How spectrum leasing can help accelerate the 5G era

One of the most important spectrum-related questions policymakers face is how to encourage 5G innovation without compromising its potential as a technology for all users. Successes to date show spectrum leasing can help solve this issue.

The GSMA’s new “Spectrum leasing in the 5G era” report provides a global overview and offers best practice. It also looks at how successes to date suggest there is an untapped potential for using spectrum leasing to accelerate the 5G era.

First the basics: spectrum leasing is a method by which exclusively licensed bands can be rented from one user by another. This is typically done for a limited period of time and/or for a specific portion of the spectrum. For example, a wireless internet service provider can lease spectrum for use in rural areas or vertical industries can lease spectrum to roll out private networks.

Leasing helps efficient spectrum use, but our mapping of the regulatory landscape points to significant variation in where spectrum leasing is and is not allowed, both within and between regions. For instance, leasing is a key secondary spectrum market initiative in the US, but it is not currently permitted in certain European markets and in most markets in Asia, Latin America, Africa and the Middle East.

Positive outcomes

Despite consensus among operators that voluntary leasing should be permitted, demand has not been universally strong where licences have allowed leasing. This has sometimes been due to regulatory frameworks that lack clarity and flexibility. Perceived risks from competition bodies or such authorities’ involvement in contract negotiations can also be a demotivating factor that threatens leasing’s potential.

However, there are clear examples of spectrum leasing that have yielded positive market outcomes in terms of delivering additional coverage and strengthening services for consumers. These have tended to originate from higher income markets.

The US was a frontrunner in adopting policies and procedures to facilitate leasing via the FCC’s 2003 Secondary Markets Order, leading to several agreements between operators and local users. In Europe, Vodafone is for example providing a 5G-ready mobile private network to energy company Centrica.

In other regions (e.g. Sub-Saharan Africa), insufficient spectrum availability is cited as a major impediment to leasing. Leases have often been agreed on a regional or local basis where operators are not using their spectrum holdings to full capacity (specifically, certain bands).

Avoiding set-asides

Importantly, by opening the door for leasing, regulators can avoid setting aside spectrum for a particular use case. Set-asides make it unlikely the spectrum will be used outside of the relatively small number of locations where verticals would want networks (e.g. factories, airports etc). In turn, operators and their vast number of consumer and business customers will have access to less 5G spectrum. That means slower 5G.

There are financial implications, as well. Conservative estimates based on the German 5G auction indicate that €1–1.5 billion of private value was lost due to a 100 MHz set-aside of mid-band spectrum. This, in turn, is driving a consumer harm of €6–15 billion. By choosing the spectrum leasing route, none of this value would have been lost.

Spectrum leasing enablers

So, what are the main considerations for policymakers who want to bet on spectrum leasing? The report looks at several enablers:

The creation of an enabling regulatory environment. Regulators should implement clear policies to permit voluntary spectrum leasing. They should allow deals between a mobile operator and other national or regional operators as well as vertical users. They should also allow for the leasing of any mobile technology. Flexibility is important.

Support for voluntary commercial negotiations. There is no one-size-fits-all model for leasing. However, an approach based on commercial negotiation aids price discovery and helps maximise the benefits.

The availability of sufficient affordable spectrum in the right bands. A precondition for spectrum leasing to work at all is bringing a sufficient amount of spectrum to market.

5G has the potential to make an even greater impact than previous generations. Success hinges of effective spectrum licensing that benefits everyone.

To learn more about spectrum leasing, download the report here.