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Comparing the Spectrum Policies of America and China

Paul Budde

With the explosion in mobile broadband, every mobile operator is scrambling to secure the spectrum capacity needed to stay ahead in the market.

There is no doubt that spectrum management is one of the most critical elements of telecommunications policy. It is seen as the pathway to 21C infrastructure.

Key elements in such policies need to be based on:

  • Open and transparent government policies and regulation;
  • Maximising competition;
  • Creating innovation in the economy.

At the same time we see some countries also looking at the broader policy issues:

  • Improved affordability, quality and innovation of services through effective competition;
  • Increased participation by local players in the information and communications technology (ICT) sector;
  • Universal service and access.

It is interesting to see how the different countries handle their spectrum management policies.

USA

In the USA the FCC policy is to unleash the power of broadband through the mobile networks, especially in the wake of the lack of vigorous competition in the fixed broadband market. In 2010 I reported on the spectrum reforms that were put forward by the FCC. They proposed that the broadcasters should sell some of their 600MHz spectrum to mobile operators. This spectrum could be reused and more efficiently applied to their mobile operations, which require significantly more capacity.

At that time the broadcasters were bitterly opposed to selling their spectrum to mobile operators.

However things have changed. The latest spectrum auctions (in the AWS-3 bands) in early 2015 delivered nearly $45 billion to the US Treasury. This large amount was a surprise to everybody involved in the industry, but also shows what the telcos are prepared to pay to stay ahead in this for them very lucrative market.

Given this result the FCC Chairman argued broadcasters might now be more interested in selling their spectrum to the mobile industry, as they would be able to attract a similar amount of income from the broadcasting spectrum they own. The mobile operators can reprovision this spectrum for their own requirements. For the broadcasters the question is: with declining broadcasting viewers, what is more valuable — the declining free-to-air broadcasting business or the value of their spectrum? At least sharing spectrum with the mobile operators should now become a real possibility.

At the same time, others argue that these high spectrum prices are a disaster for consumers, as in the end it will be the consumers who will have to cough up the money through their subscription rates.

It is also argued that this is bad for competition. Once such high amounts of money are being paid for spectrum, how much money is left for building the networks? In the end, only the few players with very deep pockets will be able to participate in the mobile network market, and this will lead to further industry consolidation and eventually to market dominance and monopolisation.

This would see the USA mobile market ending up in a similar situation as the fixed broadband market, where there is hardly any effective competition. In both markets there are no regulatory wholesale requirements that at least would stimulate some degree of retail competition.

At this stage the FCC has not shown any concerns on such issues; instead it sees its role in spectrum management as being limited to ensure national security and public safety.

China

In China, on the other hand, the spectrum policy is aimed at building a further one billion mobile towers to increase broadband capacity for the cities and regional towns, as well as rural villages. Those who come up with good plans for this don't have to pay for the spectrum, or pay very little. For 3G spectrum, for instance, further reductions to annual spectrum fees have even been granted, provided licensees meet coverage rollout targets.

This despite the fact that China Mobile and China Unicom are publicly listed on the Hong Kong Stock Exchange, and both have had substantial foreign strategic partners from time to time. It could have been tempting for the Chinese government to slam these private companies with high fees. Instead, over the last two decades their spectrum policy has been consistent, in accordance with the government's strategic decision to prioritise investment in long-term national infrastructure and the associated long-term economic benefits over short-term revenue generation by the government through spectrum fees.

As a result the Chinese networks have achieved 99.5% population coverage over a land area of 9.5 million square kilometres and coverage of all villages with a population of 20 or more. One-third of mobile revenue is now data revenue.

The two business models discussed above are radically different and as such they provide a good basis for consideration of spectrum management issues.

By Paul Budde, Managing Director of Paul Budde Communication Paul is also a contributor of the Paul Budde Communication blog located hereVisit Page
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