German Mobile Spectrum Auction Back on Track as EU, German Regulator Resolve Differences

The German regulator and the European Union (EU) have finally reached an agreement that will allow the auction of the country's 800 MHz-range "digital dividend" spectrum for mobile broadband services.

The head of Germany's telecoms regulator BNA, Matthias Kurth, has announced the agreement with the European Commission, which will see the German regulator completing a reassessment of the competitive landscape in the mobile market three months after the auction, scheduled take place in the first half of 2010, and taking corrective action if the results are deemed to have skewed competition.

As per the original terms of the tender, potential bidders now have until 21 January to express their interest in the six blocks of spectrum, each comprising a pair of 5 MHz blocks (see Germany: 27 October 2009: German Regulator Releases Details for 2010's Spectrum Licensing). The agreement should now allow the mobile licences to be awarded within the next six months, without further challenges from the operators or EU.

Outlook and Implications

• A Healthy Compromise: The controversial auction of the 800 MHz mobile spectrum, freed up by the switch-off of analogue TV broadcasts, had attracted considerable objections from both the EU and Germany's operators, who complained the auction would benefit the larger incumbent operators, T-Mobile and Vodafone. Deutsche Telecom's T-Mobile and Vodafone Germany already hold considerable spectrum in the similar 900 MHz band, and both operators indicated they would bid for two blocks totalling 10 MHz in the 800 MHz auction, leaving precious little bandwidth for the smaller players. Telefónica's O2 Germany and KPN's E-Plus reacted to the auction conditions by indicating that they may contest them in court, arguing that they give a disproportional advantage to the two larger operators (see Germany: 14 October 2009: BNA Defends 800 MHz Auction Terms). O2 and E-Plus hold mobile spectrum in the 1800 MHz band at present and can bid for three blocks—but if they were only able to secure one each, this would leave the dominant operators controlling a disproportionate share of the valuable lower 800 and 900 MHz bandwidths. The EU telecoms commissioner, Viviane Reding, has now welcomed the regulator's pledge to review the level of competition in the mobile market following the tender, saying holding the auction sooner rather than later would have a positive impact on the mobile industry in Germany.
• Cooling the War of Words with EU: The regulator BNA had originally dug in its heels, saying it was confident that the auction conditions would stand a possible legal challenge (see Germany: 25 November 2009: E-Plus, Telefónica O2 File Lawsuits over 800-MHz Auction), but far from being a back-down, the regulator has shown it is willing to work with the EU to auction the fresh spectrum as soon as possible for the benefit of the German mobile market. However, the regulator is also on something of a crash course with the EU over the sale of high bandwidth 2.6 GHz spectrum, with the European Commission for removal of any further delays in allocating the valuable mobile broadband spectrum (see Germany: 2 November 2009: European Commission Demands Germany to Open 2.6 GHz for Fixed-Wireless). Germany's smaller operators have further indicated that the delays are not only preventing the development of competition in the country, but also endangering the federal government's broadband strategy (see Germany: 19 February 2009: German Government Introduces National Broadband Strategy, Pledges to Auction Digital Dividend). Germany's operators are pushing ahead with plans to launch 4G services in the country (see Germany: 1 December 2009: ZTE, Vodafone Germany Team Up on LTE), while seeking new bandwidth-hungry services to bolster dwindling traditional voice and SMS revenues (see Germany: 14 December 2009: Alcatel-Lucent, Vodafone Germany Partner for Smart Metering Solution). As the country's operators continue to feel the effects from an increase in competition and regulation and the global economic downturn (see Germany: 9 November 2009: Revenue from German Telecoms Market to Drop by 3.6% in 2009—Study), many are keen to launch new services demanding extra bandwidth, and it is now hoped the regulator can move to provide this.