Just before Christmas 2011, the French regulator ARCEP announced the result of the auction of the 2×30 MHz spectrum in the 800 MHz digital dividend band. All three incumbents, Orange, SFR and Bouygues each won 2×10 MHz. Free has been unsuccessful to get spectrum directly but SFR is mandated by the spectrum auction terms and conditions to cooperate with Free, (probably) because they have won the 10 MHz that are in the middle of the frequency range.
Unfortunately, the press release does not quite reveal why it is SFR that is specifically required to share their spectrum with Free!? Also, the the 1 billion SFR paid for the middle section is 320 million more than what Bouygues had to pay for the lower section and still another 120 million higher than what Orange had to pay for the high part of the spectrum. Each of them still have 10 MHz. So I am not quite sure why the middle part is the most valuable part of the band. I could imagine that the lower part might imply some more coordination efforts with terrestrial TV transmissions which use the frequency range just below. But the higher part is unaffected by this so why is SFR required to share the network with Free and not Orange? The press release doesn't go into those details so if you know, please leave a comment, I'd be quite interested in this.
Other interesting bits and pieces mentioned in the press release:
- All three network operators have committed to allow "full" Mobile Virtual Network Operators (MVNOs) in their network. It's not quite clear to me how "full" MVNOs are defined but let's hope it will encourage more competition and thus better prices and conditions for customers in the future compared to the very closed and non-competitive French wireless market compared to other countries in Europe today.
- There are similar requirements as in Germany to ensure the 800 MHz spectrum is first used in rural areas to bring Internet connectivity to under-served areas. From the press release: "[the network operators] must commit to an accelerated rollout schedule in the most sparsely populated parts of the country".
According to p. 31, chapter 5 of the conditions for the frequency auctions (http://www.arcep.fr/uploads/tx_gsavis/11-0600.pdf) an operator who wins more than one frequency block in the 800MHz-auction will be subject to the obligation of letting roam any other operator, who (a) did not win an 800MHz block but (b) owns 2600MHz spectrum and (c) was qualified for the 800MHz auction and has unsuccessfully bid for an 800Mhz block. Further the demanding operator must have covered 25% of the population on the 2600MHz band before he can ask for such a roaming agreement.
However the four 800MHz blocks auctioned were not of equal size, but block B and C (which SFR won) had only 5 MHz each while A and D had 10 MHz each. So allthough SFR now own the same amount of 800MHz spectrum like their competitors they are subject to the roaming rule. What’s even more surprising is the fact SFR have paid € 1065m for these 10 MHz while Bouygues have paid just € 683m and Orange € 891m for the same amount of spectrum.
I must confess that my French is far from perfect so maybe I’m missing some important point in the document, but it seems like SFR hasn’t struck a bargain in this auction.
Regarding the term “full MVNO” on p.16 the auction conditions refer to a document published by “l’Autorité de la concurrence” (http://www.autoritedelaconcurrence.fr/pdf/avis/10a17.pdf) which on p.7 basicly defines a full MVNO as such who terminates calls himself. According to p.46 of the auction conditions admitting full MVNOs resulted in the bid amount being assessed as up to the double value depending on at how much spectrum each bid aimed for. If any MVNO-friendly bidder had bid for 5 MHz only his bid amount would have been considered as double the actual value. Bids for 10 MHz were considered being 1.5 times the actual value and if there had been a bid for 15 MHz it would have been multiplied by 1.33 if the bidder had accepted full MVNOs.
In times of significantly sinking interconnection fees (and further EU-regulation-driven declines impending) and low margins this strong preference of “full”-MVNO-friendly bidders doesn’t make much sense since the “full”-MVNO business is on the downturn. The industry tends to merge network infrastructure (even among MNOs) rather than creating costly redundancy. Further the focus on “full” MVNOs with own termination capabilities is also questionable as LTE networks will be primarily data-driven and termination fees will be forced down by Mrs Kroes anyway thus having rather little impact on cost structure and competition. So it would have been sufficient to require bidders to accept “light” MVNOs.
While doing research on the frequency spectrums of French operators I created some charts on French Wikipedia, which give an overview of frequency distribution in France:
http://fr.wikipedia.org/wiki/Global_System_for_Mobile_Communications#GSM_900_actuel_.28R-GSM_et_E-GSM_inclus.29
http://fr.wikipedia.org/wiki/Universal_Mobile_Telecommunications_System#fr.C3.A9quences_FDD
http://fr.wikipedia.org/wiki/LTE_(r%C3%A9seaux_mobiles)#Attribution_des_fr.C3.A9quences_en_France
Apparently frequencies in the GSM and UMTS bands are more or less equally distributed – at least there’s no reason to affect SFR from that point of view.