Study shows new generation of mobile spectrum is better value
A study of over 200 auctions of individual mobile licences carried out by PolicyTracker using data from the Global Spectrum Database indicates that spectrum being released over the next few years is likely to be better value than the 3G bands auctioned over the past decade.
The bands being released over the next few years – principally 700/800 MHz and 2.6 GHz – are likely to be used for 4G services, offering much higher data rates and spectrum efficiency through technologies like LTE. The propagation characteristics of 700/800 MHz means that far fewer base stations need to be built, again offering huge savings over 2GHz, the predominant band for 3G.
The new bands offer much more, but they do not command higher values at auction. In fact where 700/800 MHz and 2.6 GHz have been sold so far they have proved cheaper than 2GHz, or about the same price.
More for less
The average price for 2 GHz licences auctioned since 2000 is $1.33/Mhz/pop but the 700 and 800 MHz spectrum released by the switchover to digital TV has gone for less than 70% of this price. So far 700 and 800 MHz have only been sold in the US, Sweden and Germany and the average price was $0.905/Mhz/pop.
Of course 2 GHz was famous for generating the bubble valuations of the dotcom boom. But even if you ignore the prices from 2000 ($2.88/Mhz/pop!) the average value of a 2 GHz licence over the past ten years has still been $0.90 Mhz/pop: about the same price as the digital dividend bands, despite inflation and the superior properties of the 700 and 800 MHz bands.
The contrast with 2.6 GHz is even more marked. Since 2005 the average auction price for this band is $0.073/Mhz/pop, only 8% of the 2 GHz average.
So why is this new spectrum proportionately much better value? There seem to be three explanations: Firstly, there is more spectrum available. Single bands like 2 GHz are no longer seen as the only option for new services, and as more alternatives become available so operators are less willing to pay high prices for specific bands.
Secondly, operators have greater certainty about business models, customer habits and spending patterns. Unlike ten years ago, auction bidding is no longer a shot in the dark on which the future of the business may depend.
Thirdly, the mobile industry is consolidating making it less likely that new entrants will try to break into markets so pushing up spectrum prices.
The Global Spectrum Database covers spectrum usage and allocation in 90 major economies and has has information on 1500 licences and 800 operators. This research is based on data from the June update. A more detailed article about this study will be available shortly on the PolicyTracker website.
Martin Sims
PolicyTracker Managing Editor
