The digital dividend is set to disrupt global competitive practices in the telecommunications sector, and Europe may be the litmus test of how the rest of the world should consider the valuable spectrum assignments. But dangers are lurking.

The digital dividend is radio frequency spectrum currently populated by television broadcasters that will be freed up when media companies migrate from analogue to the more spectrally efficient digital terrestrial television.

Telecommunications consulting firm Delta Partners has released a white paper detailing what Europe can expect when the digital dividend becomes available and warns governments could squash a booming wireless broadband market by being greedy.

Daniel Torras, associate partner at Delta Partners and author of the white paper says the 800MHz frequencies, commonly referred to as the digital dividend, have the potential to “unleash a perfect storm in the telecommunications industry”.

He says the scarcity of spectrum, the need for providers to capitalise on growing demand for mobile broadband, and governments’ opportunity to cash in on spectrum auctions is at the heart of the storm.

“This may disrupt the global competitive landscape in an unprecedented manner,” he says.

The scarcity of the spectrum means governments can put the spectrum on auction and rake in huge amounts of money.

“Countries such as Sweden and Spain, former proponents of ‘beauty contests’ when it comes to awarding licences, are switching to auctions to award the digital dividend spectrum in the hope of cashing in on hundreds of millions or even billions of euros,” says Torras.

The white paper puts the total possible income from auctioning this spectrum at about US$50bn, cash many governments want to pocket. But Torras says there could be unintended side effects to this approach. “They risk fundamentally changing the structure of the telecoms markets in those countries and potentially killing the chance for wireless broadband to flourish.”

He says with this approach from regulators, telecoms operators will need to start rethinking their business models, technology choices, investment plans and partnership options.

It’s not yet clear whether the Independent Communications Authority of SA will favour an auction for digital dividend spectrum in SA. It seems likely, though, given it has already decided to auction off access to the 2,6GHz and 3,5GHz bands. — Candice Jones, TechCentral