Poorly designed spectrum auctions risk harming consumers, warns GSMA

Poorly designed spectrum auctions risk harming consumers, warns GSMA
Brett Tarnutzer, Head of Spectrum, GSMA.
Poorly designed spectrum auctions risk harming consumers, warns GSMA
Brett Tarnutzer, Head of Spectrum, GSMA.

The GSMA has published a global ‘Auction Best Practice‘ paper which aims to help governments and regulators guarantee affordable, high-quality mobile connectivity from spectrum awards. The paper highlights some key concerns from recent 4G and 5G spectrum awards globally and offers recommendations. This includes addressing a trend towards governments making decisions that artificially inflate spectrum prices, which risk limiting subsequent network investment and thus harming consumers.

These bad decisions include artificially restricting the amount of spectrum operators can access, through set-asides or by poorly chosen lot sizes, or by setting high reserve prices. Please see announcement below in line with South Africa’s spectrum award and let me know if you have any questions.

“Auctions can and do fail when poorly designed,” said Brett Tarnutzer, Head of Spectrum, GSMA. “We’re seeing a worrying trend of badly run spectrum awards that could seriously impact the mobile industry’s ability to connect a higher proportion of people to high-speed mobile broadband. It’s important that South Africa does not repeat these mistakes, and place maximising revenues above the connectivity of its citizens, if a decision is taken to award spectrum in the country.”

The paper outlines recommendations including:

  • The top priority for spectrum auctions should be to support affordable, high-quality mobile services – not to maximise revenues;
  • Auctions should not be the only award process considered, as they are not always suitable;
  • Assign a sufficiently large amount of spectrum and publish roadmaps to support high-quality mobile services. Set-asides for vertical sectors or new entrants may threaten how much operators can access and also risk inflating spectrum prices;
  • The auction design should not create unnecessary risk and uncertainty for bidders; and
  • Poorly chosen lot sizes or inflexible packages of spectrum lots risk inefficient outcomes.

The mobile industry makes an important contribution to South Africa’s economy. According to GSMA Intelligence, in 2018 the mobile ecosystem in South Africa generated 7.6 per cent of GDP or $28.5 billion in value added. Supported by the right policy environment this economic impact is expected to rise to $30 billion by 2023, due to the productivity benefits from increasing mobile internet penetration.

“Spectrum is essential fuel for mobile networks and its ineffective use will only lead to bad consequences for consumers,” added Tarnutzer. “All governments should recognise that the most important objective of awarding frequencies should not be about making the most money, but rather about ensuring consumers benefit from the best mobile connectivity.”

Edited by Fundisiwe Maseko
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