The cost of spectrum policy

“High spectrum prices can cause negative consumer outcomes, including lower coverage levels and slower data speeds.”

That’s just one of the findings of a new report released last week, by the GSMA. The report, “The impact of spectrum prices on consumers” [pdf], shows that countries with poor spectrum policies – policies which either inflate spectrum or delay spectrum assignments – are leading to millions of people being left unable to access mobile broadband services or experiencing reduced network quality.

The study is said to be the most detailed econometric study into spectrum pricing, considering more countries (64, including both developed and developing), more consumer outcomes (cost, quality and coverage) and the study controls for a wider range of other potential explanations for these outcomes, such as market competition, population density, timing of spectrum awards among others. “These findings have important ramifications for regulators, particularly when so many are trying to prioritise improved coverage and increased investment in 4G and 5G.”

The study provides the following recommendations:

  1. Maximising revenues from spectrum awards should no longer be a measure of success
  2. Auctions can deliver inefficient outcomes when poorly designed
  3. Artificially limiting the supply of spectrum, including through set-asides, risks slowing services and inflating prices
  4. Spectrum should be released to the market as soon as there is a business case for operators to use it
  5. Policymakers should work with stakeholders to enable timely, fair and effective spectrum licensing to the benefit of society

The use of set-asides have been contentious in recent Canadian spectrum auctions. The study observes that “Governments often design awards with the intention of promoting competition and innovation in the sector – for example set-asides or reserved spectrum for a new entrant (or existing operator).”

However, the report says “While such policies may be designed with the right objectives in mind, they may also have unintended consequences if they are poorly designed or implemented and result in higher spectrum prices, thus harming consumers.”

There is a cost associated with spectrum policy, not all of which is financial. As Canada moves forward with development of auction policy for the next wave of spectrum, it is critical to consider the potential for unintended consequences to have significant impact on consumers.

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