The GSMA, a lobby group for the world’s mobile operators, has warned South Africa against implementing a poorly designed spectrum auction, saying such an auction could fail if not done properly.

The association said in a statement that a bad spectrum auction process — South Africa is due to release spectrum to mobile operators later this year — could result in artificially inflated prices or inefficiently distributed scarce spectrum resources, which in turn would risk harming consumers.

“Auctions can and do fail when poorly designed,” said Brett Tarnutzer, head of spectrum at the GSMA, in a statement.

“We’re seeing a worrying trend of badly run spectrum awards that could seriously impact the mobile industry’s ability to connect a higher proportion of people to high-speed mobile broadband,” Tarnutzer said. It’s important that South Africa does not repeat these mistakes, which include seeking to maximise revenues above the connectivity of citizens, he said.

The GSMA has published a global Auction Best Practice paper “to help governments and regulators guarantee affordable, high-quality mobile connectivity from spectrum awards”. The paper highlights some key concerns from recent 4G and 5G spectrum awards globally and offers recommendations.

These include addressing a trend towards governments making decisions that artificially inflate spectrum prices, which “risks limiting subsequent network investment and thus harming consumers”.

Reserve prices

“These bad decisions include artificially restricting the amount of spectrum operators can access, through set-asides or by poorly chosen lot sizes, or by setting high reserve prices,” the GSMA said.

The GSMA has recommended:

The top priority for spectrum auctions should be to support affordable, high-quality mobile services – not to maximise revenues;
Auctions should not be the only award process considered, as they are not always suitable;
Assign a sufficiently large amount of spectrum and publish roadmaps to support high-quality mobile services. Set-asides for vertical sectors or new entrants may threaten how much operators can access and also risk inflating spectrum prices;
The auction design should not create unnecessary risk and uncertainty for bidders; and
Poorly chosen lot sizes or inflexible packages of spectrum lots risk inefficient outcomes.

According to GSMA Intelligence, in 2018 the mobile ecosystem in South Africa generated 7.6% of GDP or US$28.5-billion in value added. “Supported by the right policy environment, this economic impact is expected to rise to $30-billion by 2023, due to the productivity benefits from increasing mobile Internet penetration.” — © 2019 NewsCentral Media