Competition and investment in shared spectrum

Meeting the exploding demand for wireless data services will require access to new wireless spectrum. However, the traditional approach of clearing spectrum and reallocating it is becoming increasingly difficult. This in turn has led to much interest in new approaches for sharing spectrum among different users, such as the those being currently developed in the 3.5 GHz band. These approaches raise not only technical challenges but also can fundamentally change the economic interactions among wireless service providers. In this paper we consider such effects by adapting a model for price competition with congestible resources presented in earlier papers. In these models users select service providers based on the sum of a congestion cost and the provider´s announced price. The congestion cost in turn depends on how spectrum is shared; here, we consider a primary- secondary sharing model motivated by the three-tier approach being considered for the 3.5 GhZ band in the United States. In addition to price competition, we also model the investment decision made by providers as to whether they will enter the market or not.