GSMA fires warning shot over high spectrum prices

Jason McGee-Abe
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The GSMA is urging policymakers to readdress high spectrum prices after a study has found that they “negatively impact” consumers and threaten high quality, affordable mobile broadband services

The Effective Spectrum Pricing research report, which has been published today and was developed in conjunction with NERA Economic Consulting, sought to find what the right price for spectrum is and has four key pricing policy recommendations: 
  1. Set modest reserve prices and annual fees, relying on the market to set prices; 
  2. License spectrum as soon as it is needed; 
  3. Avoid measures that increase risks for operators; and
  4. Publish long-term spectrum award plans that prioritise public welfare benefits over state revenues.

The report has found that the surge in spectrum prices is linked to lowered quality and reduced take-up of mobile broadband services, increased consumer prices for mobile broadband data and has ultimately meant consumers have lost out on economic benefits with a purchasing power of an estimated $250 billion across 15 countries where spectrum was priced above the global median – equivalent to $118 per person.

“The era of judging the success of auctions based on headline-generating revenue figures is over,” said Brett Tarnutzer, head of spectrum at the GSMA. “The damage done to consumers –and the wider digital economy – by policies that artificially inflate spectrum prices has been too great. While auctions remain an effective means of awarding spectrum, regulators should adopt spectrum policies that focus on maximising the benefits for society, rather than simply driving up the cost of spectrum.”

GSMA’s report claims that average final prices paid in auctions were found to have risen 250% from 2008 to 2016 with the most exorbitant price tags often influenced by policy decisions.

Richard Marsden, managing director at NERA Economic Consulting, added: “There was a time when it was believed that the cost of spectrum, no matter how high, would not impact consumers through higher mobile bills or reduced investment in networks. The academic and empirical research no longer backs this up. Furthermore, if you look at best practice regulation in the mobile industry, and other comparable industries, the focus of pricing policy is on reducing risks and adopting a long-term perspective to social value creation – not maximising revenues.”

Tarnutzer warned that with 5G technology on the horizon, countries inflating spectrum prices will damage their broadband future and “holding back their entire digital economies”. GTB