UPDATE: France joins growing trend in Europe and imposes spectrum cap ahead of 4G auction

UPDATE: France joins growing trend in Europe and imposes spectrum cap ahead of 4G auction

France will begin its 4G mobile spectrum auction at the end of this month, and has revealed it will impose a limit on the amount of spectrum an operator can bid on.

France joins other European countries, including the UK, Sweden and Spain, in announcing a spectrum cap as governments look to enhance competition in domestic mobile markets.

France’s digital economy minister Eric Besson has reportedly said that a total of 30 MHz of spectrum will be auctioned in late May, which will be divided into four lots. A limit of 15MHz, however, will be imposed on operators bidding for the highly sought 800MHz band. According to Reuters, the French government aims to raise approximately €2 billion from the auction.

Although the move is aimed at protecting competition in France’s domestic mobile market, the two leading operators, France Telecom and SFR, are still thought to be able to buy as much as two of the four lots of 4G frequencies.

“The French cap allows one operator to capture half of the available “digital dividend” spectrum. Giving the operator with the deepest pockets 50% of the best spectrum hardly promotes fair competition when there are four competing operators present in the market,” said Erzsebet Fitori, director of regulatory affairs at the European Competitive Telecommunication Association (ECTA).

“A more effective cap of 2x10 MHz, or one third of the available spectrum, was set in the recent Swedish auction. The French government should take extra caution and set an appropriate cap that would prevent the anticompetitive outcome seen in Germany, where only three of the four mobile operators obtained 4G spectrum.”

Across Europe, governments have wrestled with the issue of how to structure 4G auctions. In the UK, for instance, the regulator Ofcom announced earlier this year details of its 4G auction which is due to be held in early 2012. The rules include a limit on the minimum and maximum amount of spectrum bidders can win. The date of the UK auction, however, has already been heavily delayed due to disputes between the country’s mobile operators over the distribution of existing spectrum.

“Consumers benefit if governments favour the long-term economic gains of a pro-competitive spectrum policy – such as effective spectrum caps in auctions – over the short-term, one-off income of higher auction revenues. A truly competitive mobile market spurs innovation, and delivers competitive prices and consumer choice,” said Fitori.