Economic Aspects of Frequency Management as Exemplified by the Mobile Communications Sector

Frequencies have become a resource of relevance to the overall economy. Sectors whose services are based on the use of radio frequencies already produce a substantial share of the GDP (estimated at about 2 percent in the U.K.) and show more dynamic growth rates than the economy in general, including their employment potential. It would therefore be highly inadvisable to neglect this aspect. The paper addresses the economic aspects of frequency management and analyses them with respect to mobile communications. A key point to consider is that frequency allocation processes have short- as much as long-term effects on competition in the relevant market. Whereas in the past frequencies were awarded well below their value, the Austrian Telecoms Act of 1997 provided the underpinnings for an economically efficient frequency management. Frequency allocation is economically efficient only when the frequencies are awarded to the operator with the highest rating. Only then can we assume that it will maximize a country's overall welfare. As a result, frequencies should increasingly be allocated by way of auctions or at least at prices that simulate auctioning procedures. Clear strategies will be required for frequency management to exploit the full economic potential of this valuable asset.