Should spectrum management in Europe be centralised?

Background

The EU has long desired to centralise spectrum management with pan-European policies and harmonisation. It has recently raised the issue again. As reported by Reuters[1]:

“The European Commission said on Wednesday [21 February 2024] it may seek to manage radio spectrum as part of a revamp of the European telecoms market, as well as broaden existing rules to include Big Tech and ensure a level playing field for telecoms operators.

The overhaul could include "a more harmonised approach to authorisation procedures of telecoms operators, a more integrated governance at Union level for spectrum and possible changes in wholesale access policy", the Commission said in a statement.”

Of course, the EU’s raison d’etre is centralisation so it is no surprise that it would be interested in taking over spectrum management from member states. The particular stimulus in this case is, in the EU’s view, the poor performance of mobile operators in meeting EU targets for 5G rollout and similar, which it ascribes partly to a difficulty in the emergence of multi-national operators due to differing spectrum availability and regulations across member states.

In my view this is misguided for many reasons:

1.??? The concept of pan-European operators has been tried in the past and has broadly failed, with operators like Vodafone selling off national operations to local companies.

2.??? The reason for the “slow” deployment of 5G is more because 5G is not economically viable outside urban areas, and nor does it bring any obvious benefits. The EU would be better placed acknowledging that it made an error in assuming 5G would be transformational and changing its policies rather than doubling down on trying to achieve inappropriate goals.

3.??? With mobile data growth slowing, and demand likely to plateau in the next few years, there may not be any further spectrum auctions or new licenses and hence no benefits of future alignment. Alignment of licenses already issued is near-impossible since they represent a legal contract that cannot be readily changed.

But even if the background to the current debate is flawed, the question is still a fair one – should spectrum management be centralised?

In considering this, it is important to note that there is already some centralisation. CEPT considers technical and harmonisation matters at a pan-European level and its advice is typically taken by regulators. Senior members of national regulators meet under the auspices of the EU’s Radio Spectrum Policy Group (RSPG) and aim to reach agreement on future strategy. And the international structure of spectrum allocation via the ITU tends to lead to conformity across regions of the world. But all these mechanisms are non-binding, giving national regulators full jurisdiction over national spectrum and regulatory decisions.

This paper firstly looks that the advantages of centralised spectrum management, then the disadvantages, then reaches the conclusion that centralisation in general is a bad idea but that there are some specific areas where centralised policy making would be helpful.

The advantages of centralisation at a European level

Less duplicated effort: Regulators tend to do very similar things – conduct the same studies, auction the same spectrum, gather the same data and so on. Having a separate regulator do this in each EU country is inefficient – as the US has shown one regulator can readily manage spectrum across a landmass and population the size of Europe. A national spectrum regulator might cost in the region of $20-50m per year. While some functions such as issuing licenses will remain, cost savings of perhaps $250m/year at a European level might be possible. But in the scheme of the cost of auctions, or deploying a mobile network, this is a relatively small cost.

Easier cross-border management: Radio waves do not stop at borders so national regulators on either side need to align usage or create guard zones. In principle, a pan-European regulator could eliminate the effect of national borders by making assignments at a European level. In practice though, with most spectrum already assigned nationally, the freedom to achieve this is very limited. Also, regulators already aim to align allocations with those of neighbours as they understand well the problems of cross-border interference where there is differing usage.

Emergence of pan-European operators: In principle, for a new service such as 6G, the licence could be auctioned or awarded at a pan-European level, facilitating pan-European operators. In practice, there are many challenges including the desire of countries to have national operators, the lack of harmonisation of other rules such as access to land for masts, and, as mentioned above, the fact that new auctions or licenses for any material services looks to be unlikely now – at least for the next decade.

The disadvantages of centralisation at a European level

One size does not fit all: Countries need different things. Some need better mobile coverage, and coverage obligations in licenses could be important. Others need more competition and facilitating new entrants or MVNOs may be the top priority. And in some cases, less competition may be the right answer. Some countries need more spectrum because of poor historical allocations, others do not. Having a single central policy is rather like the Euro – it forces inappropriate outcomes on some countries to their detriment, at least for many years until national adaptations are made.

European management is likely to be poor: If the central manager is the EU then history suggests it will focus on inappropriate outcomes such as “5G everywhere” and champion EU players. It will aim to align with EU policy rather than pursue the more independent role that leading regulators such as Ofcom take. Of course, it might turn out to be well-structured, have appropriate independence and have a world-class leadership, but the risk is high that it does not.

There are many challenges to overcome: For example, if there were an auction, say for 6G spectrum (which I doubt) how would the proceeds be divided among member states? Or would they all be retained by the EU? This will be a highly contentious matter and is only one of many to resolve.

Replacement of functioning bodies: While entities such as CEPT are far from perfect, replacing or adapting them would be disruptive and it is unclear whether any better result would be achieved.

Direct-to-device: A case that could make sense

Where there are likely to be pan-European operators and where cross-border issues are particularly burdensome, then pan-European licensing could be valuable. A current case in point is direct-to-device (D2D) satellite connectivity where cellphones can switch to a satellite connection when out of cellular coverage. This has already been implemented by Apple in the iPhone, albeit only for emergency communications and there is much current interest in others such as SpaceX and Amazon-Kuiper providing a service. The FCC in the US has set out its proposed regulatory framework, but there has been little progress in Europe.

Because of the size of a beam from a satellite, the service cannot readily work at a country level within Europe. There are also questions around the conditions under which a satellite could transit in mobile spectrum that need harmonisation across neighbouring countries. Hence, it may only be practical to develop regulation and licence such operations at a pan-European level.

Of course, this does not necessarily require a centralised entity. All the national regulators in Europe could get together and agree between them the appropriate regulations and could nominate a body to perform licensing on all of their behalf.

In summary: the case for centralisation of spectrum management is weak

If countries regulated spectrum in isolation then there might be a reasonable case for centralisation. But there is already much collaboration – in CEPT, RSPG, at the ITU and in cross-border arrangements with neighbours. Countries have little option than to align with harmonised frequencies for cellular and other applications that have large economies of scale. Centralisation might achieve a slight improvement or might risk losing important benefits from the current approach.

If we were at the start of licensing - for example for cellular operators – then there might be room for change. But we are at the end of this process, with future auctions unlikely and most spectrum usage set in legal contracts that cannot be altered.

If the EU had a solid track record of making the right call on technology and spectrum then its management might remove duplicated effort and provide “benevolent dictatorship”. But this is not the case, the EU repeatedly makes the wrong call on new technology, on operator economics, and on what users actually want.

The benefits are small, the risks are great, and the transitional process needed highly disruptive and contentious. The status quo, while imperfect, is better.

[1] https://www.reuters.com/business/media-telecom/eu-commission-eyes-centralised-spectrum-policy-telecoms-market-revamp-2024-02-21/