Poorly designed spectrum auctions risk harming consumers warns GSMA

As 5G spectrum auctions pick up pace globally, the GSMA today raised concerns into some auctions’ design artificially inflating prices, or inefficiently distributing already scarce spectrum resources, which risk harming consumers. 

“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 potential of 5G before we get started. It’s time for policymakers to work more closely with stakeholders to enable more timely, fair and effective awards.”

To help governments and regulators guarantee affordable, high quality mobile connectivity from spectrum awards the GSMA published today an ‘Auction Best Practice’ paper. The paper highlights some key concerns from recent 4G and 5G spectrum awards 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. 

The paper outlines recommendations including: 

1. The top priority for spectrum auctions should be to support affordable, high quality mobile services – not to maximise revenues;
2. Auctions should not be the only award process considered, as they are not always suitable; 
3. 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;
4. The auction design should not create unnecessary risk and uncertainty for bidders; and 
5. Poorly chosen lot sizes or inflexible packages of spectrum lots risk inefficient outcomes. 

According to GSMA Intelligence, the socio-economic impact of 5G will be $2.2 trillion over the next 15 years, with key sectors such as manufacturing, utilities and professional/financial services benefiting the most from the new technology. By 2025, 5G is also forecast to account for around 30 per cent of connections in markets such as China and Europe, and around half of the total in the US. 

Timely, fair and effective spectrum awards are key to delivering the full potential of 5G. Early movers include Finland, Italy, Spain, South Korea, United Arab Emirates, and United Kingdom who became amongst the first to award 5G spectrum last year. The number of countries who have assigned vital 5G spectrum is rapidly increasing this year, with Austria, Canada, Denmark, Germany, Hong Kong, Japan, Saudi Arabia, Switzerland and the USA already completing awards. More than 10 countries have announced further plans to assign spectrum in 2019 including France, India, Mexico, Greece and Romania.  

“This is crucial time in the development of 5G,” added Tarnutzer. “Spectrum is essential fuel for mobile networks and its ineffective use will only lead to bad consequences for consumers. 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.”