The experience of the last 20 years has demonstrated that demand for harmonised spectrum for mobile broadband has been growing year over year. Driven by unit price reductions that are hard to match in other sectors, usage of mobile networks has exploded. Operators have managed to deliver that growth by making intensive use of the relatively small amount of harmonised spectrum made available. The first wave of “mobile bands” in Europe released before 2010 (900 MHz, 1800 MHz, 2100 MHz) amounted to 380 MHz in total. During the 2010s, an additional set of harmonised mobile bands (800 MHz, 2.6 GHz) provided 240 MHz more. The growth in harmonised spectrum supply was, in sum, marginal when compared with the growth in traffic.
Looking at those developments from a financial perspective, we see that mobile retail revenues in the big 5 EU markets were 20% lower in 2019 compared to those in 2010. Despite that reduction in revenues, operators have paid very significant sums for scarce spectrum resources. At the same time, they have also invested very heavily on upgrading their networks with the latest technologies and to allow a more efficient use of the very limited spectrum holdings.
In GSMA’s view, this trend is unsustainable. The average Return on Capital Employed (ROCE) for the biggest 5 EU telco operators was only 5% in 2019, below the cost of capital and half of what it was in 2010. In order for investors to see any reason to finance the network upgrades required to meet the ambitious EU connectivity goals, a change of strategy is required from policymakers. To be effective, this strategic change needs to permeate all the way to those in charge of spectrum policy – their decisions amount to roughly 10% of the telco sector’s CAPEX and have very significant power to shape market structure and dynamics. The recipe for change is, in our view, very simple:
1. Maximise harmonised spectrum supply for mobile broadband and,
2. Award spectrum licences to players with clear economic demand, and with appropriate and affordable roll-out requirements, while avoiding spectrum auctions conditions that extract rents from the sector or that distort the market through spectrum reservations.
The identification of new frequencies in “5G pioneer bands” has been an important step by policymakers in Europe to provide the industry with clarity and predictability at a critical time. The availability of 60 MHz of low band spectrum in the 700 MHz band plus 400 MHz in mid-band spectrum (3400-3800 MHz) as well as 3.2 GHz in 26 GHz band is a substantial increase that offers the prospect to not only make a difference, but help Europe take a leading role globally. European Institutions and Member States should, however, not be complacent. Unless all that spectrum is made available in a timely manner, at reasonable prices, and under fair and efficient conditions, the industry will not be able to provide the innovative and competitive 5G services and experience that end users are expecting. Based on that premise, the GSMA has developed the following policy recommendations regarding the 26 GHz band awards in Europe.
For more information please contact:
Policy Manager, Europe, GSMA