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Summary

On November 17, 2015 the French regulator, ARCEP, concluded its auction to allocate the 700MHz spectrum band, raising a total of €2.8bn. Bouygues Telecom, Free Mobile, Orange, and SFR competed for lots and prices reached €466m per block. The auction coincided with the ITU’s decision to allocate the 700MHz band globally to mobile services; France is only the second European country so far to do so.

The second digital dividend needs to be the focus of spectrum policy

France’s auction followed a multi-round ascending model that consisted of six blocks of 2×5MHz. The auction concluded after 11 rounds, raising approximately $3.0bn (€2.8bn), which is higher than both the earnings from the 2011 auction and the reserve valuation. The predicted bidding war did not materialize, but operators still paid a higher premium than those in Germany in June 2015. SFR was awarded the first position in the band and allocated a 2×5MHz block for $496m (€466m), Orange has the second position with two 2×5MHz blocks for $993m (€933m), Bouygues Telecom has third position with a 2×5MHz block for $497m (€467m), and Free Mobile is fourth with two 2×5MHz blocks for $993m (€933m).

The band will be used to develop and enhance 4G (and in future 5G) capabilities in an effort to address gaps in the service. With approximately 70% of the country and nearly 20% of the population not yet covered by 4G, it was important for ARCEP to make sure rural areas are supported. As a result, 63% of the territory and 18% of the population have been marked as a “priority zone” for which the regulator to imposed obligations of 50.0% coverage within seven years, 92.0% within 12 years, and 97.7% within 15 years to ensure more widespread coverage. The licenses have other high obligations attached to them, including covering 98.0% of the population within 12 years and 99.6% of the population in 15 years, as well as covering 60% regional railroads within seven years, 80% within 12 years, and 90% within 15 years. The licenses, which are valid for 20 years, are expected to be issued over the next few weeks.

The conclusion of this auction is timely. On November 24, 2015 the ITU announced plans to assign the 700MHz band to mobile broadband across region 1 (Europe, Africa, the Middle East, and Central Asia). This approach has been in place in region 2 (Americas) and region 3 (Asia-Pacific) since 2007. The move will help to harmonize the use of the digital dividend around the world while also increasing the capacity for 4G, which will ultimately allow operators to offer more affordable mobile broadband and reach underserved areas.

Few countries in Europe have begun auctioning the 700MHz spectrum, with only France and Germany completing auctions this year and the remainder planning to start using the new frequencies in 2020. South America and the Asia-Pacific region are much further ahead in terms of their adoption and have considerably improved coverage to rural areas as a result. With the ITU’s announcement, the second digital dividend should become the focus of spectrum policy across the world and ensure more universal 4G coverage.

Appendix

Further reading

“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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