Radio spectrum is a scarce resource that is increasingly in demand to support wireless services like mobile phones and GPS. Spectrum pricing by regulators is a tool to help ensure efficient use of spectrum such that mobile operators maximize benefits for society. An effective spectrum pricing approach considers both upfront access fees and annual usage fees, sets modest reserve prices below expected market value, prioritizes allocation, helps operators manage risk, and takes a long-term perspective focusing on stimulating competition and investment over short-term revenue goals.

1. Introduction to effective spectrum pricing
Radio spectrum is used to carry information
wirelessly for many services such as mobile phone,
GPS and emergency services. As the public request
more information, faster communications and
higher definition media, demand for spectrum
grows rapidly and exceeds supply. Spectrum is a
scarce resource and should be managed efficiently
so that the benefits for the society are maximised.
Spectrum pricing is a tool that can help regulators
achieve an efficient use of spectrum such that
operators maximise its use for the greatest welfare of society.
The price of spectrum is generally made of two components.
The first one consists in the upfront access fee paid by the
successful applicant to access spectrum. The second is the
annual usage fee paid every year by the spectrum user
according to its usage of the spectrum. If spectrum is awarded
through an auction, a third component is the competitive
premium.
Spectrum price is used as an important mechanism to ensure
that users uses spectrum resources efficiently1
. Being a scarce
resource, it is crucial to maximise the benefits for the society
that can be generated from spectrum. For many regulators,
such as Germany and Sweden, generating revenue from
spectrum is not a priority but their focus is on the long-term
benefits to consumers and the broader economy2
.
A recent research reports evidences that higher spectrum prices leads to lower network investment
and higher consumer prices3
. Therefore, high spectrum prices do not benefit governments overall as
it is at the expense of the economy and consumers. Indeed, digital connectivity has a positive impact
on economic growth by reducing barriers to trade, communication and education. According to the
GSMA, in 2016, the mobile sector contributed to 3.3tn to the global GDP (i.e. 4.4%)4
. By limiting
investments, high spectrum prices slow the transition towards a digital economy and therefore limit
the growth and competitiveness of the country.
Countries looking at setting up an effective pricing technique should take into account four
recommendations that will guide them towards an effective spectrum pricing. In turn, this will
support investment in high quality services and price competition to drive affordable services.
1
InfoDev, ITU. ICT regulation Toolkit. http://www.ictregulationtoolkit.org/toolkit/5.5
2
GSMA (2017). Effective Spectrum Pricing: Supporting better quality and more affordable mobile services
3
NERA (2017). The impact of high spectrum costs on mobile network investment and consumer prices.
4
GSMA (2017). The mobile economy 2017.

2. Effective spectrum pricing will allow maximising welfare benefits induced by spectrum. The GSMA
recommends the following best practices5
:
- Set modest reserve prices: the sum of upfront access
fees and annual fees should be set below the
expected market value. This will allow the market to
identify the price which will result in a maximisation of
long-term benefits for society;
- Prioritise spectrum allocation: Spectrum should not be
hold back from the market. The regulator should
release it as soon as local operators have a business
case to deploy spectrum bands;
- Help operators manage risk: mobile operators make
substantial upfront investment in spectrum licences
and network infrastructure, which are recouped over
many years. The regulator should help reduce the risk;
- Adopt a long-term perspective: policymakers should
maximise welfare benefits over the long term by
stimulating competition and investment. Spectrum
prices should not linked to government budgetary
decisions.
National information and communications plans should give a key role to spectrum pricing at its
effective allocation and pricing is central to the transition towards a digital economy. Long-term
benefits should be preferred over short-term revenue benefits.
Bibliography:
- GSMA (2017). Effective Spectrum Pricing: Supporting better quality and more affordable
mobile services.
- GSMA (2017). The mobile economy 2017.
- InfoDev, ITU. ICT regulation Toolkit. http://www.ictregulationtoolkit.org/toolkit/5.5
- NERA (2017). The impact of high spectrum costs on mobile network investment and
consumer prices.
- World Bank (2011). Best practice spectrum renewal and pricing.
February 2018 - This article has been written as part of the Advanced Spectrum Management course organised
by the GSMA. https://www.gsmatraining.com
Author: Nicolas Fichers
5
GSMA (2017). Effective Spectrum Pricing: Supporting better quality and more affordable mobile services.