GSMA wants less of a government free-for-all with spectrum auctions

• Too much cunning maximization of the proceeds...
• ..not enough careful consideration of efficient market outcomes, it claims
• It’s produced a list of do’s and don’ts for auction design

Global spectrum policy seems to be a bit ‘all over the place’. For instance, earlier this year Denmark's telecoms regulator managed to extract US$333 million in spectrum fees for government coffers while giving away other frequencies for free in  return for better mobile coverage in underserved areas of the country. (see - Denmark hands over free spectrum for better mobile coverage). This sounds very clever, nice and Danish, but it’s the sort of thing that can be seen to distort the market.

Then in March TelecomTV’s Mary Lennighan reported that auction disparities were generally troubling European telcos. “The prices telcos have to pay for 5G licences is starting to look like a postcode lottery,” she wrote (see - 5G spectrum cost disparity gives European telcos pause for thought), noting that the industry's then latest 5G auction in Austria saw its government raise €188 million from the sale of 390 MHz of spectrum in the 3.4 GHz-3.8GHz band. Compare that to the spectrum sale that took place in neighbouring Italy last autumn which raised  an eye-watering €6.55 billion for the Italian treasury.

It’s all a bit of a disruption for telcos trying to work out the economics of 5G deployment, as the GSMA can be counted on to point out.  And it has.

“Artificially Inflating Prices in Auctions Threatens Quality and Affordability of Mobile Services,” it says, introducing its plea for a sensible (less greedy) approach to spectrum auctions.

Of course telcos hate being forced to pay more for spectrum than they think they should, mostly on the basis that while it may look like a windfall for the general pot, the money must be clawed back in the form of higher prices later. In reality, nobody wins.

What the GSMA particularly objects to are spectrum auctions specifically designed to inflate prices or likely to inefficiently distribute already scarce spectrum resources, and therefore 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.”

So the GSMA has published an ‘Auction Best Practice’ paper to highlight some key concerns from recent 4G and 5G spectrum awards and to offer recommendations. Particularly egregious decisions, in its view, 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.

Its 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 GSMA’s ‘Auction Best Practice’ paper is available in English here, in French here and in Spanish here.