The pandemic crisis has led to some 5G spectrum auctions being delayed, especially in Europe, although a few regulators have decided to minimize disruption to 5G plans by giving the spectrum out without a sale process (New Zealand set the pace in this regard).
For operators in many markets, an auction delay of six months or so is more of a relief than a disappointment. Many MNOs have felt pressure to deploy 5G to satisfy regulators or shareholders, rather than because the business case was fully ready, and will be happy to press the pause button for a short period, while they assemble financing and wait for mature equipment, mass market devices, and actual demand to materialize.
In some countries, operators have actively lobbied for auction delays until 2021, in order to recover from Covid-19 disruption, or because of other market pressures. In India, telcos were threatening to boycott the 3.5 GHz auction altogether if it were not postponed (and reserve prices lowered), and seem too have got their way, although the sale of additional 4G spectrum, including some bands where licences are expiring this year, will go ahead in 2020.
In France, the third of the four MNOs, Bouygues Telecom, had called for the 5G auction – originally scheduled for April – to be held in late 2020 or early 2021, to give more time for the operators to attend to government targets to improve 4G rural coverage, before embarking on 5G in a time of economic uncertainty.
“We need to push back the auction date simply because the economic world today is not the same as it was early March, when the terms of the auction were set,” said Martin Bouygues, CEO of the telco’s eponymous parent group.
And Richard Viel, CEO of Bouygues Telecom, recently called for the government to amend its 2018 ‘New Deal’ for rural coverage, which saw each of the four French MNOs agreeing to build an additional 5,000 cell sites each. Viel believes this should be increased by up to one-third, in conjunction with network sharing.
However, the government wants 5G to get back on track after several auction delays, and regulator Arcep seems to given in to that pressure. It now plans to start the auction between September 20 and 30 this year.
The auction will offer a total of 310 MHz in the 3.4-3.8 GHz band, and all four MNOs – Orange, SFR, Bouygues and Free Mobile – have been qualified to participate. Arcep has already agreed to sell a 50 MHz block to each operator for €350m ($396m) each. On top of that, 11 blocks of 10 MHz will be offered at auction, and the government hopes to raise a further €7.7m ($88m).
The licences would be awarded, and the spectrum ready to use, in October or November. Arcep has withdrawn plans to force each operator to launch 5G services in at least two cities before the end of 2020, because of the auction delay and the economic disruption of Covid-19.
It is not clear whether the other rules Arcep proposed late last year will remain in place. Unlike its German counterpart, the French regulator decided not to earmark spectrum for industrial or private network use, or for new entrants, but instead proposed to mandate support for network slicing techniques that would support the specialized requirements of certain verticals.
Earlier in 2019, Arcep said it had seen no demand for private spectrum for France’s industries, and that the goals of enterprise 5G would be better served by cooperation with the MNOs.
But even simple slicing – which involves carving the network into just three or four sections and keeping them quite static – is rarely achieved from end-to-end (only with upcoming Release 16 3GPP standards will the 5G radio be fully sliceable in a standards-based, interoperable way). And there are other challenges, such as how a multinational enterprise negotiates a deal for a cross-border end-to-end slice, given that most operators are not global.
So the auction policies may be premature. The rules, if they are not changed, require that operators activate network slicing by 2023, which is an ambitious timeline (depending how slicing is defined by the regulator), as well as coming close to breaking the modern norm of keeping auctions technology- and service-neutral.
Other conditions, set last November, were that each licensee must deploy 3,000 sites in 2022; 8,000 sites in 2024; and 10,500 sites in 2025; and that at least 75% of cell sites in 2022 must deliver speeds of at least 240Mbps (100% of sites by 2030). Operators would also have obligations for ensuring coverage of the country’s motorways by 2025 then, by 2027, coverage of the main roadways.
Licences will be allocated for 15 years, which will be extended by a further five years if operators agree to all the conditions. Two interim reviews were scheduled for 2023 and before 2028 to verify operators’ implementation of their obligations.
To boost non-telecoms sectors of the French economy, Arcep has established an unprecedented mechanism that would have operators commit to granting reasonable requests from businesses, cities and others, to provide them with customized coverage and performance (presumably using the slicing) or, if the operator prefers, by assigning its frequencies locally.
- Improved indoor coverage for business and commercial purposes, and to facilitate coverage by multiple operators.
- Supply of dedicated fixed access products on mobile networks.
- Increased operator transparency, on their roll-out forecasts and service outages.
- Improved MVNO hosting on operators’ 5G networks, in particular to stimulate innovation from all the sector’s players.
Finland sells three licences in 26 GHz:
The most recent 5G auction in Europe took place in Finland where the three MNOs – Telia, Elisa and DNA – spent just €7m ($7.9m) each to secure a 13-year licence in the 26 GHz millimeter wave band. That amounts to a price per MHz/POP of just $0.0018. Elisa gained the block in 25.1-25.9 GHz; Telia in 25.9-26.7 GHz; and DNA in 26.7-27.5 GHz.
Finland has taken the line of offering plentiful spectrum so that operators pay the reserve price only, and are in a position to deploy 5G quickly. It has offered 2,400 MHz in total in the 26 GHz band, compared to 1,000 MHz in Italy (where the final prices were 1.7 times greater because of higher competition for the licences). Similarly, in the 3.5 GHz auctions, Finland offered 390 MHz, or 130 MHz per MNO, while Italy sold four blocks of 50 MHz each – unsurprisingly, the Italian operators paid 11 times more on a per-MHz/POP basis.
European countries which have delayed 5G auctions because of the pandemic include Austria, Spain, Czech Republic, Poland and Portugal, and UK regulator Ofcom has indicated that its 700 MHz and 3.6-3.8 GHz sales are unlikely to take place before November 2020 at the earliest.
German regulator defends industrial 5G spectrum policies:
By contrast with French regulator Arcep, which has claimed it saw “no demand” from industries for their own 5G spectrum, the German telecoms regulator, BNetza, has defended its controversial policy of earmarking some airwaves for enterprise use, saying there was “huge demand”.
Other industrial countries, such as Japan, The Netherlands and (in a diluted way), the UK, have also set out plans to enable vertical industries to access spectrum for their own cellular networks, but Germany’s scheme has been the most visible and controversial.
Such policies have been in response to complaints from industries that, while they want to use 5G to support digital transformation programs, they fear their particular requirements will not be prioritized by MNOs building national networks, when their primary customers are consumers. Some regulators argue that there is plenty of spectrum to go around in 5G, and networks optimized for industrial use will be essential to achieve the socio-economic goals set for 5G by governments.
While Arcep hopes to address this by encouraging operators to deploy network slices for specific industries, BNetza has been defending its approach, saying the consultation period had revealed huge demand for 5G spectrum from vertical sectors. In response to criticism of its policies by French telco Orange, the regulator told LightReading: “Many verticals stated that they would need networks with heightened security regarding data and business secrets. Because of that, they aspire to build their own networks and avoid a connection to public networks.”
At LightReading’s 5G Networking Digital Symposium, Arnaud Vamparys, Orange’s SVP of radio networks, had claimed Germany’s policy of reserving 100 MHz of 5G spectrum for industrial use would disadvantage smaller companies without the resources to build and operate their own networks, as well as reducing the quality of service MNOs could ensure for customers. “Quality is really proportional to the size of the band,” he commented.
In June 2019, German operators agreed to pay nearly €4.2bn ($4.7bn) for 300 MHz of spectrum in the 3.6 GHz band plus another €2.4bn ($2.7bn) for spectrum in the 2 GHz band. There would have been 400 MHz on offer in the midband had the rest not been set aside for Industrie 4.0 applications.
The BNetza spokesperson said: “Combined with the award of nationwide spectrum, the provision was suitable to incorporate the diverse spectrum demands regarding possible 5G use cases … This does not mean that the MNOs cannot use the 100 MHz. It is possible for verticals and MNOs to cooperate and use their combined spectrum to build local networks.”