Spectrum Policies Impacting QoS to Consumers in Latin America, Warns GSMA Report

The GSMA has issued a new report, ‘Effective Spectrum Pricing in Latin America: Policies to support better quality and more affordable mobile services,’ highlighting that spectrum policies in Latin America are impacting the delivery of quality mobile services to consumers across the region.

The new report, which examines spectrum pricing trends in 15 countries across Latin America, underscores how decisions made by regulators on spectrum pricing can have a negative impact on the quality and cost of mobile broadband services.

While auctions remain an effective means of awarding spectrum, regulators should adopt spectrum policies that focus on maximising long-term benefits for society, rather than driving up the cost of spectrum for short-term gain.

In Latin America, steep spectrum prices, which are almost twice as high as in Europe, put serious financial pressure on the industry, impacting the delivery of next-generation networks.

“Latin American countries that do not make spectrum available for 4G and 5G networks and artificially inflate the price are holding back their digital economies, not closing the digital divide and hurting consumers,” said Sebastian Cabello, Head of Latin America, GSMA. “Operators require fair access to sufficient radio spectrum in order to deliver high-quality and affordable mobile broadband services. Governments and regulators must adopt policies that support this in order to help their local digital economies to grow.”

Appropriate Spectrum Policies

High prices for capacity spectrum at auctions are largely due to policy decisions rather than market forces, with regulators effectively setting the price for spectrum up front, according to the report. This approach has inflated prices in Latin America, which are approximately 60 per cent higher than in Europe.

The amount of spectrum allocated to mobile operators in Latin America is still well below Asian, European and North American markets, and as a result, spectrum auctions in the region are often conducted in an environment of spectrum scarcity and uncertainty.

Future availability of frequencies forces mobile operators to accept these higher prices to ensure long-term competitiveness in their respective markets. Many Latin American countries also have a mixed track record of making spectrum available in a timely manner and making commitments regarding future releases.

“Latin American countries must set policies that encourage the development of next-generation networks and give consumers affordable access to mobile services,” continued Cabello. “Consumer demand for mobile data services continues to grow, but unless governments and regulators manage spectrum efficiently and make the process more transparent, affordable and achievable for operators, costs will not decrease sufficiently and consumers will not see the benefits.”

A High Price to Pay

The report confirms the link between the total spend on spectrum and the price of data, arguing that lower spectrum costs would have a positive impact on the adoption of consumer and enterprise services. It also suggests that high costs may also prevent incentives for price competition.

Other issues relate to high reserve prices, annual licence fees, short licence terms, inappropriate coverage obligations and uncertainty about renewals and new awards.

Spectrum Pricing Policy Best Practice

The report encourages Latin American governments and regulators to assess how their policies impact the price and availability of spectrum, particularly as 4G and 5G networks require increasing amounts of spectrum. Appropriate policies will improve access to broadband, while delivering benefits to society, such as bridging the digital divide and growing the digital economy. Specifically, the report recommends the following key policy recommendations:

1. Set modest reserve prices below the expected market value and ensure annual fees are not prohibitive.

2. Bring spectrum to market in a timely manner, provide operators with a roadmap of future availability and release in anticipation of requirements.

3. Avoid onerous licence conditions, ensuring licence terms are long enough and bidders have appropriate renewal guarantees so that they can realise adequate returns on investments in network infrastructure.

4. Adopt best practice in award design that prioritise efficiency, not revenues