Auctions and Comparative Evaluations – UMTS (3G) Case Studies
Germany – In August 2000, Germany auctioned off 12 blocks of UMTS spectrum. The German regulator (RegTP) published the rules applicable to the award of the UMTS licences on 18 February 2000. The rules provided that eligibility to take part in the auction would be governed by the basic eligibility requirements of the Telecommunications Act. Bidders were required to bid successfully for at least two blocks of spectrum to qualify for a licence. Minimum bid increments were set at 10 percent. Additional rules were established to prevent bidders from influencing the outcome or controlling the pace of the auction. While the auction took place, for example, small groups of representatives of each bidder were isolated from to each day, with two observers from RegTP present with each group at all times. Bidders were not able to see what rivals were bidding. Only the highest bids for each block were made known to bidders.
Germany’s UMTS spectrum auction lasted for 14 days and 173 rounds of bids. At the end, six service providers each obtained two blocks of spectrum and 20-year licences. The licences require service providers to provide coverage of at least 50 percent of the German population by the end of 2002. This auction concluded with record bids for UMTS licences: a combined total of over USD 46 billion. As a result of the enormous amounts paid, concerns were expressed that some service providers may well end up spending more on acquiring the licences than on building their networks.
United Kingdom, Spain and Netherlands – The UMTS spectrum auction held in the United Kingdom in April 2000 raised USD 32.58 billion. That process continued for more than 100 rounds over a period of more than four weeks. The Netherlands auctioned off five licenses for USD 2.3 billion in July 2000. Spain, on the other hand, raised only USD 425 million from its sale of four UMTS licences in March 2000.
Norway – In Norway, a comparative evaluation process was used instead of an auction to grant UMTS spectrum licences. Applicants were required to meet minimum eligibility requirements, such as a commitment to meet specific coverage and roll out obligations, and proof of financial strength/capability. The two main selection criteria were coverage (geographical and in terms of population) and roll out. Financial aspects, quality of service, environmental impact and previous experience were secondary criteria.
Norway’s emphasis was not on raising as much money as possible from the licensing of spectrum for 3G mobile systems. Rather the goal was to encourage rapid network development and to increase the country’s overall competitiveness. In Norway, wireless service providers are required to pay moderate administrative and frequency management fees. Service providers awarded 3G spectrum licences were required to pay a special annual fee of approximately USD 2 million. In addition, subject to parliamentary approval, 3G licensees were required to pay a one-time lump sum of approximately USD 11 million. These sums are very small compared with the results of the spectrum auctions in the United Kingdom and Germany.
Sweden – In Sweden, spectrum licences for 3G mobile communications systems will also be awarded using a comparative evaluation process. Swedish law provides that spectrum licences must be awarded based on specific criteria. As in Norway, the main selection criteria for the award of 3G spectrum licences in Sweden are coverage and roll out. Modest fees will be charged for the spectrum licences. This approach is considered beneficial in that it will enable service providers to invest in network development. High spectrum fees paid by service providers will not be passed on to customers.