ISLAMABAD: Mobile operators need timely and affordable access to spectrum in order to support high-speed mobile broadband (MBB) services featuring good coverage.
According to a report of China Academy of Information and Communication Technology (CAICT), in Pakistan, three out of four mobile network operators’ (MNOs) expenses on spectrum are above 10% of their revenue. The high spectrum cost may jeopardise the operators’ ability to invest in and to support affordable services, resulting in slower deployment of MBB networks and more expensive, lower-quality MBB services. In the long term, it will hinder social and economic digital development.
The report says the Government of Pakistan is recommended to take measures to increase the affordability of spectrum for the operators.
Many countries around the world adopt measures like annual payment and deferred payment to reduce the cost burden of operators, particularly in the first years of network roll-out. When operators are spectrum-constrained, they are likely to invest more on densifying their network in urban areas than they would otherwise. This in turn can constrain their ability to invest in the rest of the network and, especially, improve coverage.
The CIACT report says that countries with low spectrum auction prices and long spectrum licence lengths tend to have better network coverage, a wider choice of services, better take-up, and healthier competition.
An econometric study by the Global System for Mobile Communications (GSMA) found that high spectrum costs lead to negative consumer outcomes by restricting the financial ability for network investment. The study also noted that in developing countries, high spectrum costs slowed the rollout of 3G and 4G networks and caused long-term reductions in overall network quality.
Globally, the spectrum costs are declining. A Coleago Consulting study has computed the Spectrum Price Index (SPI), i.e., total spectrum cost divided by monthly mobile revenue. The SPI is 6 for 3G, 4 for 4G, and 2 for 5G. This equals an annualised spectrum cost at 3% of revenue for 3G, 2% for 4G, and 1% for 5G. In countries such as China, the United Arab Emirates, Saudi Arabia, and Kuwait, the number is below 1%.
The Coleago study also calculated the impact of annualised cost of spectrum on MBB investment. It says that a cost of spectrum of up to 5% is unlikely to slow down investment in mobile broadband and 5G.
Evidence shows that lower percentage is likely to deliver better outcomes for 5G deployment. In many well-developed 4G markets, the annualised cost of spectrum is 5-9% of mobile revenue.
This indicates that the annualised cost below 10% may not have material negative impact on network deployment. When the cost of spectrum amounts to 10% of mobile revenue, operators may hit budget constraints, i.e., investment in mobile broadband and 5G is likely to be slower than it otherwise would be. A cost of spectrum above 10% of revenue presents a threat to the development of 5G.
-INP
