Chapter 

4 

      Spectrum 

Pricing 

4.0 

Objectives of Spectrum Pricing 

The principal reasons why a fee is generally applicable for the right to use 

radio spectrum, include 

i) 

Promoting efficient use of scarce spectrum resources, where it 

serves as a means to ensure that those using the spectrum do not 

acquire more than they need to provide a service  

ii) 

Recovering the costs associated with managing the spectrum.  

iii)    In situations, where the demand for a particular part of the radio    

spectrum exceeds the available supply, spectrum fees provide one 

means of reflecting the scarcity value of this spectrum and can be 

used as a selection criterion.  

Other means that are used to reflect the scarcity value of spectrum is to 

include the application of licence obligations such as requirements to provide 

a minimum level of coverage, linking the award of additional spectrum to the 

achievement of certain milestones such as network traffic or number of 

subscribers, or simply restricting the maximum amount of spectrum that one 

Service Provider can hold.  In practice, a combination of these approaches 

may be appropriate. 

It is important to decide upon the objectives that the pricing policy should 

achieve.  These objectives are generally a combination of following principles:  

a) 

Promote spectrum efficiency; 

b) 

Simplicity and transparency; 

c) Cost 

recovery; 

d) 

Reflecting market value of spectrum; 

e) Promoting 

competition; 

f) 

Increasing rural roll out; 

g) 

Raising government revenue 

If the objective is to promote availability of services in rural areas where the 

volume of subscribers is insufficient to justify the incremental cost of network 

rollout, applying a fee structure that increases these incremental costs will be 

counter productive.  On the other hand, if an objective is to maximise the 

degree of competition in areas where demand is high, it is desirable to 

accommodate a number of competing Service Providers within the available 

spectrum and to encourage each Service Provider to use as little spectrum as 

possible. There are also situations where one  time fees is introduced either 

to eliminate non serious player or to serve as a selection methodology. 

4.1 

Methodologies for pricing spectrum 

There are currently a number of methods that are used to charge Service 

Providers for their use of the radio spectrum and the main ones include 

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