Strongest message yet from GSMA on spectrum pricing

Strongest message yet from GSMA on spectrum pricing

As operators gear up for 4G or 5G rollouts in many regions, spectrum availability and spectrum prices are again in the news. Now the GSMA has intervened in the debate with what may be its strongest message to date on spectrum pricing.

The GSMA, which represents the interests of mobile operators worldwide, has released what it refers to as “a pioneering report” and “the most detailed econometric study ever conducted into spectrum pricing”. The GSMA says that report, called The Impact of Spectrum Prices on Consumers, provides strong evidence linking high spectrum prices and negative consumer outcomes, such as slow network rollout, reduced quality of service, and poor mobile coverage.

The evidence it cites comes from an analysis in the report – freely available on the GSMA website –  of the period 2010–2017. This, the GSMA says, shows that high spectrum costs played a significant role in slowing the rollout of 4G networks and drove a long-term reduction in 4G network quality.

The most notable finding for many readers of this site will be that in developing countries spectrum prices were, on average, almost three times more expensive than in developed countries in relation to expected revenues. In these countries, the report notes, high spectrum costs slowed down the rollout of both 3G and 4G networks and drove long-term reductions in overall network quality.

Not surprisingly, given its role as an operator-focused association, the GSMA has an uncompromising message for the people setting the prices. Brett Tarnutzer, Head of Spectrum, GSMA, says: “Spectrum auctions can’t be viewed as cash cows anymore,” and the report itself has a stern warning that “These findings have important ramifications for governments and regulators – particularly those betting on 4G and 5G as enablers of growth and sustainable development.”

There are many reasons for the GSMA’s concern. Margins are tighter than they once were, voice, text and data revenues are being squeezed, and revenue-creating business models for 4G and 5G are not as clearly defined as they were in the days of voice-and-text-only communications.

But the most obvious reason may date back some years: the 3G auctions that, arguably, involved massive overspends, especially in Europe, and may even have undermined the mobile business for some years after. They also made some governments a lot of money.

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