There is a view that very high spectrum prices have no downside for consumers. Spectrum costs are categorized as “sunk costs” and this has been interpreted as meaning they have no impact on operators’ investment and pricing decisions. Thus, charging excessively high prices for spectrum licenses is sometimes viewed as a risk-free means of increasing state revenue. The spectrum pricing studies are part of a growing body of academic and industry research which refutes this thesis.

NERA Managing Director Richard Marsden and Senior Consultant Hans-Martin Ihle authored a report for the GSMA, which is one of a series of regional follow ups to the global study on the impact of spectrum prices. The report highlights spectrum pricing trends in Europe and their impact on consumers and highlights cases of good and bad practice by policy-makers. As in the global study, it was observed that average spectrum prices have trended upward in Europe, with a large number of high price outliers since 2013.

The report makes four key recommendations: (1) set modest reserve prices and annual fees, and rely on the market to set prices; (2) license spectrum as soon as it is needed, so as to avoid artificial spectrum scarcity; (3) avoid measures which increase risks for operators; and (4) publish long-term spectrum award plans that prioritize welfare benefits over state revenues. With 5G and advanced 4G technologies requiring ever-increasing amounts of spectrum, European countries that inflate spectrum prices are not only damaging their broadband future, they are holding back their entire digital economies. The mobile industry, directly and as an enabler of adjacent sectors and services, contributed €500bn to EU GDP (i.e., 3.2%) in 2014. Governments and regulators must fully appreciate their ability to maximize—or thwart—their digital futures when making policies that determine spectrum prices.