NEW GSMA REPORT REVEALS HOW SPECTRUM LICENCE UNCERTAINTY JEOPARDISES MOBILE SERVICES IN LATIN AMERICA
Greater Certainty and Longevity for Spectrum Licensing is Vital for Ongoing Investment in Mobile Networks Across the Region
London: The GSMA today released findings of a new report, “Licence Renewal in Latin America”, which highlights the climate of uncertainty surrounding the continuity of spectrum licences for many countries in the region. The study finds that such uncertainty can drive mobile operators to reduce their capital expenditure by as much as 67 per cent, which in turn could significantly delay the deployment of new mobile services.
“It is vital that governments and regulators in Latin America communicate a clear process for the renewal of spectrum licences,” said Tom Phillips, Chief Regulatory Officer, GSMA said. “Licence renewal terms for existing spectrum holders should be agreed at least three to four years before a licence expires, in order for operators to ensure ongoing investment in the latest mobile services.”
A number of the original 2G spectrum licences, acquired in the 1990s, are due to expire within the next five years in many Latin American countries; namely Bolivia, Chile, Costa Rica, the Dominican Republic, Panama, Uruguay and, most urgently, Colombia. As mobile operators are unable to assume they will have the ability to renew their licence at the end of its term, they may be compelled to progressively reduce investment in their networks. The GSMA’s new report illustrates the extent to which this lack of certainty can impact operators’ investment plans.
Knock-on Effect of Expiry of Spectrum Licences for Mobile
The loss of access rights to mobile spectrum also impacts consumers, in terms of potential price increases, a reduction in the quality of their mobile services or, in the extreme, a loss of service altogether. This situation creates challenges for governments, as it can impact the achievement of their own ICT goals and create an unstable market structure.
Urgent Call to Clarify the Licence Renewal Process
The situation for Colombian mobile operators Claro and Movistar is particularly critical as their licences will expire on 31 March 2014 and the terms and conditions for renewal are not yet clear. The report identifies best practice that governments should consider when renewing spectrum licences, including a collaborative and consultative approach with operators. Any potential new conditions should be carefully reviewed in order to determine their economic cost, which should be factored into the valuation of spectrum at the time of licence renewal.
“Spectrum re-licensing must be timely and carried out in consultation with the mobile industry and in an open and transparent way,” continued Phillips. “The cost of renewing spectrum usage rights should be based on achieving the best outcome for society – one which maximises the economic and social benefits of the mobile industry – rather than on maximising short-term revenue for government.”
The GSMA is calling for greater clarity on the following:
- Spectrum Valuation: Price estimates for licence renewal should take account of changing market conditions faced by the mobile industry, including increased market saturation, commoditisation of basic services and the resulting pressure on margins and industry profitability;
- Renewal Method: Governments and regulators should define clear objectives and a transparent process well ahead of licence expiry and include an early indication of the likelihood of renewal or reassignment of the allocated spectrum;
- Conditions: Any new conditions imposed upon mobile operators as part of the spectrum licence renewal process, such as coverage and quality of service obligations, should be feasible and have a clear economic valuation so all stakeholders understand the level of obligations these conditions involve;
- Payment: The method used for setting licence payments and fees needs to be based on objective criteria such as the frequency, bandwidth and potential commercial use of the spectrum under consideration;
- Spectrum Caps: Any limitations placed on spectrum holdings should be updated according to any increased demand and the availability of other spectrum bands; and
- Licence Duration: Longer licences are necessary to stimulate continuous investment in new technology and upgrades to existing network infrastructure. Shorter licence terms can discourage new investment and reduce the likelihood of operators launching new and innovative services.
“Spectrum licences should be granted for a minimum of 15 to 20 years to give investors sufficient time to plan their long-term investments and business strategies,” stated Phillips. “Failure to effectively manage the spectrum licence renewal process can delay investment in new services. This could have serious consequences for their businesses and potentially jeopardise mobile services for millions of consumers.”
The full report can be viewed here: http://www.gsma.com/spectrum/licence-renewal-in-latin-america/
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Notes to Editors
1 GSMA Latin America represents the interests of mobile operators throughout the Latin America region with a presence in Argentina, Brazil and Chile. For more information on GSMA Latin America, including in English, Spanish and Portuguese, visit www.gsmala.com. Follow GSMA LA on Twitter: @ GSMALatam.
2 The report was developed by BlueNote Management Consulting, which provides strategy, initiatives development and implementation support for the telecommunications, financial services and consumer goods industries. More information is available at www.bluenotemc.com.
About the GSMA
The GSMA represents the interests of mobile operators worldwide. Spanning more than 220 countries and territories, the GSMA unites nearly 800 of the world’s mobile operators with 250 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and Internet companies, as well as organisations in industry sectors such as financial services, healthcare, media, transport and utilities. The GSMA also produces industry-leading events such as Mobile World Congress and Mobile Asia Expo.
For more information, please visit the GSMA corporate website at www.gsma.com. Follow the GSMA on Twitter: @GSMA.
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