Europe braced for next wave of spectrum auctions
The professional auditing firm KPMG has estimated that from 2011 to 2015 more spectrum will be auctioned in Europe than has already been auctioned over the last decade.
KPMG predicts that the total value of proceeds generated through the auction of spectrum during this period could be in the region of £20 billion in western Europe alone. This figure represents a significant investment for operators, and does not include the additional capital expenditure required to roll out new LTE networks. At least two thirds of the auction proceeds are expected to come from digital dividend transfer (the switch from analogue to digital TV) in western Europe, which will free up the valuable 700/800MHz band.
A significant number of European spectrum auctions are set to take place in 2012 (see below), including in Poland, Latvia, Hungary, Lithuania, Switzerland, Norway, Denmark, Austria, Holland and the UK. These follow several major European spectrum auctions which were held last year in France, Germany, Italy, Portugal, Spain and Sweden. The implications of those auctions are already being felt across their various markets.
The French auction of the 2.6GHz and 1800MHz bands enabled the entrance of a fourth mobile operator, Free. Free’s emergence has shaken up the French market, forcing the original big three players, France Telecom Orange, SFR and Bouygues Telecom, to lower their prices. Meanwhile, in the German auction, an obligation was attached to the 800MHz licence preventing operators from rolling out services in profitable urban areas until they had first covered underserved rural areas. This strategy was successful in prompting operators to roll out services in rural areas.
One the major spectrum auctions to take place in 2012 will be in the UK, where the planned auction has been marred by delays. Matthew Howett, regulatory telecoms analyst at Ovum, believes that the UK is fast becoming an anomaly in Europe due to its long-standing problem of unequal spectrum distribution, and that the regulator Ofcom was concerned that this problem had to be addressed before it even thought about auctioning the new spectrum.
Howett believes that the multiple delays experienced by the UK auction has impacted negatively on the country’s reputation: “The UK is now recognised as being a country associated with how not to do spectrum auctions,” he said.
An organisation with a particular interest in the continent’s spectrum auctions is the European Competitive Telecommunication Association (ECTA). ECTA’s director of regulatory affairs, Erzsebet Fitori, pointed to the Dutch auction set to take place in October as one that will shake up the domestic market: “In the Netherlands, they are setting aside a third of the digital dividend spectrum for a new entry into the market. This is the same strategy as the country’s 2.6GHz auction in 2010, which saw Ziggo and Tele2 buy spectrum and become new entrants. The Netherlands is creating competition by promoting entry into the mobile market.”
Fitori considers spectrum auctions to be a key way to encourage competition in domestic mobile markets: “Generally speaking across Europe, unless the regulator decides that they actively promote competition via spectrum policy and other forms of regulation, you can see there isn’t really much entry on a commercial basis.”
The varying results of spectrum auctions across Europe emphasise that regulators are able to dictate the pace and competition of markets through the structure of their auctions. These auction structures have altered significantly since the very first 3G auctions were held from the year 2000 and onwards.
“The idea of an auction has already evolved quite considerably from 3G auctions to the spectrum we’re awarding now. I suspect it will evolve even more going into the next phase,” said Howett.
With this year’s wave of auctions already underway, spectrum allocation is likely to remain a hot topic for the foreseeable future.
Q1 2012: Latvia, Lithuania, Hungary, Poland, Switzerland
Q2 2012: Denmark, Norway
Q3 2012: Austria
Q4 2012: Holland, UK
2012 and 2013: Czech Republic, Finland, Ireland, New Zealand, Romania, Russia, Slovak Republic