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Summary

On November 18, 2018, Germany's regulator BNetzA issued its final draft for the upcoming 5G spectrum auction of the 2100MHz and 3.6GHz bands for approval by the Advisory Council. In the proposal, the regulator outlines coverage obligations as well as requirements for encouraging roaming and infrastructure sharing.

A combination of coverage, roaming, and infrastructure-sharing obligations is required to reach rural areas

In June 2017, BNetzA published draft guidelines that identified the 2100MHz and 3.6GHz bands as suitable for the rollout of 5G services. The revised draft for the upcoming 5G auction released in November 2018 outlines the terms and conditions of the sale of this spectrum and includes additional coverage obligations, which aim to improve the coverage to households, especially in rural areas. BNetzA has made several modifications to the original draft such as including conditions to supply rural roads, waterways, and railways, as well as reinforcing the possibility of cooperation between network operators to encourage the rapid introduction of 5G. The updates provide for a reciprocal crediting of the supply and also lower the minimum starting bids for the spectrum, thus reducing the financial burden on operators.

The coverage obligations for the 2100MHz and 3.6GHz license winners include a requirement to supply speeds of a minimum of 100Mbps to at least 98% of households in each state by the end of 2022, as well as all federal highways, main roads, and main railways. This is quite ambitious considering current coverage of 100Mbps speeds is around 65%, and the obligations are far stricter than any other country has implemented so far when auctioning 5G-suitable spectrum. By the end of 2024, 5G spectrum holders will be obliged to provide speeds of 100Mbps to all other federal highways, while covering the national and state roads, all other railways, seaports, and the main waterways with data rates of at least 50Mbps. Furthermore, a latency of 10ms is required for all federal motorways and federal highways, and each operator will have to set up 1,000 5G base stations by the end of 2022, in addition to 500 base stations in so-called "white-spot" unserved rural areas. For any potential newcomers, separate coverage requirements would apply. There are still doubts over the 5G business model, so introducing 5G spectrum obligations such as these does make it difficult for operators to build the business case for bidding for these frequencies.

Introducing coverage obligations alone will not be enough to ensure coverage in hard-to-reach areas, however, so BNetzA has also included roaming and infrastructure-sharing requirements. Network operators are expected to cooperate in areas where expansion by a single network operator is not economically viable. In addition, roaming and infrastructure sharing would significantly cut the costs of supplying these areas. BNetzA would act as a referee in any commercial negotiations to cooperate. At the service level, network operators will have to negotiate with suitable service providers about the shared use of spectrum capacity and the regulator would act as a referee in these negotiations as well.

The existing frequency usage rights for the 2100MHz band are set to expire in December 2020 and December 2025, while the rights for the 3.6GHz band will be available after December 2021 and December 2022. A final decision on the license conditions is expected by the end of November 2018, with the spectrum auction planned for 2Q19. In a separate application procedure, additional frequencies in the 3.7–3.8GHz and 26GHz bands will be made available for local use after the 2019 auction.

This will not be the first 5G auction for Germany. It was the first EU member state to auction off the 700MHz band in 2015. This spectrum has been made available to operators since January 2017. However, for 5G to be successfully launched, operators require a range of low-, mid-, and high-spectrum bands. The country is aiming to roll out the first commercial 5G services by the end of 2020, so it is incredibly important that the upcoming auction is not delayed so that operators can prepare for future deployment.

Appendix

Further reading

Germany (Country Regulation Overview), GLB005-000037 (April 2018)

5G Service Provider Tracker: 3Q18, GLB007-000140 (October 2018)

"Germany fires the starting gun for the 700MHz race in Europe," TE0007-000910 (June 2015)

Author

Sarah McBride, Analyst, Regulation

sarah.mcbride@ovum.com

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