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GSMA: High Spectrum Costs Affecting Uptake in Developing Countries

GSMA: High Spectrum Costs Affecting Uptake in Developing Countries

Better spectrum pricing policies are needed in developing countries to improve the economic and social welfare of the billions of people that remain unconnected to mobile broadband services, according to a new GSMA report.

The study reveals that, when income is factored in, spectrum prices in developing countries average out at more than three times higher than prices in developed countries, presenting a significant impediment to increasing mobile penetration.

Authored by GSMA Intelligence, the study also found that governments are playing an active role in increasing spectrum prices to maximise state revenues from spectrum licensing. Notably, countries with high levels of sovereign debt tended to set particularly high reserve prices. In addition, taking average income into account, reserve prices tended to average more than five times higher in developing countries than in developed.

The report also identifies a link between high spectrum prices and poorer coverage, as well as more expensive and lower quality mobile broadband services, all of which hinder the uptake of services by consumers.

“Connecting everyone becomes impossible without better policy decisions on spectrum,” said Brett Tarnutzer, Head of Spectrum, GSMA. “For far too long, the success of spectrum auctions has been judged on how much revenue can be raised rather than the economic and social benefits of connecting people. Spectrum policies that inflate prices and focus on short-term gains are incompatible with our shared goals of delivering better and more affordable mobile broadband services. These pricing policies will only limit the growth of the digital economy and make it harder to eradicate poverty, deliver better healthcare and education, and achieve financial inclusion and gender equality.”

The GSMA study assessed over 1,000 spectrum assignments across 102 countries (including 60 developing and 42 developed countries) from 2010 through 2017, making it the largest-ever analysis into spectrum pricing in developing countries, as well as the drivers and their potential impacts of spectrum pricing on consumers. Among the countries included in the analysis are Algeria, Bangladesh, Brazil, Colombia, Egypt, Ghana, India, Jordan, Mexico, Myanmar and Thailand – all markets where spectrum licensing is a priority.

The report identifies several key policy trends as being directly responsible for driving up spectrum prices in emerging markets. These include setting high auction reserve prices, artificially limiting the amount of licensed spectrum available, not sharing a clear spectrum roadmap, setting high final price administratively, and having unclear or otherwise unsatisfactory auction rules.

“If mobile operators don’t get affordable and predictable access to spectrum, it will be consumers who will suffer the most,” said Pau Castells, Director of Economic Analysis at GSMA Intelligence. “Developing countries have the opportunity to catch up with the developed on mobile adoption; however the investment case in some of these markets is being put at risk. Operators cannot keep paying significantly more for spectrum when consumer incomes and expected profits are much lower in these markets. This is making network investment challenging at a time when policies should encourage the development of the mobile sector to maximise the benefits it can bring to everyone.”

Mobile broadband networks still do not cover 1 billion people globally, and approximately 3 billion people who live within the footprint of a network are not currently accessing mobile internet services. In low-income countries, around two thirds of rural populations are not covered by 3G networks. At the end of 2017, 3.3 billion people (or 44 per cent of the global population) were connected to the mobile internet, representing an increase of almost 300 million compared to the previous year. That leaves more than 4 billion people offline and unable to realise the social and economic benefits that the mobile internet enables. The majority of people that remain unconnected – 3.9 billion – live in developing countries.

View the GSMA’s Spectrum Pricing in Developing Countries report here.

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