Inside telecommunications Issue 8
Contrasting outcomes in spectrum auctions worldwide
Spectrum auctions continued apace in the fourth quarter. However, results challenge current notions as to the value of new spectrum, with industry predictions proving out of line with the results in some cases.
In the Netherlands, some 41 separate spectrum licences – equivalent to 380 MHz of airwaves – were up for grabs in December, making it the largest sell-off in Dutch history. A reserve price of €478m had been set, yet the auction ended up generating eight times that amount, with a total of €3.8bn paid.
Spectrum release is a key determinant of the long-term health of the mobile industry.
In November, Irish regulator ComReg revealed that €855had been raised through its multi-band auction of 4G licences. The auction exceeded expectations, with the total five times more than was expected.
The November auction of 2G airwaves in India produced a lukewarm response from mobile operators. Five players received bandwidth in an 1800MHz auction that generated US$1.71bn, equivalent to one-third of the reserve price.
The contrasting outcomes demonstrate that spectrum release is a key determinant of the long-term health of the mobile industry. Government assumptions should be realistic, while auction designs have to cater to the needs of new entrants as well as established players.
Prices paid in selected Q4 2012 spectrum auctions1
Source: EY Analysis; “India Telecom Spectrum Auction Generates $1.71 Billion,” Wall Street Journal, 15 November 2012.
Shifting landscapes in public sector spectrum release
Spectrum release policies are gaining attention worldwide as governments and regulators look to secure sufficient spectrum for mobile broadband over the next decade.
Airwaves held by the military are proving particularly appetizing. In December, the UK’s Ministry of Defence (MoD) announced plans to auction some of 200 MHz of radio spectrum under 15 GHz in 2014.
Other recent news flow has also highlighted the importance of new spectrum for public sector entities themselves, given the enriched diagnostics and communications capabilities inherent in LTE services.
In October, the Australia Communications and Media Authority (ACMA) confirmed that national emergencies would be given 5 MHz of dedicated paired spectrum in the 800 MHz band to operate a LTE network, less than the amount originally requested.
Argentina’s federal government also announced plans to auction 4G spectrum, underlining that it would retain a significant quantity.
Looking ahead, the primary challenge for policy-makers is that long-term spectrum release agendas require careful co-ordination if appetite for new airwaves is to prove sustainable.
At the same time, balancing private and public sector demands for new spectrum is challenging, as highlighted in Australia where safeguarding public sector spectrum for LTE requires buy-in from local government as well as public safety agencies.
Timing issues also need to be addressed: the prospect of repurposed public sector spectrum may undermine other auction processes, for example.
Weighted use of public sector spectrum holdings in the UK2
Source: “Spectrum Framework Review for the Public Sector,” Ofcom, January 2008.
1EY Analysis; Wall Street Journal “India Telecom Spectrum Auction Generates $1.71 Billion” 15th November 2012
2Ofcom “Spectrum Framework Review for the Public Sector” January 2008