Spectrum row threatens European innovation in mobile communications – and the European economy

On 1 July 1991, the first mobile phone call was made over a network running Europe’s Global System for Mobile Communications (GSM): now GSM serves 80 per cent of the global mobile market. The system laid the foundations for compatible national systems that allow users to make mobile calls from one phone to anywhere in Europe and large parts of the rest of the world (with Japan being the notable exception).

The GSM standard prompted huge investments in mobile networks, unleashed a wave of innovation in mobile products and services and brought Europe significant economic benefits.

Now though, as the world moves up to fourth generation networks with the capacity to handle the data explosion sparked by smartphones, Europe risks losing its edge, because of a failure to agree on the allocation of radio spectrum for 4G mobile.

Greater coordination of spectrum policy at the EU level will form a central part of the European Commission’s forthcoming single telecoms market proposals, which are due to be published in September. 

However, to date, efforts to harmonise the spectrum allocation process at the EU-wide level have stalled, due largely to tensions between the Member States and the European Commission on the sovereignty of this resource, with individual governments viewing spectrum as a national asset. Clearly, there are financial incentives motives for trying to maintain control over spectrum. For example, after analogue television broadcasting switched to digital transmission, the freed-up spectrum bands were auctioned off nationally – generating billions of Euros in revenue. 

Secondly, differing spectrum allocations in the EU can result in devices not working across national borders and users experiencing interference from competing equipment. Mobile technology should be exactly that – mobile – and function wherever it’s used in Europe.

Taken together, the EU’s piecemeal investment in telecoms infrastructure and the fragmentation of the European mobile market have knocked the EU’s attractiveness to external markets, while restricting consumer choice. For example, technology company Apple optimised its iPhone 5 handsets specifically for the US and Asian markets, where spectrum bands have been configured to facilitate 4G services. 

Indeed, research from the GSMA and Navigant Economics demonstrates that data connection speeds in the US are now 75 per cent faster than the EU average, and 19 per cent of US connections will be on 4G networks by the end of 2013, compared to less than 2 per cent in the EU.

So which uses of spectrum are most beneficial economically for the EU? And what steps can the European Commission take to facilitate a harmonised approach? Evidence for the economic value of the different spectrum allocations is revealed in the recent report from Plum Consulting, Valuing the Use of Spectrum in the EU. It shows that mobile use of spectrum generates by far the most in economic value, compared with other applications - calculated as € 269 billion across the EU27 Member States in 2013. This is predicted to rise to € 477 billion by 2023, due to increasing consumer use of smartphones, the growth of services using 4G mobile networks and the expansion of machine-to-machine communications. The report also indicates that there will be a significant decline in terrestrial television and radio broadcasts, as consumers move to paid-for satellite and cable platforms, Internet television and radio. 

To take advantage of the economic value of mobile use of spectrum, I encourage the European Commission to work closely with Member States to resolve outstanding issues around the deployment of mobile broadband. This particularly concerns the 800MHz ‘digital dividend’ spectrum band, released by the switchover from analogue television broadcast to digital television. 

Regulatory oversight is clearly needed to coordinate the release of spectrum by EU Member States in a narrow window. Similarly, the practice of reserving spectrum for potential new national telecoms entrants must be overhauled by the European Commission, as this reduces the opportunities for the current industry to invest and innovate. Instead, EU telecoms providers should be granted more flexibility in their ownership rights of spectrum and a presumption of license renewal, as in the US, in order to respond quickly to market trends and to have greater investment certainty.

Spectrum is often called the lifeblood of the mobile industry, but in fact it’s central to all European industry. The single telecoms market proposal is Europe’s opportunity to use spectrum to regain its competitive edge.