Pavel Sistek International Relations and Strategies Department RSPG/BEREC WS, 11 November 2014 Czech Telecommunication Office Spectrum triband auction 2013 in the Czech Republic

Agenda Aim of the auction Considerations of packaging Packaging and lots Choice of auction format Procedure timeframe Spectrum caps Coverage obligations, QoS Support of competition Minimum prices Auction results Result – our lesson Spectrum triband auction 2013

Aim of the auction Authorise spectrum in 3 bands: 800 MHz, 1800 MHz and 2600 MHz Create and support competitive environment Deployment of 4G mobile broadband services Implement Goals of Digital Czech (and RSPP) National policy: Auction initiated based on Government Decision No. 78 issued on 26 January 2011 Spectrum triband auction 2013

Considerations of packaging Question 1: Shall we auction all 3 bands together or separately? –Together, because the bidder has the possibility to optimise its portfolio. Question 2: Abstract blocks versus concrete blocks? –Concrete blocks: In the 700 MHz band, –the first 2x5 MHz pair could suffer from coexistence with the DTT –Reserved block of 2x10 MHz: Priority for a newcomer. In the 1800 MHz band: –2x15.8 MHz for a newcomer (reserved through spectrum caps) Question 3: Fragmentation of continuous blocks in the 1800 MHz band: Yes or no? => discussion about the final „symmetry or asymmetry“ of the spectrum among operators. –Our decision: Blocks fragmented (1 MHz blocks), market decides Spectrum triband auction 2013

Packaging and lots Inputs: Spectrum triband auction 2013

Choice of auction format SMRA chosen with regard to –Analysis of results of previous auctions (both the CCA and SMRA), –The fact of partially complementarity and substitutability of 4G lots exist in the 800, 1800 and 2600 MHz, –Final decision was made after the successful German multiband auction, therefore – SMRA, –The fact that the SMRA format was preferred by potential applicants. Auction Phase – main principles –Eligibility of the 1st auction round: Based on the amount of the Warranty deposited during the Qualification phase –The increase of bids: By 5% of the minimum price of the Auction Lot –Highest Bid Withdrawal: Max. 2x, but resulting in decrease of activity points –The Abstention option: Max. 4x without changing the amount of eligibility points –If no Highest Bid during last 2 rounds: Possible reduction of the price by 10% Spectrum triband auction 2013

Procedure timeframe First auction: –September 2011: Provisional principles of tri-band auction published –Spring – summer 2012: Consultation of principles –End of 2012: Auction and bidding. –A strong newcomer induced auction competition. –Auction STOPPED on March 2013, after 240 bidding rounds (bidding prices exceeded € 740 mil.). Why? Excessive price could have been reflected to high prices of mobile services. Spring 2013: AUCTION RESTART – „second auction“. –New consultation with supporting conditions for possible „4th operator/newcomer“. –December 2013: New bidding started. 4 operators entered the Auction, after 14 bidding rounds 3 operators successfully completed bids. –Remaining (=unsold) frequencies are in the 1.8 GHz and 2.6 GHz band. Spectrum triband auction 2013

Spectrum caps 800 MHz: –First attempt (auction 2012), SC 22.5 MHz incl. 900 MHz bands licenses –In 2013, after „restart“, a 2x10 MHz block was reserved for a newcomer MHz: –SC 2x23 MHz in order to reserve the contiguous block 2x15.8 MHz for a newcomer (i.e. 2x9 MHz available for existing operators) MHz: –FDD max. 2x20 MHz (min. 2x10 MHz) –TDD min. 15 MHz. Spectrum triband auction 2013

Coverage obligations, QoS Coverage obligations, QoS: Priority given to cover lower density population areas. –800 MHz band: 30 months to start „low coverage“; 2 years to offer „good coverage“; 5 years to reach „excellent coverage“. Specific coverage conditions apply for railways and highways. –1800 MHz and 2.6 GHz: soft conditions with respect to local reach. QoS: At least 2 Mbit/s during first 7 years, then 5 Mbit/s. (Note: 3G coverage on „other bands of the licence holder“ accepted). Spectrum triband auction 2013

Support of competition (in provision of mobile services in “new bands”) Conditions applied to licence holders: „National roaming“ in the 2G or 3G networks for a newcomer: If a new operator were to win some frequencies, it would have been allowed to enter the networks of the other operators (with further conditions). –However, roaming was not applied – since no newcomer took part in the auction. (Note: New future auction could bring it into effect.) „Wholesale offer“ in 4G networks for any MVNO, MVNE should be available for 12 years. (It is part of the “voluntary commitments“ of licence holders). Future after the 12 years? After the obligations of NR and WO finishes, NR/WO applicants will be strong enough and standard commercial agreements will apply. Spectrum triband auction 2013

Minimum prices BandBlock (lot)Minimum price per block 800 MHz2x5 MHzFirst block € 39 mil. other blocks € 43 mil MHz2x15.8 MHz 9 blocks 2x1 MHz € 19 mil. € mil. 2.6 GHz2x5 MHz FDD 5 MHz TDD € 3 mil. € 1.2 mil. Note: Extracted, simplified information Benchmarks were based on results of other European auctions. Observed prices (EUR/MHz/pop) showed huge variations. Starting prices set rather higher due to expected possible absence of competition in bidding. Spectrum triband auction 2013

Auction results Winners: After 14 bidding rounds, the 3 existing operators acquired the same amounts of frequencies in all three bands (symmetry). 200 MHz sold. Remaining spectrum (Note: subject of future auction): 1800 MHz: 2x15.8 MHz 2.6 GHz: FDD - 2x10 MHz TDD - 50 MHz Auction income (11/2013): € 331 Mil LTE BTS‘s in operation (October 2014) Further positive side effect: Price revolution: In April 2013 (after the first stoping the 2012 Auction), all mobile operators introduced new and LOWER mobile prices. LTE starting operation 10/2014 Spectrum triband auction 2013

Result – our lesson Block reservations for „newcomers“ is matter of strong discussions and needs good arguments. During bidding, withdrawal of highest bid should result in some limitation in activity points during further bidding rounds. Strong newcomer could force the price to excessive levels. Minimum or market price cannot be calculated – it is an academic issue; therefore, in reality, the starting price is a matter of market and/or „socio-political“ circumstances. Proven approaches welcomed. Spectrum triband auction 2013

CTU website Triband auction 2013 (Czech, English) vyberoveho-rizeni-na-kmitocty-v-pasmech-800-mhz-1800-mhz-a mhz-2013/vyhlaseni-vyberoveho-rizeni-2013.html Map of LTE 800 MHz _ BSs starting operation Useful links Spectrum triband auction 2013

Thank you for your attention Pavel Sistek Czech Telecommunication Office International Relations and Strategies Department