Ofcom eyes rural coverage for next spectrum auction

With another spectrum auction creeping up on us, Ofcom has started to throw its weight around with the terms and conditions.

While 4G and call coverage is certainly improving in the UK, Ofcom has pointed towards the difference between urban and rural environments as a concern. This is partly to be expected, denser environments are simpler places to improve connectivity and much more commercially attractive, though Ofcom has been banging this drum for a while. We’re not too sure anyone is paying too much attention.

“Mobile coverage has improved across the UK this year, but too many people and businesses are still struggling for a signal,” said Philip Marnick, Ofcom’s Spectrum Group Director. “We’re particularly concerned about mobile reception in rural areas.

“As we release new airwaves for mobile, we’re planning rules that would extend good mobile coverage to where it’s needed. That will help ensure that rural communities have the kind of mobile coverage that people expect in towns and cities, reducing the digital divide.”

Looking at the numbers, the digital divide is no-where near the same problem as faced in other places around the world, but it is present. Almost all homes and offices can get a good, indoor 4G signal from at least one operator; while 77% are covered by all four networks, up from 65% a year earlier. 91% of the UK’s geography has a good 4G mobile internet signal from at least one operator, up from 80% last year, while 66% has ‘complete coverage’ from all four operators.

These numbers are heading in the right direction, though they only tell part of the story. 83% of urban homes and offices have complete 4G coverage, the figure for rural premises is 41%, while there are some remote parts of the country where there is no coverage at all.

The next auction will take place in late 2019 or 2020, auctioning off the 700 MHz and the 3.6 GHz – 3.8 GHz bands. Although the mid-range spectrum will be the 5G prize to chase, the 700 MHz could prove useful for providing good-quality mobile coverage, both indoors and across very wide areas, including the countryside. This is where Ofcom will start throwing its weight around. The winning bids will have to:

  • Extend good, outdoor data coverage to at least 90% of the UK’s entire land area within four years of the award
  • Improve coverage for at least 140,000 homes and offices which they do not already cover
  • Provide coverage from at least 500 new mobile mast stations in rural areas

With telcos revving themselves up for every opportunity to grab as much of the valuable and limited resource as possible, Ofcom can dictate the playing field a bit. Those who want spectrum will have to play by the watchdog’s rules and start offering bufferless cat videos to farmers.

On the broadband side of things, there does also seem to be improvements. The number of homes which cannot receive 10 Mbps, the Ofcom threshold for acceptable broadband, has fallen to 2%. However, this still leaves 677,000 homes and offices without decent broadband, 496,000 of which are in the countryside. The last push for any project is always the hardest, though customers will have the universal broadband service to rely on, forcing telcos to extend their network, should they not be willing to do it themselves. This service will come into play during 2020.

On the opposite end of the scale, ultrafast broadband has improved, it’s now accessible to 50% of British homes and offices, while 1.8 million premises now have access to ‘full-fibre’ broadband. This is still very poor in comparison to other nations across Europe, though it is a step in the right direction.

Italy spectrum auction looks like a cheap bit of business – RBC

A research note from RBC, the Royal Bank of Canada, suggests Italian telcos in Italy might not have overpaid that much in the grand scheme of things.

This is not to say that the spectrum was cheap, but there is consistency is the rising price of that precious commodity around the world. Italy might have looked expensive to start with, but in comparison to other markets, it is a bit of a steal.

“Italy’s auction caught investors’ attention with a high price for Mid Band 5G,” the note states. “While operators have been quick to decry this as ‘artificial scarcity’, subsequent results appear to validate the Italian result. Sweden’s Low Band was a 22% premium to Italy; while the Australian regional 10-year Mid Band was a 32% premium to Italy’s 19-year Mid Band.”

Throughout the process, the Italian government managed to trouser €6.5 billion through various auctions, around three times more than was expected at the start of the process. It seems the introduction of a fourth MNO did wonders for the governments bank account.

That said, the Italian job might not be that expensive after all. While the 200 MHz of Mid band (3.7 GHz) which sold for €0.36 per MHz/Pop, Sweden saw 40 MHz of Low Band sell for €0.68 per MHz/Pop, 22% higher than in Italy and in Australia the 10-year Mid band licences sell for US$0.54 per MHz/Pop (US$0.56 incl tax), a 32% premium to the Italian 19-year Mid band.

Compared to previous auctions, the prices are starting to increase. South Korea’s 3.5 GHz and auction totalled $3.3bn for an average of $0.19 per MHz/Pop, while in the UK, 2.3 GHz sold for £0.08 /MHz/pop and 3.4 GHz for £0.12 /MHz/pop.

Looking forward, Germany is about to begin its mid band auctions, with the government expecting to raise between €4-5 billion, as is France. Regulator Arcep has already stated it want to try and avoid replicating the expensive prices elsewhere, promising cheaper prices in return for rollout commitments. Finally, the UK will have low and mid band auctions in late 2019.

Vodafone is thought to have the highest level of exposure to the high spectrum costs, with Germany and the UK on the radar for the firm, though RBC estimates Orange will have to write a cheque for €2.1 billion, while Telefonica will have to find more than €4.5 billion for the delayed Spanish auction and the battles in South America.

Treasury ministers will be rubbing their hands together at the prospect.

FCC sets the rules for third mmWave auction

The FCC has unveiled the rules for the next mmWave auction, set to take place in second half of 2019, for airwaves in the 37 GHz, 39 GHz and 47 GHz spectrum bands.

This will be the third mmWave auction to take place in the US, with the scrap for 28 GHz band spectrum currently underway, and the 24 GHz band auction to follow. While there are numerous different rules which will inevitably lead to squabbling, this is also the second incentive-based auction from the FCC, as the agency looks to promote contiguous blocks of spectrum.

To ensure this is a smooth process the block size will be increased to 100 megahertz across all three spectrum bands, while existing license holders will be afforded the opportunity to ‘rationalise’ their existing holdings. Whether anyone actually chooses to relinquish their assets during this process remains to be seen, though budget has been made available for compensation.

As with most other auctions, this one will take place over two phases. The first will be the pay-to-play section, before moving onto the allocation of specific spectrum.

“Pushing more spectrum into the commercial marketplace is a key component of our 5G FAST plan to maintain American leadership in the next generation of wireless connectivity,” said FCC Chairman Ajit Pai.

“Currently, we’re conducting an auction of 28 GHz band spectrum, to be followed by a 24 GHz band auction. And today, we are taking a critical step towards holding an auction of the Upper 37, 39, and 47 GHz bands in 2019. These and other steps will help us stay ahead of the spectrum curve and allow wireless innovation to thrive on our shores.”

While mmWave has been a very consistent buzzword for the telco industry over the last couple of years, industry lobby group GSMA feels there is a very good reason for this.

In its latest report, the GSMA suggests unlocking the right spectrum for to deliver innovative 5G services across different industry verticals could add $565 billion to global GDP and $152 billion in tax revenue from 2020 to 2034. For the GSMA, it’s not just about faster, bigger and better, but delivering services which the telcos are not able to today. mmWave is of course crucial to ensuring the 5G jigsaw all fits together appropriately.

“The global mobile ecosystem knows how to make spectrum work to deliver a better future,” said Brett Tarnutzer, Head of Spectrum at the GSMA.

“Mobile operators have a history of maximising the impact of our spectrum resources and no one else has done more to transform spectrum allocations into services that are changing people’s lives. Planning spectrum is essential to enable the highest 5G performance and government backing for mmWave mobile spectrum at WRC-19 will unlock the greatest value from 5G deployments for their citizens.”

Germany green lights 5G plans despite industry protest

German regulator Bundesnetzagentur has said it will move ahead with the proposed 5G auction plan, despite German telcos and industry lobby group GSMA slamming the plans as a commercial nightmare.

The auction, which will take place in early 2019, requires minimum data rates of 100 Mbps available by the end of 2022 in 98% of households in each state as well as along all major transport paths. Each of the telcos must also install 1000 5G base stations and 500 other base stations, and by 2024, the data coverage must be extended to seaports, main waterways and other minor roads.

While data rates for the longer-term targets will be lower, this is still a big ask for a country which currently does not meet the standard for 4G coverage. For the GSMA, the conditions placed on the spectrum are unreasonable and not commercially viable for the telcos. The risk is Germany will be left behind as the rest of the world progresses into the 5G economy.

“The mobile industry is essential to delivering on Germany’s vision for 5G leadership,” said said Mats Granryd, Director General of the GSMA. “We are alarmed that – despite real and substantial concerns raised by the mobile industry on the original proposals – the proposed terms make the situation worse by doubling down on unrealistic conditions that puts Germany’s 5G future at risk.

“Operators in Germany have invested billions in the country’s networks and have proven through history that they are committed to investing and providing innovative services. German consumers and businesses will be the ones to lose out from unreasonable obligations that make investment in 5G rollout uneconomical.”

One of the concerns surrounds the 3.6 GHz band, which can deliver on the high capacity demands though it does not offer the same advantages for coverage. To meet the 98% coverage conditions, the economics do not match, especially when you take the huge transport network into account. The GSMA also considers the roaming and wholesale obligations attached to the 3.4 to 3.7 GHz band as suspect, perhaps creating a critical level of legal uncertainty and will could deter investment in 5G networks. This is also where some of the telcos have found complaint.

“Our decision sets vital preconditions for the digital transformation of industry and society,” said Bundesnetzagentur President Jochen Homann. “Through the award of frequencies, we are creating planning and investment certainty, and contributing to a fast, needs-based rollout of the mobile radio network in Germany.”

Another issue with the auction requirements, which will certainly have the incumbent players up in arms, are the lighter conditions placed on new market entrants. As it stands, new comers could pick and choose their markets, as national roaming requirements could be negotiated with the regulator. It is creating a unfair environment, with the incumbents forced to provide coverage in the less commercially attractive regions while new comers could focus resources on the more profitable urban environments.

While telco moaning is usually taken with a pinch of salt, in this case you have to have a bit of sympathy for the established players. The German regulator seems determined to create an environment which increases the number of telcos in the country, and potentially builds the prospect of furthering the digital divide between urban and rural environments. Not only does this favouritism go against a lot of the independent values supposedly in place at government level, but risks the spread of wealth. This in turn will decrease a telcos ability to invest. Just as the industry is craving consolidation, the German regulator seems to be shooting off in the other direction.

The plans seems incredibly short-sighted, though it reeks of bureaucrats who wanted to clock out on time for the 4pm happy hour stein and bagel.

Germany frees up the whole of C-Band for 5G and the GSMA approves, sort of

The German government has decided to make the entire 3.4-3.8 GHz band available for 5G use, which is a good idea.

For 5G to do its thing, it needs big chunks of continuous spectrum to ‘fatten the pipe’. Piecemeal auctions of 3.4-3.8 GHz spectrum (otherwise known as C-Band) such as we had in the UK earlier this year, are not as useful as offering up the whole lot in one go. The eventual outcome may end up being the same, but the whole process is a lot more complicated.

This decision has been met with approval by the mobile industry trade association, the GSMA. “The C-Band is the most vital frequency band for 5G,” said Mats Granryd, Director General of the GSMA. “Germany is demonstrating 5G leadership in the timely release of this vital spectrum, but risks undercutting its 5G future with unnecessary obligations. Spectrum is a limited resource and it must be used and managed as efficiently as possible to ensure a 5G future that will benefit all.”

Among the GSMA’s regulatory gripes are proposed coverage obligations for 3.6 GHz spectrum, which it says disregard the laws of physics. Since the time of Isaac Newton this had been frowned on by polite society and the GSMA has chosen to use this emotive concept to point out what short range these high frequencies have.

They do seem to have a point here. 5G is all about capacity and surely coverage obligations can be left to earlier generations in the short term and 5G over lower frequencies in the long term. As characterized by the GSMA this stipulation seems to be gratuitous, counter-productive and a classic example of regulation for the hell of it.

Other than that there are some inevitable whinges about roaming obligations and high reserve prices for the auction. In the latter case we have sympathy for the GSMA position as any attempt by the German government to push up the price of spectrum is a blatant cash grab and an indirect tax on mobile subscribers.

Iliad threatens Italy with legal action over 5G spectrum extensions

Iliad is reportedly on the verge of taking Italian watchdog Agcom to court over licence extensions in the valuable 3.5 GHz band which were offered to various WiMAX operators back in 2008.

After having to defend the almost laughable prices operators will be having to fork out for 5G spectrum, Agcom is now under-fire for considering cut-price extensions for four companies in the 3.5 GHz range. With Iliad Italia forking out €1.2 billion 20 MHz of 3.7 GHz and 10 MHz in the 700 MHz band, you can see why the team has issue with the extensions being offered.

The licenses in the 5G-applicable frequencies were initially granted to Linkem, Tiscali, Go Internet and Mandarin back in 2008, with the option of a six-year extension once the initial license expires in 2023. According to Corriere delle Comunicazioni, all of Italy’s operators are irked at the situation, but Iliad is leading the charge with the threat of taking the regulator to regional courts to dispute the decision.

What is worth noting is this is not taking any of the spoils away from the victors of the expensive auction. Not all of the valuable assets in the 3.4-3.6 GHz frequency range were released for auction, with the remaining licenses being used to honour the extensions. Whether these extensions will be allowed to stand is unknown for the moment, as aside from Iliad protests, Italian Senators have requested an investigation by Ministry of Development boss Luigi Di Maio.

One company which will certainly benefit from the saga is Fastweb, a Swisscom subsidiary which primarily offer broadband services in Italy. Fastweb came to a €150 million wholesale agreement with the cash-strapped Tiscali in 2016 for 40 MHz in the 3.5 GHz band, an absolute steal when you compare to the inflated prices for 5G-capable spectrum in the recent auction. Fastweb might be looking pretty now, but the convergence plans will certainly come under-threat with Iliad legal ambitions.

For those who are of a logical disposition, and considering the inflated figures being discussed in the recent Italian auction, one would think the Italian government would decide against renewing the extensions and offer the available spectrum in an auction. Legacy-agreements are certainly something to consider, though the landscape has seemingly evolved enough over the last decade suggest these extensions are no longer viable.

This certainly will not be the only legacy-agreement in place around the world which will come back to bite, though the saga does not add credibility to the Italian government’s ability to operate in a fair and just manner.

Italian 5G spectrum orgy reaches its climax

The frenzy of bidding for mid frequency 5G spectrum in Italy has come to a climax with operators’ cash reserves apparently spent.

The hot action took place around the 3.7 GHz band, where the relatively small amount of spectrum on offer – 200 MHz – and the presence of a new fourth player – Iliad – ensured supply outstripped demand. When we last checked in the bidding had already become frenzied, but they still managed to keep it up for another nine days.

As you can see from the final table published by Italy’s Ministry of Economic Development below, the final amount of cash trousered by the Italian government was €6.5 billion, around three times more than was expected at the start of the process. In hindsight that seems pretty naïve, especially when it came to demand for 3.7 GHz spectrum, but then again Italian operators have paid way more than any other European country for this decidedly limited spectrum.

We could go through all the European 5G auctions ourselves in order to calculate the average price per MHz paid for mid frequency spectrum, but why bother when Iain Morris from Light Reading has already done so and we can just rip off his work?

In Finland’s recent auction 390 MHz of mid frequency spectrum was offered up to three operators. At least in part due to there being so much more spectrum on offer the Finnish operators only shelled out the equivalent of four cents per MHz, according to Morris. The traditionally exuberant UK operators dropped 15 cents per MHz in their equivalent auction but the Italians dwarfed that in dropping 42 cents per MHz.

Telecom Italia seemed happy with the outcome in a press release. “By securing all three band frequencies put on auction, TIM strengthens its network leadership in Italy,” said CEO Amos Genish. “The new frequencies acquired represent a core asset for the Group’s future development and, at the same time, for the ongoing digitization of Italy.” The release also said the 26 GHz block was 200 MHz wide, which was presumably the case for everyone.

Italy 5G auction final

Telia pays the most in Finnish 5G auction

Finland offered up nearly 400 MHz of mid frequency 5G spectrum to its MNOs and Telia bought the most expensive block.

The whole of the 3410-3800 MHz frequency range, split into three blocks of 130 MHz each. After just a few days of bidding Finland’s three MNOs concluded their business as follows:

Frequency band 3410–3540 MHz (A)

Telia Finland

€30,258,000

Frequency band 3540–3670 MHz (B)

Elisa

€26,347,000

Frequency band 3670–3800 MHz (C)

DNA

€21,000,000

The slightly lower frequency stuff apparently has a bit more value than the rest and it’s worth noting that Elisa is the market leader by subscriber number so it looks like Telia has decided to make a strategic move to close the gap in the 5G era. While Finland is admittedly a much smaller country, €77 million seems like a small return for the government when you compare it to the frenzied bidding we’re seeing in Italy.

Italian operators throw money at 3.7 GHz spectrum

Italian politicians must be loving the country’s ongoing 5G auction, with operators bidding on the 3.7 GHz band like they think they’re still using lira.

One of the fun things about Europe before the euro was the existence of currencies that, due to historical hyperinflation, operated at crazy exchange rates to the pound. Italy was one of the best examples of this and who doesn’t miss going over there and stuffing their wallet with billion lira notes?

That same longing seems to apply to the Italian operators, who have decided to compete with each other, over relatively useless mid frequency spectrum, with such fervent abandon that it’s hard not to conclude they still believe the bill will be settled in the long-abandoned national currency.

A week ago they agreed to pay the going rate for 700 MHz spectrum that is especially handy due to its long range and superior propagation qualities. They also had a few rounds of bidding on higher frequency spectrum and we noted that Wind might want to make sure it gets a nice lot of 3.7 GHz band, since it didn’t get any 700 MHz, and that new-entrant Iliad might also want to grab more than just 20 MHz of 3.7 gig.

The ensuing days apparently saw frenzied bidding for the 3.7 GHz band to roughly triple the level it was a week previously (see table). This means the Italian state is already set to pocket billions of euros more than was forecast at the start of the auction process and there’s still plenty of time to go.

For context read this Light Reading analysis of the auction orgy thus far, which notes that the Spanish and Irish were far more parsimonious than the Italians are being and even the spectrum-hungry UK operators were positively reticent by comparison. The fun starts again this week and who knows what levels it could reach after a weekend on the Grappa.

Italy 5G auction table 2