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.
As hyper-automation connects factory robots and data networks to marketing and business systems, connected technology has become a business imperative. Connected enterprises need to be agile and open to the challenges and opportunities of this era of digitalisation that 5G is delivering.
Private networks are an integral part of 5G, enabling industrial applications, logistics hubs, local campus networks and many more. However, private networks do not equal private spectrum. Asymmetric carve-outs are an aggressive regulatory tool that has a huge economic cost.
With best-practice licensing, it is a cost that can be avoided entirely.
Why does it matter?
In 2019 the German regulator BNetzA laid out plans for its 3.5 GHz auction with the aim of creating a new flexible use of spectrum in the 3.7-3.8 GHz band. A set-aside was created to look after requests from its large manufacturing community, carving out 100 MHz of spectrum for private networks in the 3.7-3.8 GHz band and leaving 300 MHz for the mobile operators to bid for. In the same year, the UK regulator Ofcom laid out plans to allow flexible use of the 3.8-4.2 GHz band – 400 MHz this time – to “enable wireless innovation through local licensing” known as shared access licences.
The German carve out inflicted a surcharge estimated at €3bn on the German mobile market and, three years on, has resulted in less than 300 licences. In the UK, only 100 users have applied for licences and for a maximum of half the spectrum available, despite the huge difference in licence terms and regulatory burden compared to MNOs.
Meanwhile, in 2018, Finland showed that such regulatory intervention could have been avoided entirely. In its 3.5 GHz auction, Finnish regulator Traficom stipulated that mobile operators must, where requested by tender, deploy a private network that meets the specified customer needs in a localised area. If operators consider the tender requirements overly onerous, they must sub-licence 3500 MHz spectrum within the specified area instead. Problem solved, and no carve-out required.
In India, the appetite for private networks was shown by the Adani Group’s participation in its recent mmWave auction. No carve out, no asymmetric regulation, just an industry player (Adani is focussed on transport logistics and energy utilities) competing for spectrum at the same table as everyone else.
What are the policy considerations?
1. Commercial mobile operators support the needs of a wide variety of private networks in the 5G era.
2. Spectrum that is set-aside exclusively for private networks, verticals or local licences in core mobile bands risks being underused and can undermine fair spectrum awards.
3. Spectrum that is set-aside in core mobile bands threatens the wider success of 5G – including slower rollouts, lower performance, and reduced coverage.
4. Network slicing provides private network solutions; voluntary spectrum leasing can also support private networks.
5. Policymakers should carefully consider their options and consult stakeholders to ensure they most efficiently support the needs of private networks without undermining other spectrum users.
What we expect to see in the year ahead
The 5G era is one of industrial connectivity. 2023 will continue to see demand for private networks, and MNOs are delivering a huge phase of private 5G network growth. Carve outs may still be considered as regulators look at historic policies from high-income countries without considering their subsequent success or failure. Lessons need to be learned not just from the German auction or the UK licensing process, but what happened after. The billions of euros in potential network investment that Germany has lost could have been saved by best-practice licencing policies.
In 2023, regulators and policymakers will continue to follow both good and bad practice with regard to the needs of industry verticals or local networks. Spectrum is a limited resource, and set-asides for verticals in prime 5G bands can jeopardise the ability of 5G to meet its potential. Nevertheless, regulators continue to follow a practice of set-asides, making regulatory-led rather than market-led approaches and picking “winners”, leading to economic harm to their markets and inefficient spectrum use.
In recent years, licensing obligations, including sub-licencing spectrum, have been used to provide spectrum for private or local networks. This trend is expected to continue in 2023 to avoid carve-outs. Sub-licencing allows verticals to access spectrum while creating opportunities for operators to provide customised 5G services. Finland and Sweden are examples where policymakers have provided spectrum to verticals by routing through operators.
|Policy Good Practice: Finland delivers private 5G through licence terms |
As part of a policy to promote Finland as a 5G innovator and testbed, national regulator Traficom included licence conditions in the 3.5 GHz spectrum auction in 2018 to promote the deployment of private networks without a dedicated set-aside.
The licence conditions stipulate that mobile operators must, where requested by tender, deploy a private network that meets the specified customer needs in a localised area, such as a hospital, port, or industrial facility. Operators can charge reasonable, non-discriminatory fees for these deployments. Alternatively, if they consider the tender requirements overly onerous, they must sub-licence 3500 MHz spectrum within the specified area instead.
Finland met the spectrum needs of nationwide and private networks without a set-aside in any core bands. In doing so, Traficom created an efficient compromise that has preserved spectrum usability and created incentives to invest in mobile connectivity.