High spectrum fees choking the developing world: GSMA

Mobile industry association the GSMA has warned that high spectrum licence fees are choking economic growth in developing countries.

In a new report publish this week, titled Spectrum Pricing in Developing Countries, the body warned that better spectrum pricing policies are needed in emerging economies “to improve the economic and social welfare of the billions of people that remain unconnected to mobile broadband services”.

Spectrum fees, it said, are “acting as a roadblock” to higher mobile penetration. On average, spectrum fees in developing countries are three times higher than in developed countries when income is considered. In addition, it said governments are actively increasing spectrum prices to maximise state revenues.

“Better spectrum pricing policies are needed in developing countries to improve the economic and social welfare of the billions of people that remain unconnected to mobile broadband services,” the GSMA said in a statement.

Authored by GSMA Intelligence, the study found that high spectrum prices are linked to countries with high levels of sovereign debt, and “alarmingly”, average reserve prices in spectrum auctions are more than five times higher in developing countries than in developed, once income is accounted for.

The report identified a link between high spectrum prices and poor coverage, as well as more expensive and lower-quality mobile broadband services, “all of which hinder the take-up of services by consumers”.

“Connecting everyone becomes impossible without better policy decisions on spectrum,” said Brett Tarnutzer, head of spectrum at the GSMA, in the statement.

“For far too long, the success of spectrum auctions has been judged on how much revenue can be raised rather than the economic and social benefits of connecting people. Spectrum policies that inflate prices and focus on short-term gains are incompatible with our shared goals of delivering better and more affordable mobile broadband services.”

The GSMA study assessed over a thousand spectrum assignments across 102 countries (including 60 developing and 42 developed countries) from 2010 to 2017.

Many remain unconnected

Setting high final prices administratively or setting high auction starting prices (such as reserve prices), artificially limiting the amount of licensed spectrum available, not sharing a clear spectrum road map and setting poor auction rules are some of the policy decisions that are driving high spectrum prices in developing countries, the body said.

At the end of 2017, the GSMA estimates that 3.3 billion people (or 44% of the global population) were connected to the mobile Internet, representing an increase of almost 300 million compared to the previous year. “That still leaves more than four billion people offline and unable to realise the social and economic benefits that the mobile Internet enables. Most people that remain unconnected — 3.9 billion — live in developing countries.”

“If mobile operators don’t get affordable and predictable access to spectrum, it will be consumers who will suffer the most,” said Pau Castells, director of economic analysis at GSMA Intelligence. “Developing countries have the opportunity to catch up with the developed on mobile adoption. However, the investment case in some of these markets is being put at risk. Operators cannot keep paying significantly more for spectrum when consumer incomes and expected profits are much lower in these markets.”  — © 2018 NewsCentral Media