German telecommunications regulator BNA has decided on the conditions and timing of the auction of several frequencies packages, worth in total 360 MHz. The auction will take place in the second quarter of 2010, and interested parties can apply starting on 21 October 2009 until 21 January 2010. The precise auction details will be made public on 21 October through a publication in Germany’s official gazette Ambtsblatt, but BNA president Matthias Kurth unveiled several details at a press conference on 13 October. The auction will include 800 MHz, 1.7 GHz, 1.8 GHz, 2 GHz and 2.6 GHz frequency blocks. The most interesting frequency package is the so-called digital dividend package in the 800 MHz range. These frequencies were freed up due to the switch from analogue to digital terrestrial TV services.
The digital dividend was approved for mobile internet services by the German Federal Government during the summer, as part of its broadband strategy. The goals of that strategy include 1Mbps broadband availability for all German households by the end of 2010. To reach this goal, a quick digital dividend auction is needed. This seems to be happening, but there could be some snags on the way as both E-Plus and the European Commission have threatened legal action against BNA over the auction conditions.
The reason for the legal action is the limitations set by BNA on the 800 MHz frequencies auction. BNA has decided to auction a total of 60 MHz in this band, divided into six blocks of 2x5 MHz. The two largest mobile operators, T-Mobile Germany and Vodafone Germany, are limited to making bids for two of those six blocks, as they already own licences for the 900 MHz frequency range. O2 Germany and E-Plus can only bid for three blocks, and newcomers like cable network operators or other fixed network operators can bid for four blocks. BNA claims that these limitations ensure a level playing field for all parties concerned and will increase the competitiveness of the German mobile market.
Before BNA’s final decision about the auction conditions on 13 October, E-Plus and O2 have tried to persuade the regulator to change the conditions so they're more favorable for them and ensure a more equal distribution of frequencies. They proposed a bid limit of one block for T-Mobile and Vodafone, but BNA did not change the conditions accordingly. At the same time, European Commissioner for telecommunications Viviane Reding wrote a letter to BNA president Matthias Kurth voicing concerns over the same conditions, which could represent discrimination. In the letter Reding proposed that T-Mobile and Vodafone give part of their 900 MHz spectrum, for which they have a licence until 2016, to E-Plus and O2 Germany, or to limit the possibilities of T-Mobile and Vodafone acquiring large parts of the digital dividend. BNA defied the European Commission as well, claiming that how the digital frequencies are divided is outside the scope of the EU's competence.
Whether the EC, E-Plus and possibly O2 as well take legal action against the current auction conditions will become clear during the next few weeks, but their point against the conditions seems valid: in a worst case scenario, only three of the four existing mobile operators would win digital dividend licences, leaving the fourth operator behind with too few frequencies to offer the same quality of service as its competitors. The conditions are also prone to starting a bidding war among the existing mobile operators, to ensure they get one block of digital dividend. At the same time, the broadband strategy of the German federal government is under threat if legal action is taken and the auction is delayed.
This opens the possibility of a compromise among the EC, BNA and the operators, instigated by the German federal government to protect its broadband strategy.
Source: Telecompaper.com