Impact of license fees on the prices of mobile voice service

In response to rapidly growing demand for wireless services, regulatory agencies have introduced license fees to enhance the efficiency of spectrum use. The impact of such fees on the market for mobile services is poorly understood. Under certain conditions, license fees are sunk and thus inconsequential for firm decisions. Given the economic and institutional setup of the mobile markets real effects of license fees are possible. The paper reviews the conditions under which these different scenarios are likely, and develops an empirical test for the nexus between license fees and prices. Despite weak hints that license fees influence prices, in the examined GSM and PCS markets no statistically significant evidence for lasting effects could be detected.