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Reality Bites in the Spectrum Auctions

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In June last year, the latest round of US spectrum auctions raised $2.7 billion, with AT&T and T-Mobile between them spending $1 billion. This contrasted with figures of up to $45 billion that were spent on spectrum for 3G and 4G. There are more auctions to come, and a view that many companies are holding onto ‘dry powder’ to bid for subsequent bands. It’s also true that 5G infrastructure will be more expensive to build out. But it seems clear that underlying the fall is a determination to avoid the mistakes of the past, when companies allocated capital based on highly optimistic growth and revenue forecasts. Now there is a widespread expectation that 5G will command a small premium, if any, and to make a success of it companies cannot to afford to be saddled with high levels of debt.

In many IIC events over the last year, concerns have been expressed about the viability of 5G business models alongside pleas for governments not to make excessive demands. Regulators have heard this, and where once the objective was to maximise revenue, the balance appears to have moved in favour of ensuring the efficient allocation necessary to benefit the maximum number of consumers.

5G still has its sceptics. But spectrum that once cost dollars and pounds per citizen is now selling for cents and pennies as companies weigh the demands of their shareholders as well as their customers. More auctions are due this year, including in Europe and the US, and in Australia next year. More of the current pricing devaluation should be seen as an encouraging sign.

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Scars from 3G should help to ensure that 5G will be a success

Infrastructure and Spectrum, Governance
Asia Pacific, Americas, Europe
Andrea Millwood Hargrave Andrea Millwood Hargrave Director of Regulatory Fora, International Institute of Communications
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