The Impact of High Spectrum Costs on Mobile Network Investment and Consumer Prices

Mon May 01 10:35:13 EDT 2017
By Richard Marsden, Hans-Martin Ihle, and Peter Traber

NERA Managing Director Richard Marsden, Senior Consultant Hans-Martin Ihle, and Associate Analyst Peter Traber authored a paper, “The Impact of High Spectrum Costs on Mobile Network Investment and Consumer Prices,” which Mr. Ihle presented at the 14th International Telecommunications Society (ITS) Asia-Pacific Regional Conference: "Mapping ICT into Transformation for the Next Information Society."

Auctions are now the standard approach for allocating spectrum licenses for mobile use in many countries. A key justification for using auctions is the potential to deliver an efficient allocation of a scarce resource. Auctions also raise revenues, though the level of revenues has varied widely across countries. This paper provides statistical evidence that links high spectrum costs to lower network investments and higher consumer prices, suggesting that excessive prices for spectrum licenses may have an adverse impact on consumers. The results of the paper suggest that lost consumer surplus far outweighs the gain in auction revenues.