An Economic Welfare Analysis of Shared Spectrum Use: A Case Study of LTE-U/LAA

LTE-U is an interesting case of spectrum sharing in that it is asymmetric, since the wireless service provider can utilize licensed and unlicensed spectrum, while non-subscribers can only utilize unlicensed spectrum. Furthermore, the use of spectrum by one party can impose a cost upon another party and, because the service provider can at times benefit from imposing such a cost, it can have the wrong incentive to access spectrum in the unlicensed band. In addition, unlicensed spectrum may currently be over-consumed in certain situations and, thus, may be inefficiently used. Finally, prices are not fully relied upon to guide the assignment of users to licensed and unlicensed spectrum since the unlicensed band serves as a common pool resource. Together these unique features of the wireless market contribute to the lively debate among interested parties regarding the welfare effects of a wireless service provider’s decision to adopt LTE-U. Using standard economic techniques, this paper presents a set of economic models designed to assess the welfare effects of LTE-U under different economic and technical conditions.