Incentives always matter, when regulators and policymakers want robust investment in next-generation networks. But competition and investment tend to be rival goods in competitive telecom markets. Success on one dimension tends to diminish the other.
Consider the European Community broadband targets, which call for gigabit access by 2025 for “all schools, transport hubs and main providers of public services as well as digitally intensive enterprises.”
The problem: the EC itself believes this will cost about €500 billion ($558 billion) in investment over the next eight or nine years.
However, the costs of building such a network are high, with the commission estimating that there is a shortfall of €155bn of the €500 billion of investment that could be required to deliver a so-called “gigabit society”.
Right now, investment in next-generation networks might fall short of that goal by about €155 billion ($173 billion).
As plans for 5G mobile networks advance, additional spectrum–and lots of it–will be needed.
Spectrum below 1 GHZ and between 1 GHz and 6 GHz will be important. But spectrum in millimeter wave regions will be crucial, as there is not enough additional bandwidth available in low bands (below 1 GHZ) or in the middle bands (up to 6 GHz).
That means the cost of acquiring or using spectrum will be important drivers of how much investment happens, and how fast.
The planned 5G networks are expected to serve up to one million connected devices per square kilometer, about a one thousand-fold (three orders of magnitude) more than current levels.
Though investment will not be linear (three orders of magnitude more investment to support three orders of magnitude more devices), the incremental investments will be quite substantial.
High spectrum prices, tax policies, mandatory fees and other conditions of doing business also shape the possible business models and therefore the magnitude and timing of investment.
Telecommunications always has been a highly-regulated business, where government decides whether market entry is possible, by whom, under what conditions, what prices can be set and what services can be offered.
Creation of incentives to invest is now, and always will be, a crucial element of policy.