GSMA lobbies for more and cheaper spectrum

Ahead of WRC-19 mobile industry lobbying group the GSMA has lobbied on behalf of the mobile industry.

The main concern of the GSMA, and thus we can assume the global mobile industry, is access to plenty of licensed spectrum at reasonable prices. The ITU’s 19th World Radiocommunication Conference will take place in November, but lobbying groups are getting organised well ahead of time. While the cost and availability of spectrum is a perennial issue, the advent of 5G makes it arguably more important than ever.

The GSMA has opened two lobbying fronts in this case. The first involved an open letter loftily headed ‘Delivering the greatest value for society at WRC-19’. As indicated the letter conflates the progress of 5G with that of civilization itself and warns that any failure to heed the GSMA’s wishes could have dire societal consequences.

The second initiative took the form of a report that concludes ‘High spectrum prices leave millions unconnected’. Once more the fortunes of its members are intimately associated with the progress of mankind, as the GSMA opens its presentation of the award by saying ‘the negative impacts of high spectrum prices on consumers can no longer be disputed.’

“Spectrum auctions can’t be viewed as cash cows anymore,” said Brett Tarnutzer, Head of Spectrum at the GSMA. “Any government that prices spectrum to maximise revenue now does so with full knowledge that its actions will have negative repercussions on citizens and the development of mobile services. We now have clear evidence that shows by restricting the financial ability of operators to invest in mobile networks millions of consumers are suffering.”

The GSMA is in danger of laying it on too thick with these two attempts to pressure the powers that be into making it cheaper for its members to get hold of all-important spectrum. The negative impacts of doing otherwise can and will be disputed, while appeals to philanthropy are a bit rich coming from such an affluent and profitable industry.

Having said that there are many good arguments in favour of freeing up spectrum and not allowing them to be a public sector cash grab every few years. There’s no way it costs governments and regulators the amount of money they extort from operators in spectrum licenses to manage them and in its unsubtle way the GSMA seems to be saying that if you want to service your people, try being a bit more helpful about keeping them connected.

US starts edging towards mid-band spectrum release

The Federal Communications Commission (FCC) has released a statement all the telcos have been waiting for; there is finally going to be a spectrum auction for the 3.5 GHz band.

The telcos will have to wait more than year to access the valuable spectrum assets, though the FCC team will hope to discuss rules and procedures to carve up the much-desired mid-band spectrum next June. The auction will likely be later in the year or early 2021, though it is evidence of the slow-moving wheels of progress.

“Making more spectrum available for the commercial marketplace is a central plank of the Commission’s 5G FAST strategy,” FCC Chairman Ajit Pai said in a blog post.

“We’ve already completed two spectrum auctions this year and will begin a third on December 10. And at our September meeting, we will vote to seek comment on draft procedures for an auction of 70 MHz of spectrum in the 3.5 GHz band to begin on June 25, 2020.”

For the telcos, this will be welcome news. The US has largely focused on high-frequency spectrum bands, the mmWave assets, though commentators have suggested this has not been able to deliver the desired experience for 5G connectivity. High speeds might be achievable, however there is a serious compromise to be made on the coverage maps.

This is where the European telcos are reaping the benefits. Most of the 5G launches have been based on mid-band spectrum, striking what is a much more palatable balance between increased speeds and reasonable coverage. This coverage can later be supplemented by higher frequency connectivity to add additional speeds in the future, though the 100+ Mbps speeds should be more than enough for the moment.

“The 3.5 GHz band is prime spectrum for 5G services,” Pai said. “But when I became Chairman, we didn’t have the right rules in place to encourage the deployment of 5G in the band.

“That’s why I asked Commissioner O’Rielly to lead our effort to adopt targeted updates to the licensing and technical rules for the 3.5 GHz band with the aim of promoting more investment and innovation.”

Alongside frequencies in the 3.5 GHz band, the FCC is also considering new procedures to free-up more spectrum in the 3.7-4.2 GHz frequency range. Currently being used for video, this band will offer much more opportunity than the 70 MHz being released for auction in the 3.5 GHz band.

Although the mmWave frequencies will be critical in delivering the promised speeds for the 5G era, it does look like the US has gone the long-way around delivering the foundations for 5G. European telcos and regulators have generally prioritised mid-band spectrum, allowing for a 5G-ish experience on current network densities, with the long-term ambition of supplementing with higher frequencies.

This approach seems to be a much more reasonable one. It creates a foundation layer, with coverage maps consumers have come to expect, though speeds can grow as adoption increases and applications emerge which require the ridiculous speeds which are being promised.

With these auctions promised by the FCC, the US is heading in the right direction, albeit, quite slowly.

Israel takes the ‘Vickrey’ approach to 5G auctions

The Israeli telcos have taken a bit of a battering over the last 12-18 months and it seems the Government has a sympathetic ear with its new approach to auctioning 5G spectrum.

According to Globes, the Government will make use of an auction technique known as the Vickery method to divvy up the precious 5G frequencies. It is an interesting approach, and bundled together with other incentives, should create a much more investment friendly environment for the telcos.

A Vickery auction is a blind auction where the highest bidder wins the prize, but the second-highest value is actually paid. Although this approach is uncommon, for some it is believed to be fairer as it attempts to attract bids closer to the value of the asset but does not punish competition for inflated prices. Whether this proves to be true remains to be seen, though it certainly is an interesting approach.

This auction might turn some heads, but context is key. The Israeli telcos have had somewhat of a difficult period in recent years thanks to the introduction of aggressive new players and an on-going price war which has driven down profits. The Israeli Government has suggested revenues declined in telco by 5.6% in 2018, leading some to the assumption the telcos would struggle to fulfil the financial commitments of 5G networks.

“The financial state of the companies at this time has not escaped us, and the tender also takes this situation into account,” said Minister of Communications David Amsalem. “I congratulate my friends and participants in the tenders committee for their professional work. The dedication and responsibility exercised is what made it possible to lay the cornerstone today for the next era of technology.”

To attract further interest in the 5G bonanza, the Israeli Government will also introduce a number of incentives to lessen the burden of network investment. Payments for spectrum licenses can be delayed until 2022 for example, while there are also rebates being offered to those parties who meet geographical coverage expectations set over a four-year period.

Another interesting aspect of the auction is the shared network element. Some of the assets will only be offered to those telcos who agree to participate in the creation of shared infrastructure, a strategy the Government hopes will increase the efficiency of investments.

Looking at the frequencies available, the Government will attempt to ensure all telcos have a slice of the most desirable bands, 700 MHz for example, while a series of other lots will be available. The assets bought in the 2.6 GHz to 3.8 GHz frequencies will only be useable for 5G, while the other frequencies can be used to bolster 4G.

Only time will tell whether this approach will lead to a net-gain in terms of investment and network rollout, but the Israeli Government should be applauded for taking an alternative approach which is potentially better suited to local market dynamics.

Telcos complain about auction as German regulator bags €6.5bn

With 41 blocks available in the 2 GHz and 3.6 GHz bands, this spectrum auction has proved to be a busy one for Germany, but it certainly is a profitable one also.

Lasted 52 days and consisting of hundreds of different bids in what appeared to be a frustrating process, the German regulator will pocket €6.5 billion. It seems Deutsche Telekom and Vodafone were having the biggest feud, sending the total expenditure considerably north of the €3-5 billion expectation.

Sitting at the top of the pile, Deutsche Telekom spent €2.2 billion, while Vodafone contributed €1.9 billion. Telefonica spent €1.4 billion and up-start Drillisch wrote a cheque for €1.1 billion as it searches for a means to break the dominance of the three MNOs.

“Vodafone is committed to bring the full benefits of a digital society to Germany through our gigabit network including 5G,” said Vodafone Group CEO Nick Read. “We believe it is important to have a balance between the price paid for spectrum and our strong desire to create an inclusive society through investment in mobile network coverage.”

And while Read’s comments are as bland as you would expect for a press statement, there have been grumblings elsewhere over price. Deutsche Telekom has said the process has left a ‘bitter taste’.

“The network rollout in Germany has suffered a significant setback. The price could have been much lower,” said Dirk Wössner, Member of the Board of Management of Telekom Deutschland.

“Once again, the spectrum in Germany is much more expensive than in other countries. Network operators now lack the money to expand their networks. With the auction proceeds one could have built approximately 50,000 new mobile sites and close many white spots.”

Deutsche Telekom has secured 4 frequency blocks in the 2 GHz band and 9 frequency packages in the 3.6 GHz band. Vodafone on the other hand has purchased four different blocks in 2 GHz, and one continuous block of 90 MHz in the 3.6 GHz spectrum band. Telefonica collected two paired blocks in the 2 GHz band and seven unpaired blocks in 3.6 GHz.

Although Telefonica feels it can maintain its market share leadership position in mobile following this auction, it also felt the need to vent over a frustrating couple of months.

“We remain convinced that frequency allocation via auction was counterproductive for the expansion of mobile communications in Germany,” said Valentina Daiber, Chief Officer for Legal & Corporate Affairs at Telefónica Deutschland.

“The course of the auction showed that the design as well as the insufficient amount of available frequencies drove up the costs. From the consumer’s point of view and for Germany as a business location, these investment funds would be much better spent on network expansion.”

The telcos will certainly be glad they have a bit of breathing room from the auction process now, though the relationship between the regulator and industry seems to be turning very sour.

No clear winners in the latest US spectrum auction

Millimetre Wave spectrum has been a polarised topic in the US, and now the results are in from the latest auctions, some interesting tales have emerged.

Two spectrum auctions have taken place so far this year in the US, with both results being announced at the same time. $2.7 billion might be a lot to add into the FCC coffers, but it is considerably short of the monstrous amount of cash which was spent ahead of the 3G and 4G connectivity euphoria. Considering the amount of attention which has been given to mmWave, some might have expected this auction to attract more attention.

Strictly speaking, mmWave spectrum should be considered way above what we are talking about here, though the industry seems to have adopted anything above 26 GHz. Here, the two auctions are dealing with assets in the 24 GHz and 28 GHz spectrum bands.

Telco 24 GHz licences Total spend 28 GHz licences Total spend
AT&T 831 $982,468,996 N/A N/A
T-Mobile 1,346 $803,212,025 865 $39,288,450
Starry 104 $48,462,700 N/A N/A
US Cellular 282 $126,567,813 408 $129,404,200
Windstream 116 $20,439,360 106 $6,170,990
Verizon 9 $15,255,000 1,066 $505,733,170

The list of companies who have actually won spectrum assets through the auction is quite extensive, many are regionalised, rural telcos. We’ve only included the big ones here, and some interesting also-rans.

Although there still has been a considerable amount of cash spent during the auction period, the results do seem to imply mmWave might not be as crucial as previously believed. These assets might well be able to transmit huge amounts of data, but shorter ranges in comparison to the low- and mid-band bands, and the risk of signals being easily blocked, perhaps have telco fearing to dig too deep into the pockets.

Starting with Verizon, the telco now owns 65% of the available assets in the 28-31 GHz band. Through this auction and previous acquisitions of XO and Straight Path, Verizon has worked up quite a holding, though considering how much it has been beating its chest in the mmWave debate, it is perhaps surprising it low-balled the 24 GHz auction. Here, the firm only owns 1% of the total assets available.

From T-Mobile US’ perspective, the firm has shored up its spectrum breadth. Previously, the firm had not owned any licenses in the mmWave bands and has been the most critical of the potential of the assets. Spending the most in total across the two auctions, it seems the team is attempting to cover all bases, adding to the 600 MHz assets it has accumulated and plans to launch 5G on later this year.

AT&T’s focus was exclusively on the 24 GHz auction, where it spent the most cash, building out its portfolio in the higher spectrum bands.

Sprint is perhaps the biggest omission from the list, not winning any licenses across the two auctions, though it has previously aired its own criticisms of the potential of mmWave. The firm has started its 5G rollout, primarily using its 2.5 GHz spectrum for the launch. Whether its anonymity in this auction is evidence of its confidence in the success of the T-Mobile US merger we’ll leave you to decide.

There is of course life beyond the four major providers, and there have been some interesting wins across both the auctions.

FWA start-up Starry is an interesting one, winning 104 licenses in the 24 GHz auction. At the Big 5G Event in Denver this year, Starry COO Alex Moulle-Berteaux suggested the business was able to operate at such low prices while scaling in new regions was down to making best use of unlicensed spectrum assets. Spending $48 million this time around suggests a slightly new approach to delivering connectivity for the start-up.

These licences are now owned by Starry in 51 Partial Economic Areas (PEA), suggesting the business could be on the verge of much more aggressive geographical expansion. Details of where in the US Starry has won are not available just yet, but soon enough there will be much more colour on the plans. The assets might be used to shore-up performance in existing markets, or fuel geographical expansion.

US Cellular is another interesting case from the auctions, spending more than $250 million on 690 licenses. The telco currently has a presence in 23 markets across the US, with more than six million subscribers. It certainly isn’t going to challenge on a nationwide scale, however, with a stronger presence in the mmWave segment it could prove to be a worthy pain in the side to the big four telcos.

Windstream is the final ‘also-ran’ which we want to look at here. Spending just over $25 million on 222 licenses across both of the auctions, the team appear to be targeting the emerging FWA segment in some of the regions which are often overlooked in the US.

The firm launched a fixed-wireless access to business customers several years ago, and more recently has added products for consumers. In states such as Nebraska and Iowa, Windstream has pointed out signals can travel further thanks to “fairly flat topology”, while the mmWave assets will help the firm achieve the higher speeds demanded by enterprise and consumers alike.

What is worth noting is this is not the end of the spectrum auction bonanza. Over the next couple of months, the hype will start building for a combined auction in the upper 37 GHz, 39 GHz and 47 GHz bands.

That said, at the moment, the mmWave euphoria is appearing to be somewhat of a let-down.

US drives solid Deutsche Telekom numbers but German 5G auction is a drag

German operator group Deutsche Telekom has reported solid Q1 revenue growth, driven largely by T-Mobile US.

As you can see from the table below, revenues and EBITDA all grew nicely in Q1 2019. Profits, however, went in the opposite direction, apparently due to one-off things like the cost of trying to get the merger between TMUS and Sprint approved. Speaking of the US the second table shows just how much of the revenue growth is attributable to TMUS.

Q12019

millions of

Q12018

millions of

Change% FY
2018
millions of

Revenue 19,488 17,924 8.7 75,656
Proportion generated internationally in % 69.0 66.6 2.4p 67.8
EBITDA 6,461 5,269 22.6 21,836
Adjusted EBITDA 6,901 5,549 24.4 23,333
Adjusted EBITDA AL 5,940 5,487 8.3 23,074
Net profit 900 992 (9.3) 2,166
Adjusted net profit 1,183 1,190 (0.6) 4,545
Free cash flowa 2,370 1,382 71.5 6,250
Free cash flow ALa 1,557 1,318 18.1 6,051
Cash capexb 3,827 3,139 21.9 12,492
Cash capexb(before spectrum) 3,682 3,076 19.7 12,223
Net debtc 71,876 50,455 42.5 55,425
Number of employeesd 214,609 216,926 (1.1) 215,675

 

Q12019

millions of

Q12018

millions of

Change% FY
2018
millions of

Germany
Total revenue 5,357 5,325 0.6 21,700
EBITDA 1,946 1,915 1.6 8,012
Adjusted EBITDA 2,114 2,082 1.5 8,610
Adjusted EBITDA AL 2,108 2,058 2.4 8,516
Number of employeesa 62,358 64,695 (3.6) 62,621
United States
Total revenue 9,796 8,455 15.9 36,522
US-$ 11,124 10,394 7.0 43,063
EBITDA 3,210 2,360 36.0 9,928
Adjusted EBITDA 3,309 2,332 41.9 10,088
Adjusted EBITDA AL 2,679 2,331 14.9 10,084
US-$ 3,042 2,865 6.2 11,901
Europeb
Total revenue 2,891 2,811 2.8 11,885
EBITDA 1,035 905 14.4 3,757
Adjusted EBITDA 1,059 911 16.2 3,880
Adjusted EBITDA AL 945 898 5.2 3,813
Systems Solutions
Order entry 1,609 1,506 6.8 6,776
Total revenue 1,630 1,665 (2.1) 6,936
Adj. EBIT margin (%) (0.2) (2.3) 2.1p 0.5
EBITDA 79 19 n.a. 163
Adjusted EBITDA 125 57 n.a. 429
Adjusted EBITDA AL 92 60 53.3 442

“We got off to a successful start to the year,” said Tim Höttges, CEO of DT. “Deutsche Telekom has much more to offer than just our sensational success in the United States. We are seeing positive trends throughout the Group.”

Not included in his canned comments, but picked up by Reuters, was Höttges inevitable irritation at the amount of cash DT is having to drop on the interminable German 5G spectrum auction. We’re on round 305 of the bidding, believe it or not, and the total pledged has now reached €5,687,520,000. Expect to hear persistent muttering about how that’s money they can’t spend on infrastructure, etc, before long.

Rivals get Rogered in Canadian 600 MHz spectrum auction

Canada made 70 MHz of 600 MHz spectrum available nationally in a recent auction and Rogers got nearly half of it.

Low frequency spectrum such as this is especially handy in huge countries such as Canada due to its long range. Canada split the band, which covers 614-698 MHz including the guard band and duplex gap, into seven chunks of 10 MHz. Each of those in turn was divided into 16 regions, making 112 licenses in total. As you can see in the table below Rogers got 52 of those, dropping C$1.725 billion for the privilege.

Canada 600mhz auction

“We are proud to make leading and meaningful investments to build the 5G ecosystem in Canada and to help drive our country’s global competitive advantage,” said Joe Natale, CEO of Rogers Communications. “This 5G spectrum is a precious and scarce resource that will benefit Canadians and Canadian businesses across the country.”

It’s interesting that this is being positioned as 5G spectrum. Unlike millimetre wave, for example, there’s nothing uniquely 5G about low frequency spectrum, so we can only assume the Canadian government made the spectrum available on the condition that it’s used for 5G. Having said that the quote further down from Shaw appears to contradict that.

In distant second place in terms of spend was Telus. “The acquisition and deployment of this spectrum is critical to the advancement of our national 5G growth strategy and to the global-leading network quality, speed and coverage we provide to Canadians,” said Telus CEO Darren Entwistle. “As the demand for wireless data continues to grow, the acquisition of 600 MHz spectrum will enable Telus to deliver enhanced urban and rural connectivity to our customers on Canada’s fastest and most reliable network.”

Shaw Communications subsidiary Freedom Mobile seemed to get a good deal by paying half as much as Telus for more population coverage. “We have made significant investments to improve the wireless experience for Canadians, becoming a true alternative to the incumbents, with a differentiated value proposition,” said Brad Shaw, Shaw CEO. “The addition of this 600 MHz low band spectrum will not only vastly improve our current LTE service but will also serve as a foundational element of our 5G strategy providing innovative and affordable wireless services to Canadians for years to come.”

Conspicuously absent from the process was Bell, which seems to think it didn’t need any because it’s already sorted for low frequency spectrum. “Bell leverages each new generation of wireless network technology to drive renewed innovation and productivity growth, and with 5G we’ll take connectivity further than ever before with smart cities, connected vehicles and other revolutionary service advancements for both consumers and business users,” said Bell’s CTO Stephen Howe. “Bell looks forward to participating in upcoming federal auctions of the mid band 3500 MHz and high band millimetre wave spectrum that will be required to drive the Fifth Generation of wireless.”

So while Rogers got loads more licenses than anyone else, Freedom Mobile could be viewed at the big winner in terms of cost per population covered. According to Ovum’s WCIS Freedom only accounts for around 5% of Canadian mobile subscribers right now. Judging by the outcome of this auction it has ambitions to significantly increase that share in the 5G era.

TDC hoovers up Danish spectrum in latest auction

The Danish Energy Agency has completed its latest spectrum auction, with TDC running away with the majority of the available assets.

Of the 20 blocks in the 700, 900 and 2300 MHz frequency bands, TDC won 14, the maximum available to the telco at this auction. 3 Denmark acquired two 10 MHz blocks in each of the 700 and 900 MHz bands, while TT Network, Telia and Telenor’s joint venture, two 5 MHz in the 700 MHz and two 10 MHz in the 900 MHz band.

“Several frequency blocks provide higher speed, longer range and stronger indoor coverage, which gives us a unique position to strengthen and develop the best coverage in Denmark,” said TDC CEO Allison Kirkby.

“TDC has connected all over Denmark for almost 140 years, and the new licenses ensure that Danish consumers, companies and society enjoy new experiences, services and the many opportunities that 5G offers.”

With ambitious plans to rollout 5G across Denmark by the end of 2020, this is certainly an aggressive sign of intent from TDC. The telco paid NOK 1.6 billion, roughly €210 million, for its haul, while 3 Denmark paid a total over roughly €68 million. TT Network paid €14 million for its 700 MHz assets and nothing for 900 MHz, though it will be charged with coverage obligations.

As it currently stands, according to Ovum’s WCIS database, TDC is currently the market leader with 42% market share, TT Network controls roughly 40% of subscriptions, while 3 collects the remaining 18%.

While these prices might seem ludicrously cheap in comparison to other spectrum auctions which have been taking place around the bloc, Denmark’s population of 5.8 million ranks it at 111th worldwide, while its land mass ranks at 130th.

DT CEO moans as bidding in German 5G auction tops €1 billion

Just for a change operators are moaning about the amount they have to pay for licensed spectrum, arguing that leaves less cash for infrastructure.

This time the country in question is Germany, which is in the middle of a 5G auction its operators have had a problem with from the start. According to the regulator bidding has already topped a billion euros and, while it still has a way to go before reaching the orgiastic excesses of the Italian one, muttering about the cost has already begun.

Commenting at its recent AGM, DT CEO Tim Höttges made it clear he has a problem with the fact that not all available spectrum is even being offered in the action, which he reckons is bound to have an inflationary effect. “An artificial shortage of public resources is being created, which may push up the price,” he said. “In the end, there is no money for the build-out.”

There was also some general dissent about excessive regulation, ease and speed of access to new cell sites and access regulation for new fibre networks that is considered counterproductive. But the main theme of his speech at the AGM was ‘sharing and participation’ and featured largely generic sentiments about the importance of communications networks and how totally committed to them DT is.

This auction is expected to hit at least three billion euros but, as we saw in Italy, auctions can easily become frenzied. European operators seem to be feeling increasingly inclined to challenge the terms of spectrum auctions but so far their attempts at legal challenges have yielded little. It does seem odd that the German state has held back a bunch of spectrum, however, and it would be interesting to know the rationale for that.

Money is piling up in the US 24 GHz auction

Over 30 companies have put more than $560 million in bid money on the table at FCC’s auction for the 24 GHz frequency. And this is only the beginning.

Following the underwhelming auction of the 28 GHz (dubbed Auction 101) spectrum, which only returned $703 million, the new auction of the 24 GHz (dubbed Auction 102) is heating up quickly. The auction started last Thursday and has gone through 11 rounds of the first phase of the auction, or the “clock phase”, when participants bid on a Partial Economic Area (PEA) blocks. By the end of round 11, the gross proceeds have reached a total amount of $563,427,235. There are still two days, or six more rounds to go, before the winners can move to the next phase of the process.

The “assignment phase” will allow the winners from the first phase to bid for specific frequency licence assignments. The total bid value for the 24 GHz frequencies could go up to between $2.4 billion and $5.6 billion, according to the estimate by Brian Goemmer, founder of the spectrum-tracking company AllNet Insights & Analytics, when he spoke to our sister publication Light Reading.

The key difference the has driven up the interest from the bidders for Auction 102 is the locations where the frequencies are made available. While major metropolises like New York, Los Angeles, or Chicago, were absent from 28 GHz auction, they are all on the current 24 GHz auction together with other major cities that would be the candidates for the 5G services to roll out in the first wave.

Bidders have included AT&T, Verizon, T-Mobile, Sprint and more than 30 other companies. The FCC will announce the winners including those from Auction 101 only after both phases of Auction 102 are completed.

In addition to bidding for mmWave frequencies, operators like AT&T are also actively refarming the lower frequency bands in their possession that are used to provide 3G services. AT&T sent a notice to its customers in February that it will stop 3G only SIM activation, urging customers to move to LTE. The company said “we currently plan to end service on our 3G wireless networks in February 2022.” Specifically the company is planning to refarm the 850 MHz and 1900 MHz frequency bands, saying “it may be necessary for us to turn down one band of our owned and operated 3G network, such as 1900 MHz or 850 MHz service”.

Considering the AT&T only switched its 2G networks off at the beginning of 2017, this is a clear sign that the generational transition of mobile telecom services is accelerating. Earlier in the middle of last year, Verizon confirmed that it will shut down its 3G CDMA networks by the end of 2019. Even earlier at the MWC in 2017, T-Mobile’s CTO Neville Ray said the company was looking to sunset both GSM and WCDMA.