20 February 2025

Spectrum licences awarded in the past two decades are now expiring in many countries and with this many regulators face an important decision: should licences be extended or put up for an auction?

When are auctions more appropriate?

Spectrum auctions are transparent, objective and, if implemented properly, should maximise social value through allocating mobile spectrum to users that generate the highest value for society.

Auctions are often the preferred method to allocate any resource where demand exceeds supply – and spectrum is no exception!

There are many reasons why operators might want a different spectrum portfolio than the one acquired 10-20 years ago. For example, operators might have different market shares (or expectations of future market shares), different spectrum portfolios in other bands or different current or expected future traffic demands. These can create a situation where demand for expiring licences outstrips supply, making auctions the preferred method for licence reallocation.

When are extensions more appropriate?

Licence extensions might be appropriate when all existing operators are satisfied with their current spectrum holdings and there is no interest from potential new entrants. In such cases, a competitive process may be unnecessary. Instead, extending operator licences can help to maintain stability and continuity.

To avoid potential high auction prices, many operators are now lobbying for licence extensions. However, careful evaluation is required as extensions might not always result in lower prices. When extending licences regulators might want something in return – expensive coverage obligations or prices that would have been higher than reserve prices in an auction. In such circumstances, a predictable, reserve price auction, might be preferable for the operators.

From a regulatory perspective, extensions can simplify the administrative process by avoiding designing a time-consuming and potentially costly auction. More importantly, if done properly, extensions provide a strong investment environment for operators.

There have been recent examples where licences have been extended rather than included in an auction:

• Canada (2021): ISED renewed expiring licenses in the 2600MHz band. The decision aimed to foster innovation and investment.
• Spain (2024): The Ministry of Economic Affairs and Digital Transformation extended licences in six mobile bands with no upfront fees for a 10-year period, providing MNOs with long-term investment certainty, enabling a focus on expanding their mobile infrastructure.

Summary

The decision to extend licences or put them up for an auction is a complex one that requires careful consideration by both operators and regulators. Auctions work best when demand is high, ensuring fair allocation, while extensions provide certainty for operators and encourage long-term investment.

Finally, the choice between extensions and auctions is not necessarily a binary one. In some cases, a hybrid approach may offer the best of both worlds – for example extending critical spectrum that would ensure continuation of serves and auctioning spectrum at the margins (similar approach was taken in Czechia, Hong Kong, New Zealand and Singapore).