GSMA Report Shows High Spectrum Prices Threaten High Quality, Affordable Mobile Broadband Services
London – The GSMA today published ‘Effective Spectrum Pricing’, a research report on spectrum pricing, including the impact on consumers. The study, developed in collaboration with NERA Economic Consulting, links high spectrum prices to more expensive, lower quality mobile broadband services and also estimates that, due to the increased data prices, consumers lost out on economic benefits worth US$250 billion across selected markets. Average final prices paid in auctions were found to have risen 250 per cent1 from 2008 to 2016 with the most exorbitant price tags often influenced by policy decisions.
“The era of judging the success of auctions based on headline-generating revenue figures is over,” said Brett Tarnutzer, Head of Spectrum, 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.”
The study found that although price outcomes for some spectrum awards remain moderate, the upward trend in average prices was driven by a growth in the number of exceptionally high price auction outcomes. Statistical evidence shows the impact on consumers and links high price outcomes with:
- Lower quality and reduced take-up of mobile broadband services;
- Higher consumer prices for mobile broadband data; and
- Consumers losing out on economic benefitswith a purchasing power of an estimated US$250 billion across 15 countries where spectrum was priced above the global median – equivalent to US$118 per person.
“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,” said Richard Marsden, Managing Director at NERA Economic Consulting. “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.”
The report highlights four key pricing policy recommendations:
1. Set modest reserve prices and annual fees and rely on the market to set prices;
2. License spectrum as soon as it is needed, so as to avoid artificial spectrum scarcity;
3. Avoid measures that increase risks for operators (e.g. that put the value of their company in jeopardy); and
4. Publish long-term spectrum award plans that prioritise public welfare benefits over state revenues.
“With advanced 4G networks being deployed now and 5G technology on the horizon, both requiring ever-increasing amounts of spectrum, those countries that inflate prices aren’t just damaging their broadband future, they are holding back their entire digital economies. The mobile industry, directly and as an enabler of adjacent sectors and services, contributed US$3.1 trillion to global GDP, or 4.2 per cent of GDP, in 2015. Governments and regulators must fully appreciate their ability to maximise – or thwart – their digital futures through spectrum pricing,” added Tarnutzer.
The full version of the report can be found here: http://www.gsma.com/spectrum/effective-spectrum-pricing/.
Notes to Editors
1 A three-year moving average of spectrum prices in the 4G era (i.e. from 2008 to 2016) was used to identify the underlying trend.
About the GSMA
The GSMA represents the interests of mobile operators worldwide, uniting nearly 800 operators with almost 300 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and internet companies, as well as organisations in adjacent industry sectors. The GSMA also produces industry-leading events such as Mobile World Congress, Mobile World Congress Shanghai, Mobile World Congress Americas and the Mobile 360 Series of conferences.
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