This article is part of the Spectrum Policy Trends 2024 report. Download the full report for a handy compilation of the top six spectrum policy trends for 2024.

Attitudes towards spectrum pricing have changed since the early 2000s, and there is a growing realisation among regulators and policymakers that spectrum pricing best practice is important for digital development. The high costs demanded for spectrum licences in the past are being replaced by new assignment approaches that propose investment commitments. These are given in return for more rational prices, leading to better quality of services, expanded coverage and faster adoption.

Such measures are important regulatory tools for delivering affordable connectivity to more consumers and helping lower the broadband usage gap and the digital divide.

Why does it matter?

Licensed spectrum is central to the quality and affordability of mobile broadband services. However, some government policies – inadvertently or not – result in high prices being paid to access the spectrum. There is strong evidence that high spectrum prices have a negative impact on the speed of network deployments, the quality of services, and affordability, which are critical factors in increasing digital inclusion.

Spectrum assignments seeking to increase socio-economic benefits rather than short-term income through high licence fees often have far higher value to GDP growth and overall social benefit. High spectrum fees also risk spectrum being underused and, as spectrum has no intrinsic value, it does not generate wealth if underused or idle, limiting all benefits it could bring to society.

Spectrum has value only when used, and government and industry collaboration is essential. Capex, including spectrum costs, is a significant portion of operator revenue, so operators and governments need to agree on a spectrum roadmap with which operators can align their investment plans. Through such transparent negotiation, governments can ensure that the industry is ready to invest at the right time and that spectrum use has the maximum socio-economic value to their citizens.

What are the policy considerations?

Bridging the digital divide and fostering digital inclusion are priority policy issues for governments worldwide. Delivering connectivity to underserved areas is one part of closing the digital divide and requires appropriately licensed spectrum. Historically, regulators and policymakers have used spectrum assignment processes to achieve upfront and annual fees. However, regulators are now designing different assignment models, substituting spectrum fees for investment commitments, including sharing initiatives in rural areas.

The coverage gap, or the proportion of any population that lives outside of mobile coverage, is decreasing and stands at around 5% globally. Meanwhile, the usage gap, the percentage of people living within mobile coverage but not accessing mobile broadband, stands at 40% globally but increases as a country’s income decreases. Spectrum pricing can directly impact lowering the usage gap by encouraging the quality and affordability of mobile services. It can also help reduce the coverage gap by encouraging investment from operators.

Figure 1: Policy recommendations on spectrum pricing

What to expect in the year ahead

Closing the mobile broadband usage gap and increasing coverage are both aspects of closing the digital divide, supported by licensing best practices. Regulators and policymakers have implemented innovative spectrum fee payment strategies in 2023. Brazil, Guatemala and New Zealand set precedents by assigning spectrum in exchange for connectivity, coverage and infrastructure build-out rather than fee payment. Meanwhile, Germany prolonged licences at the time of renewal in exchange for network investments, a practice that France had previously put in place.

This trend is expected to continue in 2024, with more countries accepting investment commitments as the new currency for spectrum fee payments. Such initiatives will free operators to invest in additional spectrum resources and provide a clear pathway to better connectivity. A strategic vision on spectrum requires long-term policies created through dialogue with industry to ensure that the main priority is the delivery of socio-economic benefits to consumers.

Policy Good Practice: Flexible, innovative 3.5 GHz award sets the foundations for 5G deployment and rural connectivity expansion in New Zealand   Traditionally, New Zealand has used auctions to award new mobile spectrum. In 2023, the government demonstrated flexibility by adopting a direct allocation process for the 3.5 GHz band through negotiations with mobile network operators.   The direct award ensured an equitable allocation of 80 MHz for each of the three MNOs. This gave early certainty on access to prime mid-band spectrum and allowed operators to seamlessly transition from interim licences to long-term rights, avoiding unnecessary delays to their 5G deployments.   In exchange, each operator committed NZ$24m in financial contributions towards improving rural connectivity and pledged to speed up 5G deployment to specific rural towns nationwide. For the government, this bespoke deal represented a step towards expanding and improving coverage in regional and rural New Zealand. By setting a fair price level for the spectrum and ensuring that the revenues are directly invested into connectivity infrastructure, the New Zealand approach will help sustainable investment and growth in 5G, benefiting consumers and enterprises in the long run.