Forever isn't a spectrum policy: how the DNA gets spectrum licensing wrong

This article is authored by John A. Howes, Jr., who is Principal of Magis LGA, LLC, a premier legal and government affairs firm. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of  EU Tech Loop.

 Let’s say your local government gave you the right to be the only person who can use a particular road to a beach.  The government said you don’t have to do much with it if you don’t want to, you can prevent others from using it, and you can have the right to use the road forever.  

That’s what the European Commission is planning to do with its Digital Networks Act (DNA).  This proposed legislation would essentially allow your phone company to use the spectrum radio waves that power our mobile phones via exclusive licenses forever.

This is a bad idea, and I’ll tell you why.

Why spectrum licenses matter

Spectrum licenses are big business because spectrum is scarce.  With a license, you’re the only one using that spectrum band, so it’s like you’re the only one who can use that road to the beach.  As a result, wireless and satellite companies pay a lot of money for these exclusive rights.  

I’m an American who recently moved to Europe, and I have been working with tech and telecoms companies for a decade.  I’ve worked with multi-billion-dollar network operators, as well as small companies still run by the families that started them a century ago.  Building a telecoms network is expensive.  Spectrum licenses are a critical but expensive part of the business.  In the States, auctions for these licenses often generate billions of dollars.

Why spectrum licenses need conditions

Certainly, the more time a company has to use the spectrum, the better, but what if it just sits there and doesn’t use it?  

Because spectrum is scarce and a public resource, the terms attached to a license — not just who holds it, but what they're obligated to do with it, and what happens if they don't — are the only real levers that regulators have to make sure this public resource actually gets used. 

Years ago, one company acquired some spectrum licenses and promised to build a  mobile network across the US.  The telecoms regulator, the FCC, attached requirements that the company had to cover a percentage of the population by certain dates, or the licenses would terminate. 

Years later, when that company was (arguably) behind in covering 75% of the US population, because the spectrum rights were time-limited and conditioned on measurable buildout, the FCC had leverage to investigate, threaten termination, and ultimately force a transfer of the spectrum to operators that would use it. 

If those original licenses had, instead, been granted for an unlimited term with only lightly-enforced review — the DNA's preferred model — that decade of failed promises could have stretched indefinitely, and that spectrum would never be used to serve people in rural areas. 

This is not a pro-investment policy.  It’s a pro-incumbent, pro-stagnation policy

Some in the EU believe renewable-by-default spectrum licenses are “a clear signal that the telecoms sector is worth investing in”.  Sure, some companies would bid for those licenses, but how would regulators ensure that they use them to provide connectivity if there is no deadline or mandatory review?  

This law would take away a tool that EU regulators, like Lithuania’s RRT, use for ensuring that companies make clear commitments to expand mobile networks and increase their capacity for reliable connectivity.

This is not a pro-investment policy.  It’s a pro-incumbent, pro-stagnation policy for another giveaway of scarce, public resources that treats renewal as a formality rather than a genuine decision point.  

 This policy won’t solve Europe’s connectivity problems

 Europe lags behind the US and China in connectivity.  It fell behind in 4G LTE deployment and now 5G: 

“In Europe, the coverage of standalone 5G – which operates independently from existing 4G infrastructure and is used for industrial purposes – is at 40%, while it reaches 91% of the population in North America, and 45% in Asia Pacific.”  

 If Europe wants to compete with the US and China, how would removing an enforcement mechanism help to ensure better connectivity and better networks for the future?

 The DNA adds to the regulatory complexity of operating in Europe, and some say could give “dominant telecom operators a playbook to game the system and potentially force payments” from others in the Internet ecosystem.  Coupled with recently-announced plans to reserve a large chunk of spectrum for EU-based satellite companies, if Europe wants to compete, it should ensure that incumbent, legacy carriers don't just sit on their exclusive roads forever.