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Summary

On September 10, 2018, Italy's 5G spectrum auction began, with seven operators (Iliad, Telecom Italia, Vodafone Italy, Wind Tre, Linkem, Fastweb, and Open Fiber) qualifying for the auction. Frequencies in the 700MHz, 3.6–3.8GHz, and 26GHz bands are up for grabs and so far, the auction of the 700MHz band has been completed, raising €2bn ($2.3bn), while the 3.6–3.8GHz band continues to see bidding at unprecedented levels.

Italy's 5G spectrum auction is the first to include low-, mid-, and high-range frequencies

After the award of the 700MHz band on September 13, 2018, which raised €2bn ($2.3bn), the attention of Italian telecoms operators has now turned to bidding for the 3.6–3.8GHz band frequencies. All the frequencies on offer in this auction (including the 26GHz band) are suitable for 5G, and this is the first 5G auction in Europe to include spectrum across low-, mid-, and high-frequency bands. The lower-frequency bands provide much better in-building and wide-area coverage, while higher frequency bands support faster and greater capacity networks. For operators to develop their 5G capabilities, it will be crucial for them to hold a range of low-, mid-, and high-spectrum bands, so this auction should put them in a great position for launching new services.

The operators Telecom Italia, Vodafone, and Iliad were each awarded 2×10MHz of spectrum in the 700MHz band. The 15-year licenses are valid from 2022. Overall, 700MHz spending works out at approximately $0.66 per MHz per population (a metric commonly used to assess the value of spectrum), which is far higher than the $/MHz/pop. value in Germany (0.23) or Finland (0.21) but lower than the value in France of 0.79.

Typically, in other countries, 5G auctions of mid- and high-band spectrum see much lower spending than the 700MHz band. However, Italy has already seen unprecedented levels of bidding in the 3.6–3.8GHz bands, pushing the total amount raised so far across all spectrum bands to over €5bn. This is more than twice the reserve price and is an encouraging sign for the government, which will be able to raise much-needed funding for the public purse. However, it could also cause some anxiety for operators in other EU countries yet to start their own 5G auctions. If Italy's auction is anything to go by, they could be in for a fierce bidding process for the 3.6–3.8GHz bands too. The biggest concern though, is that the high prices being paid by operators for spectrum will likely have to be passed on to consumers in the form of higher tariffs. Telecom Italia, however, has suggested it will probably sell off assets to pay the auction fees.

The auction of the 3.6–3.8GHz band is now in its 10th day, with Vodafone, Telecom Italia, Wind Tre, and Iliad leading the bidding for two 80MHz and two 20MHz blocks. Meanwhile, Telecom Italia, Vodafone, Wind Tre, Iliad, and Fastweb have submitted the highest bids for the five blocks of frequencies being sold in the 26GHz range. What is interesting in this case is that prior to the auction, Italy's operators had complained about the high reserve prices and even threatened to boycott the auction. It seems the pressure from the possibility of missing out on spectrum that could result in their falling behind competitors in the 5G race was too great; the operators didn't follow through with their threat, and the desire for more spectrum has resulted in bidding being far more intense than expected.

Appendix

Further reading

5G Service Provider Tracker: 2Q18, GLB007-000101 (July 2018)

Spectrum Requirements for 5G, TE0007-001111 (February 2017)

"Spectrum policy should be the top priority for regulators in the race to 5G," GLB005-000080 (August 2018)

Author

Sarah McBride, Analyst, Regulation

sarah.mcbride@ovum.com

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