The Dynamics of Spectrum Cost in the Era of 4G and 5G and Its Impact on Mobile Network Development

This research focuses on spectrum acquisition and its implications for mobile network operators (MNOs) and consumers in the period between 2014 and 2023. We performed a vast data collection on spectrum holdings and fees paid by close to 250 operators in nearly 100 countries. Mobile spectrum has increased consistently across all regions, driven by the rollout of 4G and 5G networks. Despite the enhanced functionality, average revenues per user have declined. These fundamentals have reduced the value of spectrum from the perspective of operators, and spectrum unit prices have declined in recent years. However, the overall cost of spectrum as a proportion of recurring revenue (the cost-to-revenue ratio) has increased, globally averaging 7.4% in 2023, up from 4.4% in 2014. This cost varies significantly across countries, from as little as 1% and up to 25% of operators' revenues. We attribute such vast differences in spectrum cost to different approaches taken by regulators and market dynamics. Through econometric analysis, we find that higher spectrum cost slows down network deployment and quality, with 10 pp higher spectrum cost to revenue ratio reducing network coverage by up to 2%, and reducing network speeds by up to 8%. On the other hand, we affirm positive impacts of making sufficient spectrum available, with 10% increase in available spectrum increasing network speeds by up to 3.8%. These findings point to spectrum policy as a key driver of network deployment strategies and infrastructure quality. Given the vast evidence on the economic benefits of connectivity, regulators should consider how pricing and timely release can maximise the benefits of spectrum to society.