Germany Finishes 5G Spectrum Auction: Supply and Demand Mattered

The government of Germany has completed an auction of 5G spectrum in the 3.6-GHz and 2-GHz bands, and prices per potential customer (price per MegaHertz POP), while not as high as in the Italian auction, are higher than prices in other countries that have recently auctioned mid-band 5G spectrum. 

Some critics argue a restriction on supply drove prices higher.

Still, spectrum prices seem to be falling, in large part because of a vast expansion of supply.

Millimeter wave spectrum for 5G represents so much more new spectrum that per-unit prices have been dropping. Other ways of wringing more value out of any amount of spectrum also act to increase virtual supply. 

Willingness to spend also is shaped by perceived scarcity: what any bidder has, needs and wants, compared to the resources available to purchase. 

And scarcity is at least in part a decision by regulators. Minimum prices can be set at high levels, for example, as typically has been the case in India. 

High spectrum prices have been a problem in the global telecom industry, nearly bankrupting some major service providers who overpaid for 3G spectrum. That has been a rather frequent problem in India, for example. 

It looks like high prices still are an issue for India. India has the highest unit pricing of 5G spectrum in the 3.4GHz-to-3.8GHz band, for example. 

Indian operators might have to pay close to four times more than South Korean operators for 100 MHz of spectrum. 

As always, there are conflicting interests. Government officials see spectrum sales as an important revenue source. For mobile operators it is a necessary cost of doing business.

The Indian government expects to raise as much as 5.83 trillion rupees ($83.8 billion) from the 5G spectrum sale. That is way more than the $48 billion spent by all operators on spectrum since 2010.

Aggressive new competitors seem to have the result you would expect in any spectrum auction: prices are driven higher. That was the case in Italy, for example, where prices were in the 40 cents per MHz Pop range. 

source: Light Reading