Friday, September 23, 2011

France 4G spectrum "auctions"

As Australia's radiocommunications regulator the ACMA announces the use of a convoluted auction system for the 2.5GHz and 700MHz bands the French regulator has completed and allocation of the 2.5 GHz band (which they call 2.6GHz).

While the Australian auction is tagged as the 4G auction, there is nothing that actually ties the frequency to the technology. This is actually a benefit as we've already seen Telstra and Optus commiting to use existing 1.8GHz allocations for 4G. This "refarming" is not permitted in all jurisdictions despite the significant cost savings.

The French spectrum is restricted to use for 4G which they have described as "mobile networks whose maximum data rate must be at least 60 Mbps" which they assert is "significantly faster than currently available 3G connections." The Telstra HSPA network actually gets very close to that. It is also a weird concept to refer to the minimum level that the maximum speed can be.

The winners are France's existing four major mobile operators. The French system also allows the regulator to consider operator commitments to provide host MVNO's on their network.

The French announced this as;

The procedure therefore achieved its objectives of increasing competition in the mobile market by allocating 2.6 GHz-band spectrum between mobile network operators in a balanced fashion, and of obtaining significant commitments with respect to the hosting of mobile virtual network operators (under a full MVNO model).

The allocation of these frequencies also translated into a strong valuation of State property, bringing in the sum of €936 million – compared to the reserve price of €700 million.

The French model seems to be more about sealed bids rather than open auction. In other words taking the approach that you are allocating mobile licences rather than spectrum licences can be just as fruitful for generating competition and revenue.

The second stage will be the allocation of their Digital Dividend (what they call 800MHz and we call 700MHz). The interesting piece is the number here. France has a population of about 62M versus 22M for Oz, and one Euro riht now buys 1.38 $Oz so on an equivalent $'s per MHz pop basis the Australian 2.5 GHz should raise $458M.

The question is how many interested parties there will be, and whether the ability to refarm the existing 1.8 GHz reduces the mobile operators' interest. Australian prices are also likely to be lower because of the greater cost of building networks in Australia (that is, the population density).

Note: Section 60 of the Radcomms Act allows that the auction rules may include limits on the amount any one person may acquire, such limits to be set by the ACMA only on the direction of the Minister. The provision was added by Act No.41 of 1997. I know that on previous ocassions the Minister has sought the advice of the ACCC before determining the limits but it appears that is not mandated by the legislation. Good question for Conroy though - what is he going to do about competition limits.

Also good question to ask Conroy is how spectrum renewal discussions as announced to AMTA in March 2010 are going.....

Novae Meridianae Demetae Dexter delenda est

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