163 46,786,730 32,873,674 21,899,606 14,559,931 9,661,384 6,398,179 4,238,024 2,807,557 1,860,099 1,232,484 816,703 541,239 358,725 363,836 369,019 374,277 379,609 385,018 390,503 396,067
Moderate 2100MHz 15,994,837 29,515,270 45,470,326 58,177,394 67,049,069 73,302,616 77,747,821 81,106,816 83,753,204 85,933,904 87,812,334 89,496,749 91,058,921 92,546,476 93,864,999 95,202,307 96,558,668 97,934,353 99,329,638 100,744,802 102,180,127
Fast 900MHz (or equivalent 2100MHz)
Total 72,793,000 76,302,000 78,344,000 80,077,000 81,609,000 82,964,000 84,146,000 85,344,840 86,560,760 87,794,004 89,044,818 90,313,452 91,600,161 92,905,201 94,228,835 95,571,327 96,932,945 98,313,963 99,714,656 101,135,305 102,576,194
% migrated to moderate 2100MHz 22% 39% 58% 73% 82% 88% 92% 95% 97% 98% 99% 99% 99% 100% 100% 100% 100% 100% 100% 100% 100%
% migrated to fast 900MHz 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Economic Benefits (£m) 11,975 13,049 13,989 14,755 15,340 15,795 16,152 16,470 16,763 17,040 17,309 17,572 17,834 18,095 18,353 18,614 18,880 19,149 19,421 19,698 19,979
NPV of Economic Benefits (£m) 233,160
Base Case Migration to fast 900MHz
GSM 56,798,163 46,786,730 32,873,674 21,899,606 14,559,931 9,661,384 6,398,179 4,238,024 2,807,557 1,860,099 1,232,484 816,703 541,239 358,725 363,836 369,019 374,277 379,609 385,018 390,503 396,067
Moderate 2100MHz 15,994,837 29,515,270 45,470,326 58,177,394 66,595,131 69,471,291 72,475,264 68,888,173 61,887,832 47,638,415 32,330,626 21,377,569 14,146,695 9,366,148 6,076,855 3,897,356 2,452,148 1,493,036 855,807 431,747 148,863
Fast 900MHz (or equivalent 2100MHz) 0 0 0 0 453,938 3,831,325 5,272,556 12,218,644 21,865,372 38,295,489 55,481,708 68,119,180 76,912,226 83,180,328 87,788,144 91,304,951 94,106,520 96,441,317 98,473,831 100,313,055 102,031,264
Total 72,793,000 76,302,000 78,344,000 80,077,000 81,609,000 82,964,000 84,146,000 85,344,840 86,560,760 87,794,004 89,044,818 90,313,452 91,600,161 92,905,201 94,228,835 95,571,327 96,932,945 98,313,963 99,714,656 101,135,305 102,576,194
% migrated to moderate 2100MHz 22% 39% 58% 73% 82% 84% 86% 81% 71% 54% 36% 24% 15% 10% 6% 4% 3% 2% 1% 0% 0%
% migrated to fast 900MHz 0.56% 4.62% 6.27% 14.32% 25.26% 43.62% 62.31% 75.43% 83.97% 89.53% 93.16% 95.54% 97.08% 98.10% 98.76% 99.19% 99.47%
Economic Benefits (£m) 11,975 13,049 13,989 14,755 15,362 15,981 16,409 17,066 17,828 18,906 20,012 20,892 21,582 22,148 22,631 23,064 23,465 23,848 24,220 24,586 24,951
NPV of Economic Benefits (£m) 260,196
Delayed Migration to fast 900MHz (No Catch Up) 0.28%
This row gives the migration profile from moderate 2100MHz to 2.59% 5.44% 10.29%
fast 900MHz assuming a six month delay. 19.79% 34.44% 52.96% 68.87% 79.70% 86.75% 91.35% 94.35% 96.31% 97.59% 98.43% 98.97% 99.33%
GSM 56,798,163 46,786,730 32,873,674 21,899,606 14,559,931 9,661,384 6,398,179 4,238,024 2,807,557 1,860,099 1,232,484 816,703 541,239 358,725 363,836 369,019 374,277 379,609 385,018 390,503 396,067
Moderate 2100MHz 15,994,837 29,515,270 45,470,326 58,177,394 66,708,616 70,313,754 72,821,926 70,605,915 64,255,994 51,668,065 36,490,780 24,339,323 16,102,331 10,659,229 6,932,538 4,463,875 2,827,332 1,741,548 1,020,432 540,810 221,122
Fast 900MHz (or equivalent 2100MHz) 0 0 0 0 340,453 2,988,862 4,925,895 10,500,902 19,497,210 34,265,839 51,321,554 65,157,426 74,956,590 81,887,247 86,932,461 90,738,432 93,731,336 96,192,805 98,309,206 100,203,992 101,959,006
Total 72,793,000 76,302,000 78,344,000 80,077,000 81,609,000 82,964,000 84,146,000 85,344,840 86,560,760 87,794,004 89,044,818 90,313,452 91,600,161 92,905,201 94,228,835 95,571,327 96,932,945 98,313,963 99,714,656 101,135,305 102,576,194
% migrated to moderate 2100MHz 22% 39% 58% 73% 82% 85% 87% 83% 74% 59% 41% 27% 18% 11% 7% 5% 3% 2% 1% 1% 0%
% migrated to fast 900MHz 0.42% 3.60% 5.85% 12.30% 22.52% 39.03% 57.64% 72.15% 81.83% 88.14% 92.26% 94.94% 96.70% 97.84% 98.59% 99.08% 99.40%
Economic Benefits (£m) 11,975 13,049 13,989 14,755 15,356 15,940 16,392 16,982 17,713 18,710 19,809 20,747 21,486 22,085 22,589 23,036 23,447 23,836 24,212 24,581 24,947
NPV of Economic Benefits (£m) 259,459
73,765 421,231 121,332 343,548 236,816 0 0
Delayed fast 900MHz Migration (With Catch Up)
GSM 56,798,163 46,786,730 32,873,674 21,899,606 14,559,931 9,661,384 6,398,179 4,238,024 2,807,557 1,860,099 1,232,484 816,703 541,239 358,725 363,836 369,019 374,277 379,609 385,018 390,503 396,067
Moderate 2100MHz 15,994,837 29,515,270 45,470,326 58,177,394 66,668,896 69,892,523 72,596,596 69,231,721 62,124,648 47,638,415 32,330,626 21,377,569 14,146,695 9,366,148 6,076,855 3,897,356 2,452,148 1,493,036 855,807 431,747 221,122
Fast 900MHz (or equivalent 2100MHz) 0 0 0 0 380,173 3,410,093 5,151,225 11,875,095 21,628,555 38,295,489 55,481,708 68,119,180 76,912,226 83,180,328 87,788,144 91,304,951 94,106,520 96,441,317 98,473,831 100,313,055 101,959,006
Total 72,793,000 76,302,000 78,344,000 80,077,000 81,609,000 82,964,000 84,146,000 85,344,840 86,560,760 87,794,004 89,044,818 90,313,452 91,600,161 92,905,201 94,228,835 95,571,327 96,932,945 98,313,963 99,714,656 101,135,305 102,576,194
% migrated to moderate 2100MHz 22% 39% 58% 73% 82% 84% 86% 81% 72% 54% 36% 24% 15% 10% 6% 4% 3% 2% 1% 0% 0%
% migrated to fast 900MHz 0.47% 4.11% 6.12% 13.91% 24.99% 43.62% 62.31% 75.43% 83.97% 89.53% 93.16% 95.54% 97.08% 98.10% 98.76% 99.19% 99.40%
Economic Benefits (£m) 11,975 13,049 13,989 14,755 15,358 15,961 16,403 17,049 17,817 18,906 20,012 20,892 21,582 22,148 22,631 23,064 23,465 23,848 24,220 24,586 24,947
NPV of Economic Benefits (£m) 260,150
NPV Impacts (£m) relative to Base Case 4G Migration
Delayed 4G Migration (No Catch Up) 737
Delayed 4G Migration (With Catch Up) 46
Innovation Delay - Calculation of Economic Impact
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Economic benefits per user per month (£)
GSM £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99
Moderate 2100MHz £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24
Fast 900MHz £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30
Migration to moderate 2100MHz (no migration to fast 900MHz)
GSM 56,798,163 46,786,730 32,873,674 21,899,606 14,559,931 9,661,384 6,398,179 4,238,024 2,807,557 1,860,099 1,232,484 816,703 541,239 358,725 363,836 369,019 374,277 379,609 385,018 390,503 396,067
Moderate 2100MHz 15,994,837 29,515,270 45,470,326 58,177,394 67,049,069 73,302,616 77,747,821 81,106,816 83,753,204 85,933,904 87,812,334 89,496,749 91,058,921 92,546,476 93,864,999 95,202,307 96,558,668 97,934,353 99,329,638 100,744,802 102,180,127
Fast 900MHz (or equivalent 2100MHz)
Total 72,793,000 76,302,000 78,344,000 80,077,000 81,609,000 82,964,000 84,146,000 85,344,840 86,560,760 87,794,004 89,044,818 90,313,452 91,600,161 92,905,201 94,228,835 95,571,327 96,932,945 98,313,963 99,714,656 101,135,305 102,576,194
% migrated to moderate 2100MHz 22% 39% 58% 73% 82% 88% 92% 95% 97% 98% 99% 99% 99% 100% 100% 100% 100% 100% 100% 100% 100%
% migrated to fast 900MHz 0 0 0 0 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Economic Benefits (£m) 11,975 13,049 13,989 14,755 15,340 15,795 16,152 16,470 16,763 17,040 17,309 17,572 17,834 18,095 18,353 18,614 18,880 19,149 19,421 19,698 19,979
NPV of Economic Benefits (£m) 233,160
Base Case Migration to fast 900MHz
GSM 56,798,163 46,786,730 32,873,674 21,899,606 14,559,931 9,661,384 6,398,179 4,238,024 2,807,557 1,860,099 1,232,484 816,703 541,239 358,725 363,836 369,019 374,277 379,609 385,018 390,503 396,067
Moderate 2100MHz 15,994,837 29,515,270 45,470,326 58,177,394 66,595,131 69,471,291 72,475,264 68,888,173 61,887,832 47,638,415 32,330,626 21,377,569 14,146,695 9,366,148 6,076,855 3,897,356 2,452,148 1,493,036 855,807 431,747 148,863
Fast 900MHz (or equivalent 2100MHz) 0 0 0 0 453,938 3,831,325 5,272,556 12,218,644 21,865,372 38,295,489 55,481,708 68,119,180 76,912,226 83,180,328 87,788,144 91,304,951 94,106,520 96,441,317 98,473,831 100,313,055 102,031,264
Total 72,793,000 76,302,000 78,344,000 80,077,000 81,609,000 82,964,000 84,146,000 85,344,840 86,560,760 87,794,004 89,044,818 90,313,452 91,600,161 92,905,201 94,228,835 95,571,327 96,932,945 98,313,963 99,714,656 101,135,305 102,576,194
% migrated to moderate 2100MHz 22% 39% 58% 73% 82% 84% 86% 81% 71% 54% 36% 24% 15% 10% 6% 4% 3% 2% 1% 0% 0%
% migrated to fast 900MHz 0.56% 4.62% 6.27% 14.32% 25.26% 43.62% 62.31% 75.43% 83.97% 89.53% 93.16% 95.54% 97.08% 98.10% 98.76% 99.19% 99.47%
Economic Benefits (£m) 11,975 13,049 13,989 14,755 15,362 15,981 16,409 17,066 17,828 18,906 20,012 20,892 21,582 22,148 22,631 23,064 23,465 23,848 24,220 24,586 24,951
NPV of Economic Benefits (£m) 260,196
Delayed Migration to fast 900MHz (No Catch Up) 0.00%
This row gives the migration profile from moderate 2100MHz to 0.56% 4.62% 6.27%
fast 900MHz assuming a one year delay. 14.32% 25.26% 43.62% 62.31% 75.43% 83.97% 89.53% 93.16% 95.54% 97.08% 98.10% 98.76% 99.19%
GSM 56,798,163 46,786,730 32,873,674 21,899,606 14,559,931 9,661,384 6,398,179 4,238,024 2,807,557 1,860,099 1,232,484 816,703 541,239 358,725 363,836 369,019 374,277 379,609 385,018 390,503 396,067
Moderate 2100MHz 15,994,837 29,515,270 45,470,326 58,177,394 66,822,100 71,156,216 73,168,587 72,323,657 66,624,156 55,697,715 40,650,935 27,301,077 18,057,967 11,952,309 7,788,222 5,030,395 3,202,515 1,990,060 1,185,057 649,873 293,380
Fast 900MHz (or equivalent 2100MHz) 0 0 0 0 226,969 2,146,400 4,579,233 8,783,159 17,129,048 30,236,190 47,161,399 62,195,672 73,000,955 80,594,167 86,076,777 90,171,913 93,356,153 95,944,293 98,144,581 100,094,929 101,886,747
Total 72,793,000 76,302,000 78,344,000 80,077,000 81,609,000 82,964,000 84,146,000 85,344,840 86,560,760 87,794,004 89,044,818 90,313,452 91,600,161 92,905,201 94,228,835 95,571,327 96,932,945 98,313,963 99,714,656 101,135,305 102,576,194
% migrated to moderate 2100MHz 22% 39% 58% 73% 82% 86% 87% 85% 77% 63% 46% 30% 20% 13% 8% 5% 3% 2% 1% 1% 0%
% migrated to fast 900MHz 0.28% 2.59% 5.44% 10.29% 19.79% 34.44% 52.96% 68.87% 79.70% 86.75% 91.35% 94.35% 96.31% 97.59% 98.43% 98.97% 99.33%
Economic Benefits (£m) 11,975 13,049 13,989 14,755 15,351 15,899 16,375 16,898 17,598 18,514 19,607 20,603 21,391 22,022 22,547 23,008 23,429 23,824 24,204 24,576 24,944
NPV of Economic Benefits (£m) 258,721
147,530 842,462 242,663 687,097 473,632 0 0
Delayed fast 900MHz Migration (With Catch Up)
GSM 56,798,163 46,786,730 32,873,674 21,899,606 14,559,931 9,661,384 6,398,179 4,238,024 2,807,557 1,860,099 1,232,484 816,703 541,239 358,725 363,836 369,019 374,277 379,609 385,018 390,503 396,067
Moderate 2100MHz 15,994,837 29,515,270 45,470,326 58,177,394 66,742,661 70,313,754 72,717,927 69,575,269 62,361,464 47,638,415 32,330,626 21,377,569 14,146,695 9,366,148 6,076,855 3,897,356 2,452,148 1,493,036 855,807 431,747 293,380
Fast 900MHz (or equivalent 2100MHz) 0 0 0 0 306,408 2,988,862 5,029,893 11,531,547 21,391,739 38,295,489 55,481,708 68,119,180 76,912,226 83,180,328 87,788,144 91,304,951 94,106,520 96,441,317 98,473,831 100,313,055 101,886,747
Total 72,793,000 76,302,000 78,344,000 80,077,000 81,609,000 82,964,000 84,146,000 85,344,840 86,560,760 87,794,004 89,044,818 90,313,452 91,600,161 92,905,201 94,228,835 95,571,327 96,932,945 98,313,963 99,714,656 101,135,305 102,576,194
% migrated to moderate 2100MHz 22% 39% 58% 73% 82% 85% 86% 82% 72% 54% 36% 24% 15% 10% 6% 4% 3% 2% 1% 0% 0%
% migrated to fast 900MHz 0.38% 3.60% 5.98% 13.51% 24.71% 43.62% 62.31% 75.43% 83.97% 89.53% 93.16% 95.54% 97.08% 98.10% 98.76% 99.19% 99.33%
Economic Benefits (£m) 11,975 13,049 13,989 14,755 15,355 15,940 16,397 17,032 17,805 18,906 20,012 20,892 21,582 22,148 22,631 23,064 23,465 23,848 24,220 24,586 24,944
NPV of Economic Benefits (£m) 260,105
NPV Impacts (£m) relative to Base Case 4G Migration
Delayed 4G Migration (No Catch Up) 1,475
Delayed 4G Migration (With Catch Up) 91
Innovation Delay - Calculation of Economic Impact
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Economic benefits per user per month (£)
GSM £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99 £12.99
Moderate 2100MHz £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24 £16.24
Fast 900MHz £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30 £20.30
Migration to moderate 2100MHz (no migration to fast 900MHz)
GSM 56,798,163 46,786,730 32,873,674 21,899,606 14,559,931 9,661,384 6,398,179 4,238,024 2,807,557 1,860,099 1,232,484 816,703 541,239 358,725 363,836 369,019 374,277 379,609 385,018 390,503 396,067
Moderate 2100MHz 15,994,837 29,515,270 45,470,326 58,177,394 67,049,069 73,302,616 77,747,821 81,106,816 83,753,204 85,933,904 87,812,334 89,496,749 91,058,921 92,546,476 93,864,999 95,202,307 96,558,668 97,934,353 99,329,638 100,744,802 102,180,127
Fast 900MHz (or equivalent 2100MHz)
Total 72,793,000 76,302,000 78,344,000 80,077,000 81,609,000 82,964,000 84,146,000 85,344,840 86,560,760 87,794,004 89,044,818 90,313,452 91,600,161 92,905,201 94,228,835 95,571,327 96,932,945 98,313,963 99,714,656 101,135,305 102,576,194
% migrated to moderate 2100MHz 22% 39% 58% 73% 82% 88% 92% 95% 97% 98% 99% 99% 99% 100% 100% 100% 100% 100% 100% 100% 100%
% migrated to fast 900MHz 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Economic Benefits (£m) 11,975 13,049 13,989 14,755 15,340 15,795 16,152 16,470 16,763 17,040 17,309 17,572 17,834 18,095 18,353 18,614 18,880 19,149 19,421 19,698 19,979
NPV of Economic Benefits (£m) 233,160
Base Case Migration to fast 900MHz
GSM 56,798,163 46,786,730 32,873,674 21,899,606 14,559,931 9,661,384 6,398,179 4,238,024 2,807,557 1,860,099 1,232,484 816,703 541,239 358,725 363,836 369,019 374,277 379,609 385,018 390,503 396,067
Moderate 2100MHz 15,994,837 29,515,270 45,470,326 58,177,394 66,595,131 69,471,291 72,475,264 68,888,173 61,887,832 47,638,415 32,330,626 21,377,569 14,146,695 9,366,148 6,076,855 3,897,356 2,452,148 1,493,036 855,807 431,747 148,863
Fast 900MHz (or equivalent 2100MHz) 0 0 0 0 453,938 3,831,325 5,272,556 12,218,644 21,865,372 38,295,489 55,481,708 68,119,180 76,912,226 83,180,328 87,788,144 91,304,951 94,106,520 96,441,317 98,473,831 100,313,055 102,031,264
Total 72,793,000 76,302,000 78,344,000 80,077,000 81,609,000 82,964,000 84,146,000 85,344,840 86,560,760 87,794,004 89,044,818 90,313,452 91,600,161 92,905,201 94,228,835 95,571,327 96,932,945 98,313,963 99,714,656 101,135,305 102,576,194
% migrated to moderate 2100MHz 22% 39% 58% 73% 82% 84% 86% 81% 71% 54% 36% 24% 15% 10% 6% 4% 3% 2% 1% 0% 0%
% migrated to fast 900MHz 0.56% 4.62% 6.27% 14.32% 25.26% 43.62% 62.31% 75.43% 83.97% 89.53% 93.16% 95.54% 97.08% 98.10% 98.76% 99.19% 99.47%
Economic Benefits (£m) 11,975 13,049 13,989 14,755 15,362 15,981 16,409 17,066 17,828 18,906 20,012 20,892 21,582 22,148 22,631 23,064 23,465 23,848 24,220 24,586 24,951
NPV of Economic Benefits (£m) 260,196
Delayed Migration to fast 900MHz (No Catch Up)
GSM 56,798,163 46,786,730 32,873,674 21,899,606 14,559,931 9,661,384 6,398,179 4,238,024 2,807,557 1,860,099 1,232,484 816,703 541,239 358,725 363,836 369,019 374,277 379,609 385,018 390,503 396,067
Moderate 2100MHz 15,994,837 29,515,270 45,470,326 58,177,394 67,049,069 72,841,141 73,861,911 75,759,141 71,360,479 63,757,014 48,971,244 33,224,585 21,969,238 14,538,471 9,499,589 6,163,433 3,952,883 2,487,084 1,514,307 867,999 437,898
Fast 900MHz (or equivalent 2100MHz) 0 0 0 0 0 461,475 3,885,910 5,347,675 12,392,724 22,176,891 38,841,090 56,272,164 69,089,683 78,008,005 84,365,410 89,038,874 92,605,786 95,447,269 97,815,331 99,876,802 101,742,229
Total 72,793,000 76,302,000 78,344,000 80,077,000 81,609,000 82,964,000 84,146,000 85,344,840 86,560,760 87,794,004 89,044,818 90,313,452 91,600,161 92,905,201 94,228,835 95,571,327 96,932,945 98,313,963 99,714,656 101,135,305 102,576,194
% migrated to moderate 2100MHz 22% 39% 58% 73% 82% 88% 88% 89% 82% 73% 55% 37% 24% 16% 10% 6% 4% 3% 2% 1% 0%
% migrated to fast 900MHz 0.00% 0.56% 4.62% 6.27% 14.32% 25.26% 43.62% 62.31% 75.43% 83.97% 89.53% 93.16% 95.54% 97.08% 98.10% 98.76% 99.19%
Economic Benefits (£m) 11,975 13,049 13,989 14,755 15,340 15,817 16,342 16,731 17,367 18,121 19,201 20,314 21,200 21,896 22,464 22,953 23,392 23,800 24,188 24,565 24,937
NPV of Economic Benefits (£m) 257,247
453,938 2,190,402 693,323 2,404,839 1,894,529 1,611,860 0
Delayed fast 900MHz Migration (With Catch Up)
GSM 56,798,163 46,786,730 32,873,674 21,899,606 14,559,931 9,661,384 6,398,179 4,238,024 2,807,557 1,860,099 1,232,484 816,703 541,239 358,725 363,836 369,019 374,277 379,609 385,018 390,503 396,067
Moderate 2100MHz 15,994,837 29,515,270 45,470,326 58,177,394 67,049,069 71,661,694 73,168,587 71,293,012 63,782,361 49,250,275 32,330,626 21,377,569 14,146,695 9,366,148 6,076,855 3,897,356 2,452,148 1,493,036 855,807 431,747 148,863
Fast 900MHz (or equivalent 2100MHz) 0 0 0 0 0 1,640,922 4,579,233 9,813,805 19,970,842 36,683,629 55,481,708 68,119,180 76,912,226 83,180,328 87,788,144 91,304,951 94,106,520 96,441,317 98,473,831 100,313,055 102,031,264
Total 72,793,000 76,302,000 78,344,000 80,077,000 81,609,000 82,964,000 84,146,000 85,344,840 86,560,760 87,794,004 89,044,818 90,313,452 91,600,161 92,905,201 94,228,835 95,571,327 96,932,945 98,313,963 99,714,656 101,135,305 102,576,194
% migrated to moderate 2100MHz 22% 39% 58% 73% 82% 86% 87% 84% 74% 56% 36% 24% 15% 10% 6% 4% 3% 2% 1% 0% 0%
% migrated to fast 900MHz 0.00% 1.98% 5.44% 11.50% 23.07% 41.78% 62.31% 75.43% 83.97% 89.53% 93.16% 95.54% 97.08% 98.10% 98.76% 99.19% 99.47%
Economic Benefits (£m) 11,975 13,049 13,989 14,755 15,340 15,875 16,375 16,948 17,736 18,828 20,012 20,892 21,582 22,148 22,631 23,064 23,465 23,848 24,220 24,586 24,951
NPV of Economic Benefits (£m) 259,852
NPV Impacts (£m) relative to Base Case 4G Migration
Delayed 4G Migration (No Catch Up) 2,949
Delayed 4G Migration (With Catch Up) 344
Consumer and Producer Surplus Calculations
Private Business Consumer Producer Total
2012 Estimate
(in 2008 prices)
Surplus 2012 £6,468,540,477 £6,468,540,477 £12,937,080,953 These consumer and producer surplus inputs were generated using the competition impacts model
This is the total surplus generated by a 2 player market in 2012, using the total UK mobile market as the affected market segment.
Number of Subscribers 82,964,000 82,964,000 82,964,000 To generate these values input the following parameters on the following control sheet. All other parameters should be set as in the base case.
It is does not matter what the n_cf_nat_exit is set equal to as this does not enter the welfare calculation.
Average Surplus per Sub per Month £6.50 £6.50 £12.99 subcriber_proportion = 100%
revenue_proportion =100%
Proportion of total welfare 50.00% 50.00% 100.00% Discount rate = Social
n_f_nat_exit =2
Surplus is taken from the Cournot model using base assumptions, 2 players The surplus inputs are reported in 'Linear Demand'!K96:K98