Spectrum Policy and the EU Digital Single Market: Lessons from the United States

The European Union has outlined a set of ambitious goals in its Digital Single Market proposals, including a set of proposed reforms to radio spectrum management to create an EU-wide market for mobile communications. While challenging, the goal of a single telecoms market is also the most promising: the mobile digital economy is poised to have a tremendous impact on growth, productivity, and progress throughout the 21st century. Europe should take this opportunity to achieve a true single market for mobile by moving wireless policy from the national level and centralizing spectrum management functions, harmonizing regulations, and allowing for industry consolidation to fit the scale of a single market.

The difficulty in enacting these reforms is considerable, with member countries wanting to retain autonomy and control over industries and inputs, but success will mean significantly greater value throughout the entire EU mobile ecosystem. ITIF recommends bold action over half-measures—most importantly in centralizing EU-wide spectrum management—and hopes the Commission is successful in these efforts. We offer five key lessons from the United States that may help inform the European Union’s attempt to create a true single market for mobile communications:

1. Consolidated EU-wide spectrum management and harmonization of regulations.

EU spectrum management should be consolidated within a single body, with the goal of harmonizing band allocations, service rules, and regulations as much as possible. By providing centralized spectrum management functions, but keeping overall all auction revenue flowing to the member countries, the Commission can focus on the most socially beneficial allocations and technical rules, while reducing opportunities for mis-aligned incentives or regulatory capture.

2. Permissive merger policy.

Europe has too many wireless carriers for it to take full advantage of the wireless revolution. Indeed, the EU’s fragmented market structure has played a substantial role in its slow adoption of 4G LTE technology. As a part of the digital single market for telecommunications, the EU should enable considerable consolidation in its mobile industry to allow firms to achieve appropriate economies of scale. The goal should be to eventually see dynamic competition between four to six firms covering virtually all of Europe.

3. Reallocation of broadcast spectrum for mobile broadband.

If the EU is going to see a single market for advanced mobile services, it must allocate additional low-band spectrum for mobile services. With the ITU now formally endorsing a globally harmonized reallocation of the 700 MHz band from broadcast television to mobile broadband, it is time to accelerate this transition throughout Europe.

While there is a wide diversity of reliance on low-band spectrum for broadcast television across member countries, the EU should look to the U.S. incentive auction as a potential mechanism to ease uniform reallocation of spectrum to mobile broadband. The entire EU would greatly benefit from harmonized band plans and service rules as more and more countries make more spectrum available for broadband.

4. Technologically neutral, flexible licenses tradeable on a secondary market.

Mobile technologies can shift over time—it is important that spectrum managers use technology neutral, flexible licenses to allow room for change. Mandates on particular technologies or standards severely stifles innovation, reduces competition in developing new radio technologies, and slows reallocating old spectrum to meet new demands. Technology-neutral licenses will be especially important as we move forward with 5G, as a wide array of different technologies are contemplated—regulators should encourage competition to deploy new innovations, even if on a pre-standard basis.

Managers should also offer certainty about licenses. Radio rights should be offered on longer terms with a presumption of renewal to encourage long-term investment.

5. Neutral spectrum policy eschewing active market shaping.

The EU should avoid explicit market shaping beyond protecting a baseline level of competition. Several restrictions and regulations have been put in place with a narrow focus on static measures like number of competitors or consumer prices. Less active market shaping and greater reliance on innovation, capital investment, and the realization of economies of scale will drive better long-term outcomes for users and for the overall evolution of the EU wireless system.