The German telecoms regulator Bundesnetzagentur (BNetzA) is currently considering different scenarios for the future allocation of frequencies for mobile broadband services. This initiative relates to the discussion about the 900 and 1,800 MHz frequencies that are currently used by mobile operators for their GSM networks. The current licenses for these frequencies will expire by the end of 2016. Mobile operators are therefore urging BNetzA for an early extension of the existing licenses while other market players make the case for a reallocation of these frequencies in an open auction. At the same time, frequency policy is required to deal with the ever increasing demand for mobile broadband services and thus needs to develop a broader strategy, taking into account the different frequency bands that are allocated and/or suitable for mobile broadband services. Apart from the GSM frequencies this includes the UMTS frequencies in the 2 GHz band (expiring 2020), the BWA frequencies in the 3.5 GHz band (expiring 2021) and the frequencies of the 2010 auction in the 800 and 1,800 MHz and the 2 and 2.6 GHz bands (expiring 2025). In addition, further frequencies in the 700 MHz and other bands may become available for mobile broadband services as a result of the 2015 summit of the World Radio Conference.
Against this backdrop, BNetzA on November 9, 2012 issued a discussion paper (full text and press release published in German on the BNetzA website) setting out four possible scenarios for the future allocation of the 900 and 1,800 MHz and other frequencies:
- Scenario 1 – Prolongation: This scenario proposes a short-term prolongation of the mobile operators' licenses for the 900 and 1,800 MHz (GSM) frequencies, which would be the fastest and easiest way to provide a stable investment environment for these operators. However, under German telecommunications law the allocation of scarce frequencies must generally be done by way of a tendering process. Exemptions can only be justified if so required by the aims of telecoms regulation. BNetzA does not seem to be convinced that such exemption can be justified with regard to the GSM frequencies. In particular BNetzA points out that a prolongation of the existing licenses would also extend the current fragmentation of frequencies. And further, a prolongation of existing licenses would clearly not provide equal access to spectrum for newcomers.
- Scenario 2 – Allocation 900/1,800 MHz: This scenario proposes an early reallocation and flexibilization of the 900 and 1,800 MHz frequencies, giving newcomers an early opportunity to enter the mobile broadband market. However, an isolated auction of these frequencies cannot take into account other frequency bands for mobile broadband, such as the UMTS frequencies in the 2 GHz band that will expire by the end of 2020. In BNetzA's view this scenario is thus likely to increase the regulatory complexity calling for certain measures such as spectrum caps in order to ensure effective competition in the mobile broadband market.
- Scenario 3 – Allocation 900/1,800 MHz Plus: This scenario proposes a joint auction of the GSM frequencies in the 900 and 1,800 MHz band with other frequencies that will become available for mobile broadband services in the coming years, i.e. the UMTS frequencies in the 2 GHz band, the BWA frequencies in the 3.5 GHz band, and possibly frequencies in the 700 MHz and other bands as a result of the 2015 summit of the World Radio Conference. In terms of timing, BNetzA clearly prefers an early auction before the expiry of the GSM frequencies by the end of 2016, which would provide a clear and stable investment environment for all stakeholders early on.
- Scenario 4 – Global Allocation 2025: This scenario even goes a step further and aims to also include the frequencies of the 2010 auction (expiring 2025), in a global auction of all frequencies for mobile broadband services. To achieve this, the license terms of the different frequencies ranging from 2016 to 2025 would need to be harmonized, either by prolonging existing licenses until 2025 or by granting new licenses for expiring frequencies only until 2025. However, BNetzA does not seem to be too convinced by this scenario. In particular, market entry for newcomers would be rather difficult before such global auction. And then it might be difficult for any stakeholder to have the required funds for all frequency resources and network infrastructure available in one go.
Stakeholders now have the opportunity to comment on the scenarios presented by BNetzA until January 31, 2013. However, from the reasoning of the BNetzA discussion paper, an implementation of scenarios 1 (prolongation) or 4 (global allocation 2025) appears to be an unlikely outcome. BNetzA rather seems to be aiming at a middleground solution as described in scenarios 2 (allocation 900/1,800 MHz) and 3 (allocation 900/1,800 MHz plus), which gives newcomers an early opportunity for market entry and, at the same time, allows sufficient coordination in the allocation of the different frequency bands. This means that in the short to medium term, Germany is likely to see one or more frequency auctions that may have the potential to reshuffle the mobile broadband market. Stakeholders should continue to monitor this area to prepare for future BNetzA action.