The big question is how this valuable
spectrum should be allocated for European operators.
Governments worldwide should resist temptation to pocket the proceeds from the "Digital Dividend" – the spectrum freed with the switch from analog to digital TV. Instead, monies should be directed with competitive bidding to fund widespread mobile broadband across the Digital Divide to include people and places where the operator business case is weak.
Leaders from some of the world's largest mobile firms gathered at the Mobile World Congress (MWC) in Barcelona recently to make their case for mobile broadband as the driver for economic growth. VimpleCom's CEO Alexander Izosimov depicted mobile as the "new lifeblood of the global economy" and said that additional spectrum was "not a luxury but an absolute necessity" for future growth. GSMA CEO Rob Conway described current economic conditions as the most synchronized downturn ever. Panelists quantified the significant economic stimulus that would arise from increased wireless broadband.
Conway described the Digital Dividend as a "once-in-a-generation opportunity." He called for 100 MHz of the 400 MHz Digital Dividend spectrum to be assigned to mobile. He said these lower-band 
frequencies, at around 700 MHz, are best for rural coverage and in-building penetration.
Mobile is a bright spot in the current economic gloom with distress in the financial markets and many industries. Press conference panelists, including Franco Bernabè, CEO of Telecom Italia, and Wang Jianzhou, chairman and CEO of China Mobile, also outlined how their businesses are flourishing despite the downturn. Carl-Henric Svanberg, CEO of Ericsson, indicated no slowdown yet in his equipment business.
REGULATORY RESISTENCE
Panelists were fearful that mobile companies would be constrained from financing mobile broadband expansion by licensing fees and regulation. Indeed, the 3G licensing proceeds in Europe were a whopping $150 billion. Handy for government exchequers in the economic downturn early this decade, but this diversion of funds impeded investment in 3G infrastructure and service deployment. European operators are under pressure from European Union regulators to reduce call termination and international roaming charges. Operators can only commit to building widespread mobile broadband if they are sufficiently profitable to generate cash flow for investment and attract additional financing. In the absence of government handouts, they will only be willing to close the Digital Divide if they can use the Digital Dividend bounty to make that investment.
How should this scarce and valuable spectrum be allocated? In attendance, I posed this question to the panelists multiple-choice style: with auctions, unlicensed allocations or a return to beauty contests as possibilities. Bernabè blamed the British example for the costly 3G auctions that ensued in much of Europe. Jon Fredrik Baksaas, CEO of Norwegian-based operator Telenor Group, proposed the kind of license fee capping Nordic nations used in their 3G auctions. I presume that also would entail some kind of beauty contest or lottery when supply exceeds demand for spectrum, as is inevitable in nations such as the U.K. that already has five national infrastructure-based operators, plus MVNOs and other prospective new entrants. The drawback is that awards could be more a function of luck or political lobbying than who will do the best job of rapidly connecting needy people and places to the Internet.
I agree with the panelists that whereas the mobile industry is capable of expanding broadband reach without subsidies, it should not be burdened with onerous regulation or enormous licensing fees. European mobile operators are not dominant monopolies. With vigorous competition, the relatively high termination charges in their calling-party-pays nations end up in handset subsidies for postpaid users and in supporting the ability of price-sensitive individuals to remain registered users at low outbound usage levels with very low or even zero monthly expenditure on prepaid. Similarly, regulators should not fret about the relatively high prices for international roaming by carriers worldwide. Competition among carriers and with substitutes such as Skype, SIM swapping and dual SIM phones provides pricing pressure and alternatives for price-sensitive consumers.
BEAUTY IS IN THE EYE OF THE BEHOLDER
Prize spectrum should not be given away on the basis of luck or privilege. Lotteries are out. Unlicensed spectrum allocations should be limited and for local area usage such as with Wi-Fi and Bluetooth. Beauty contests are problematic because no two bids are quite alike, making comparisons with objectivity or political impartiality difficult, and they run the risk of passing windfall gains to license winners. What's needed is a process in which bidders compete to define deployment, adoption, timescales, service levels and perhaps some consumer pricing commitments. When suitably demanding specifications are set, auctions can determine winners that pay modest license fees without receiving large windfall gains. Only if license obligations are not fulfilled should large payments in the form of cash penalties have to be paid.
Mallinson is founder of WiseHarbor, solving commercial problems
in wireless and mobile communications. www.wiseharbor.com