Refining the Thesis

So, after meeting with my faculty adviser and reading "Pricing Internet Access" (Greenstein, Shane. IEEE Micro, 0272-1732/01, 2001.) I think I'm a little closer to a thesis.

The current business model for telecoms in LATM is not sufficient to successfully support deployment of a 4G network. (I think I can show evidence of this based on margins in LATM and the problems that Alcatel-Lucent had in India.) With margins so squeezed already, it is going to be impossible to justify building the new network.

There are several barriers preventing telecoms from recouping their CAPEX investments. One of these barriers is failure of the 4G ecosystem to CREATE all the potential value of a 4G network. Mobile, wireless broadband still lacks the "killer ap." 4G networks have more capability than either 3G networks or terrestrial broadband - BUT, we're still doing the same things on the new network that we've done on the old networks. We need some application (and device quite possibly) that truly takes advantage of the high bandwidth and ability to move around (mobility.) Once we have that, there will be much more value on the table for service providers and consumers to share.

Another barrier, is the difficulty capturing that value. It is easy to apply a lot of the lessons of internet pricing to 4G access pricing. Taking this view, the current system is inadequate. Current pricing is either takes the form of an unlimited plan or a pre-pay, pay-as-you-go type of plan. This, like past internet pricing is not economically optimal. On the side of the unlimited plan, consumers will over use the network - accessing the network when the marginal utility they receive is less than the marginal cost for service providers. On the other hand, the pre-pay plans are analogous to metered internet pricing - utility is destroyed on the consumer side because no one likes to keep an eye on a meter ticking down the time they have for a web session. Value is also destroyed for the providers, because of the additional costs of administering this system.

Lastly, the diffusion of hardware in these areas make it difficult to capture value. Subsidizing the CPEs for WiMAX or LTE networks will be much more costly than subsidizing, say, a 2G handset. Until, laptops, phones and other devices are widely available, there won't be enough people using WiMAX to create significant value.

This could be a good portion of the paper and I believe there is a lot of research I can cite to support my claim. I'm a little disappointed at the negative bent this is taking, but I still hope to have room in my paper to propose some potential solutions.