GSMA warns govts: lower spectrum prices and invest in digital or you’re doomed

Their government didn't lower spectrum prices and look what happened. Credit: Lauren Elisabeth / Shutterstock.com

With just a few days to go before Mobile World Congress 2017, the GSMA has sharpened its lobbying knives with the release of two new reports urging governments and regulators to lower spectrum prices and invest in digital economy technologies if they don’t want their citizens to be left behind in the digital dust and miss out on billions of dollars in economic growth.

The report on spectrum pricing, released Wednesday and developed in collaboration with NERA Economic Consulting, found that average final prices paid in auctions rose a whopping 250% from 2008 to 2016, with the most exorbitant price tags often influenced by policy decisions.

Source: GSMA

The study links high spectrum prices to more expensive, lower quality mobile broadband services (and thus lower takeup). The study also concludes that those higher data prices resulted in consumers losing out on economic benefits with a purchasing power of an estimated $250 billion across 15 countries where spectrum was priced above the global median (equivalent to $118 per person).

“The era of judging the success of auctions based on headline-generating revenue figures is over,” said Brett Tarnutzer, Head of Spectrum at GSMA. “The damage done to consumers – and the wider digital economy – by policies that artificially inflate spectrum prices has been too great.”

“There was a time when it was believed that the cost of spectrum, no matter how high, would not impact consumers through higher mobile bills or reduced investment in networks. The academic and empirical research no longer backs this up,” added Richard Marsden, Managing Director at NERA Economic Consulting. “Furthermore, if you look at best practice regulation in the mobile industry, and other comparable industries, the focus of pricing policy is on reducing risks and adopting a long-term perspective to social value creation – not maximizing revenues.”

Tarnutzer said regulators should adopt spectrum policies that focus on maximizing the benefits for society, rather than simply driving up the cost of spectrum.

The report lists four pricing policy recommendations:

  1. Set modest reserve prices and annual fees and rely on the market to set prices
  2. License spectrum as soon as it is needed to avoid artificial spectrum scarcity
  3. Avoid measures that jeopardize operator valuation
  4. Publish long-term spectrum award plans that prioritize public welfare benefits over state revenues.

The GSMA claims that the mobile industry, directly and indirectly, contributed $3.1 trillion to global GDP, or 4.2% of GDP, in 2015. Tarnutzer said regulators who don’t follow the GSMA’s spectrum pricing advice “aren’t just damaging their broadband future, they are holding back their entire digital economies.”

Mind the digital economy gap

Speaking of which, the GSMA also launched a second new report Wednesday that encourages governments to pursue policies that incentivize investment – and promote development of – digital economies.

That report, developed in collaboration with Boston Consulting Group (BCG), calls on policymakers to encourage digital advancement and prepare for the changes that lie ahead, while – again – highlighting the peril of inaction.

In essence, the report says, the many benefits of digitalization also comes with the risk of widening the digital divide. As such, governments will play an important role in creating a policy environment that allows for an inclusive digital society where few feel threatened or left behind.

The report encourages policymakers to use policy to drive change and transform their economies by putting in place these key factors:

  • High-speed, reliable and robust digital infrastructure
  • Digitally willing and capable people (citizens, consumers and employees)
  • Digitally competent and engaged businesses
  • A trusted environment for digital interactions
  • A government that sets an enabling policy framework and leads by example

“As the digital and mobile revolution continues to accelerate, new technologies – artificial intelligence, robotics and the Internet of Things – promise great benefits but also continued disruption resulting from the digitalization of many industry sectors,” said GSMA chief regulatory officer John Giusti. “Governments have a critical role to play in creating an inclusive digital future by establishing a policy framework that incentivizes network investment, by ensuring laws and regulations reflect the realities of today’s digital world, and by promoting digitalization across the economy and society.”

The GSMA naturally sees mobile as the cornerstone of that “inclusive digital future”. To make that point, the report cites BCG research in six countries (Brazil, China, Germany, India, South Korea and the United States) showing that mobile technologies have created $6.4 trillion of annual consumer surplus (that is, the value that consumers receive, over and above what they pay for devices, apps, services and internet access) – that’s more than the individual GDP of every country in the world, with the exception of China and the United States.

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