Have governments gone off free money?
Feb 02, 2018 by Toby Youell

Blog

Governments’ enthusiasm for filling treasury coffers with auction cash seems to be waning. Is enthusiasm for market mechanisms declining?

According to the theory behind spectrum liberalisation, the purpose of a spectrum auction is to ensure that spectrum rights are held by the entity that values them the most.

Supposedly, spectrum auctions’ ability to produce vast revenues out of thin air is little more than a fortunate side-effect, even for heavily indebted governments.

But is the idea that highest price = best spectrum usage going out of fashion?

Donald Trump’s National Security Strategy, published in December 2017, promised to “improve America’s digital infrastructure by deploying a secure 5G Internet capability nationwide”. A month then passed, with no more details. Many speculated that there might be more in the President’s annual agenda-setting State of the Union address.

A few days before the speech, a leaked memo from the National Security Council emerged that did include more details. The memo called for a single nationwide 5G network at 3.7 – 4.2 GHz, built and maintained by the US government, which it likened to a contemporary Eisenhower National Highway System. One option discussed, but not favoured, was to “parcel out” 100 MHz blocks to carriers so they can build their own 5G networks.

Reflecting a possible change in priorities for spectrum regulators, both the German and French regulators have announced plans for future spectrum awards and renewals that put a greater emphasis on coverage obligations, rather than raising revenue.

Pulling in the other direction, we see the possible introduction of an auction element to Japan’s upcoming spectrum awards.

As for the idea of a nationalised 5G network, it was quickly shot down by all the FCC commissioners, including FCC chair Ajit Pai. “The main lesson to draw from the wireless sector’s development over the past three decades—including American leadership in 4G—is that the market, not government, is best positioned to drive innovation and investment,” he said, adding that the government’s role is to put spectrum into the marketplace.

To generalise, it is possible to draw a broad narrative arc on mobile spectrum policy in recent decades. 2G was awarded by government fiat, 3G was awarded through expensive auctions that were not followed by vastly successful services, and 4G was awarded in more moderately priced auctions with more carefully drafted conditions. So what about 5G spectrum awards? Do we replicate 4G auctions, award spectrum in new dynamic ways, or–like many revolutions–do we end up more or less where we started?

PolicyTracker looks forward to finding out: do governments still like free money the most? Or are social and political considerations now more important?