The telecommunication firms operate on acquired airwave space, licensed by the government. The usual practice of allocating spectrum is ascending auction that ensures maximization of government revenue. The literature shows that the license fee is a sunk cost and therefore cannot adversely affect the industry. Monopoly market structure can produce high license fee but that is not social welfare maximizing. This article shows, with a theoretical analysis, how the social planner's objective of social welfare maximization can be achieved using a part of the license fee for subsidization of telecom industry.
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