This article is part of the Spectrum Policy Trends 2023 report. Download the full report for a handy compilation of the top six spectrum policy trends for 2023.

While there is no one-size-fits-all, auctions have become the dominant mobile spectrum assignment mechanism over the past three decades. They are designed to provide a transparent, impartial and legally robust means of assigning spectrum to those who will use it most efficiently to support competitive, high-quality mobile services. Alternative approaches like administrative awards have also been gaining traction, especially when the COVID-19 pandemic required rapid spectrum assignment to support a surge in data usage.

The benefits of any type of assignment will be lost without proper planning. Some processes have failed to assign spectrum despite it being in demand, while others have been contested for artificially inflating prices, which risk harm to consumers. Getting the assignment design right is of utmost importance.

In 2023, we expect to see a growing realisation among regulators and policymakers that spectrum pricing is key to unlocking the digital growth of nations. In return for more rational prices, there will be licence obligations demanding coverage of networks and quality of services. Governments will maximise the benefit to society rather than zoning solely on short-term state revenue creation.

Why does it matter?

Effective spectrum pricing is critical to encourage the investment required to expand mobile access. An enduring interest for the media, and national treasuries, is how much money a spectrum auction will raise. However, the truth is that the most successful assignments aren’t the ones that bring in the most revenue.

Research shows just the opposite. High spectrum prices have a significant impact on network rollouts and speeds. For example, in developing countries, high spectrum costs slowed the rollout of 3G and 4G networks and drove long-term reductions in overall network quality. Other decisions that can have negative impacts include artificially restricting the amount of spectrum operators can access through set-asides, poorly chosen lot sizes, or hoarding spectrum to encourage unsustainable auction bidding prices.

What are the policy considerations?

Mobile networks require predictable access to spectrum in low, mid- and high bands. Predictability is the result of national broadband plans and spectrum roadmaps. Auctions are a proven means of awarding spectrum to those most likely to put it to the best use. However, poor auction design can lead to inefficient or failed assignments that undermine competition.

Spectrum resources and network infrastructure rollouts entail heavy capital investments. The speed of rollouts, quality of service and coverage levels will all be compromised by high spectrum prices. Regulators and policymakers should encourage these investments by designing policies that provide certainty to the licensing process. Clarity on licence renewals, conditions and obligations, and offering a clear spectrum roadmap, enables operators to plan for the long term. On the other hand, access to adequate and affordable spectrum resources increasingly comes with associated obligations, most of which involve commitments and targets related to network rollout, coverage and base stations/cell sites. It is, therefore, imperative for operators to have a detailed network rollout and evolution roadmap that considers the licensing obligations and future requirements from networks to align with the spectrum roadmap. Robust network infrastructure not only improves spectral efficiency but also helps unlock monetisation opportunities for operators.

What we expect to see in the year ahead

There is growing realisation among regulators and policymakers that spectrum auctions are more than just a means to maximise state revenues and are also key to unlocking the digital growth of nations. The GSMA expects governments and policymakers to continue with rational spectrum prices in 2023. There were already positive signs in 2022 in countries such as India, Panama, Bangladesh, Colombia, and Ecuador.

In exchange for more rational prices, there will be licence obligations demanding coverage of networks and quality of services. Brazil is a notable example of a country that has adopted this approach. Such obligations are best used with caution and should always be deducted from spectrum prices. So, while there is a reason for optimism, further and wider change is needed so everyone can benefit from the socio-economic benefits of well-designed assignments sooner.

Policy Good Practice: Brazil multi-band auction: one of the largest in mobile history   Brazil’s multi-band auction in December 2021 was one of the largest in history. With 91% of spectrum costs going into investments, Brazil showed that it is serious about ensuring that its citizens are ready to embrace the benefits of mobile. The successful spectrum assignment process focussed on balancing government objectives, operators’ requirements and consumer welfare. This process began several years ago with the modernisation of various Brazilian regulatory policies designed to support investment. In 2019, an updated telecommunications law was introduced with three crucial aspects:  longer licence terms, secondary spectrum market and unlimited renewal terms. These decisions were crucial to support current networks, attract new players and guarantee better services to end users. Certain auction policies also focused on long-term network investment. New payment terms were introduced, including yearly instalments for the duration of the licence, the exchange of the premium for investments and deduction of obligation costs from reserve prices.