Some Thoughts On the Czech Republic Canceling Spectrum Auctions

So far I've only seen two ways of handing out spectrum to companies:

Some countries assign spectrum to companies in what is called a 'beauty contest' for relatively little money to companies the national regulator sees as the most promising ones to quickly deploy and operate a network. The advantage is that companies have to pay relatively little for the spectrum and thus have more money to deploy a network and potentially lower prices for customer.

Other countries use an auction scheme which has the advantage that the price is decided by 'the market', i.e. by companies bidding reasonable sums for the spectrum. Unfortunately this does not always work and companies have massively overspent on spectrum licenses in the past. Remember the 50 billion Euros paid for a few MHz of 2.1 GHz beachfront property for UMTS in Germany and the UK around 15 years ago? But still, countries going for an auction usually saw them trough till the bitter end, no matter what the consequences. That is, until now…

Earlier this month, the Czech regulator canceled the ongoing spectrum auctions for LTE and other radio technologies when the bidding price exceeded 780 million euros. This might not sound much but one has to set this sum into perspective with the population of the country, which is about 10 million. In Germany, the LTE spectrum auction back in 2010 yielded 4.4 billion Euros in a country with a population of around 85 million. In other words, the regulator stopped the auction when in Germany the sum would have been well over 6 billion.

So from my point of view the Czech regulator has to be commended to take the unprecedented step of stopping the auction. After all, a spectrum auction is not (only) there to raise money for the treasury but should actually serve two other purposes:

• Improving network coverage
• Lower prices for consumers

This reminds me of a very insightful post over at Stephen Temple's blog which I wrote about a few months ago. Finally a country that has acted along these lines. That just leaves the question of how the Czech regulator wants to change the rules to still have a fair bidding process and still avoid excessive prices? Perhaps by changing tactics by considering a 'beauty contest'?