Posts Tagged ‘paired’

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Austrian 2.6GHz spectrum auction results show some consistency with previous auctions but the picture is still confusing

September 23, 2010

The Austrian regulator RTR concluded the auction of 140MHz of paired spectrum and 50MHz of unpaired spectrum raising proceeds of €39.5 million from the four incumbent operators Telkom, Hutchison, T-Mobile and Orange. The benchmark for the paired spectrum of approximately €0.04 is at a similar level to the results from the German auction which also saw the 4 incumbents secure spectrum but 4 times lower than the Danish auction, another market with 4 existing operators. Whilst relative levels of spectrum supply relative to operator demand is often a significant determinant of spectrum prices achieved at auction it is clearly not the full story.

Austria has one of the most competitive and developed mobile broadband markets in Europe and the need for capacity should have pushed prices higher. However, unusually the RTR attached roll-out requirements to the 2.6GHz band requiring 25% of the population to be provided with coverage with a downlink of 1 MBit/s and 256 KBit/s on the uplink by no later than December 2013. This represents an onerous requirement for operators as it will require them to deploy LTE sooner than perhaps they might have preferred. The coverage requirements will have depressed auction prices. Attaching coverage requirements to the 2.6GHz spectrum is unusual as coverage is usually addressed through lower frequency spectrum bands such as 900MHz and 800MHz as the propagation characteristics of the lower bands are more suited to providing coverage. The mix of strong demand and onerous roll-out conditions mean that the auction results provide little additional insight for regulators and operators who have yet to auction the spectrum.

The relative prices for paired and unpaired spectrum also remains confusing as Hutchison paid less in total for its paired and unpaired spectrum (a total of 65MHz) compared to T-Mobile which only acquired 40MHz of paired spectrum. This outcome is however more likely to be due to the algorithm (effectively a second price rule) used by the regulator to determine the final prices.
The use of second price rules, where the highest bidder wins but only has to pay the amount of the 2nd highest bidder, tends to result in more economically efficient allocations of spectrum but it can lead to interesting variations in price for similar lots. For example Telkom paid 20% more for the same amount of spectrum as Hutchison and T-Mobile paid 40% more on a €/MHz/Pop for its 40MHz of paired spectrum than Orange paid for its 20MHz and the difference is unlikely to be explained in full by differences in spectral efficiencies of LTE in wider bands
As countries such as Switzerland, Spain and the UK prepare to auction spectrum in the 2.6GHz band the Austrian auction provide some insight into the potential value of the spectrum but considerable uncertainty remains.

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