To deliver affordable, widespread, quality mobile broadband services, operators require fair access to sufficient radio spectrum. Careful spectrum management is central to the digital economy.

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

NERA Managing Director Richard Marsden, Senior Consultant Hans-Martin Ihle, and Associate Analyst Peter Traber prepared a report in conjunction with our client, the GSMA, that highlights the damage done to consumers by policy decisions that artificially inflate spectrum prices. Put simply, spectrum policies are impacting the delivery of quality mobile services to consumers; slower deployment of next generation networks; and irrecoverable losses in consumer welfare. This report is one of a series of regional follow-ups to the GSMA’s global report on the impact of spectrum prices. It investigates spectrum pricing trends in Latin America and their impact on consumers, and highlights cases of good and bad practice by policymakers. One finding is that median prices for capacity spectrum in Latin America are almost twice as high as in Europe, so there is reason to be concerned about policy.

The report has been published on the GSMA website.

This report makes four key recommendations for regulators in Latin America and beyond:

1. Set modest reserve prices and annual fees, and otherwise rely on the market to determine spectrum prices;

2. License spectrum as soon as it is needed and provide road maps for future spectrum releases, so as to avoid artificial spectrum scarcity;

3. Avoid onerous licence conditions, such as coverage obligations not reflected in reserve prices or asset reversion clauses; and

4. Adopt best practice in award design, for example by using multiple-round auction formats and avoiding beauty contest or sealed bid designs that prioritise revenues over efficiency.

With 5G and advanced 4G technologies requiring ever-increasing amounts of spectrum, Latin American countries that do not make available spectrum in a timely fashion and/or inflate spectrum prices are not only damaging their broadband future, they are holding back their entire digital economies and likely slowing the bridging of the digital divide. Governments and regulators must fully appreciate their ability to maximise—or thwart—their digital futures when making policies that determine spectrum prices.