Spectrum pricing in Latin America needs more attention

13 February 2018 | Lucas Gallitto

This blog post was written by Lucas Gallitto, Public Policy Director at GSMA Latin America

Latin America is poised to be one of the fastest growing regions during the next couple of years, with tens of millions of new subscribers and increasing smartphone adoption. Governments and regulators can either help or hinder this.

For mobile operators to be able to increase coverage and increase speeds, an investment-friendly framework is needed. An important part, but by no means the only one, is fair access to spectrum.

During the last year, the GSMA’s spectrum team has focused on the impact of high pricing. How it affects the ability for operators to deliver affordable, widespread, quality mobile broadband services.

The latest addition to this body of work is the “Effective Spectrum Pricing in Latin America” report. Produced by NERA Economic Consulting, it investigates spectrum pricing in Latin America across 15 countries. Importantly, the report highlights cases of good and bad practice by policymakers. The goal isn’t to name and shame countries, but find a better way forward.

Negative impact on cost and quality

Still, the report underscores how decisions made by regulators on spectrum pricing in Latin America can have a negative impact on the quality and cost of mobile broadband services.

While auctions remain an effective means of awarding spectrum, regulators should adopt spectrum policies that focus on maximising long-term benefits for society, rather than driving up the cost of spectrum for short-term gain. In Latin America, steep spectrum prices, which in some categories are almost twice as high as in Europe. This puts serious financial pressure on the industry that impacts the delivery of next-generation networks.

High prices for capacity spectrum at auctions are largely due to policy decisions rather than market forces, with regulators effectively setting the price for spectrum up front, according to the report. This approach has inflated prices as operators still need spectrum to keep their businesses afloat.

More than spectrum pricing needs to be addressed

Other issues relate to high annual licence fees, short licence terms, inappropriate coverage obligations and uncertainty about renewals and new awards.

To improve the situation, the report makes four key policy recommendations:

1. Set modest reserve prices

2. Bring spectrum to market in a timely manner

3. Avoid onerous licence conditions

4. Adopt best practice in award design

The report provides more information on why following these recommendations makes sense.

Going forward, governments and regulators have lots of juicy spectrum-related topics to sink their teeth into. More spectrum and new licensing models can help improve rural coverage. And work to ensure the best possible start for 5G is also ramping up. Working together with mobile operators, they have a great opportunity to make the best of these opportunities and the societal benefits they bring.

You can find the full report and a summary here.

And you can find the GSMA’s other reports on spectrum pricing here.