It is an economic truism that higher prices lead to lower demand, all other things being equal. A new study by the GSMA suggests that basic relationship holds for spectrum prices: higher spectrum prices lead to higher retail cost of service, which leads to less consumer demand.
Looking at data from 2010 to 2017 in both developed and developing countries, GSMA found that, in developed countries, high spectrum costs played a significant role in slowing the rollout of 4G networks and drove a long-term reduction in 4G network quality.
In developing countries, spectrum prices were almost three times more expensive than in developed countries in relation to expected revenues. In these countries, high spectrum costs slowed down the rollout of both 3G and 4G networks and drove long-term reductions in overall network quality, GSMA says.
In the countries studied with the highest spectrum prices, the average mobile operator’s 4G network would cover 7.5 percent more of the population if they had acquired spectrum at the median spectrum price.
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