Report on Policy and Investment in the Mobile Telecoms Market

A new report by three Compass Lexecon experts assesses how governments and regulators can facilitate the investment required to achieve widespread and timely 5G deployment in European mobile markets. The report highlights the material impact of merger and spectrum policies on investment and discusses how such policies can be adapted to better promote dynamic competition.

The authors first review the record on the effect of investment in mobile network capacity and technology on capacity, quality, and quality-adjusted prices, and discuss the potential gains resulting from investment in 5G. Then, they investigate how certain policies designed to achieve and maintain particular market structures can affect investment. In particular, they show that an overly strict merger policy can deter investment in markets where demand is highly uncertain and investments must be sunk prior to the resolution of such uncertainty. In such cases, mergers serve to mitigate expected losses if investments turn out unsuccessful. This result suggests mobile merger assessments should place less weight on short-term pricing effects and more weight on dynamic competition and particularly rivalry in investment.

Finally, our experts discuss the impact of spectrum policies. They argue that the adoption of perpetual, tradeable, spectrum licenses would improve predictability and reduce the risk of regulatory opportunism. In their opinion, authorities should also avoid imposing new conditions on operators except at the time of releasing new spectrum when the cost of the obligation can be taken into account by operators in valuing the spectrum.

The report ‘Mobile market structure: policy and investment’, written by expert economists Jorge Padilla, Paul Reynolds, and Joe Perkins (September 2021), was commissioned by Vodafone.[1]

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[1] This report has been prepared by Compass Lexecon professionals. The views expressed in this report are those of the authors only and do not necessarily represent the views of Compass Lexecon, its management, its subsidiaries, its affiliates, its employees, or clients.