BY CAROLINE GABRIEL
This will be the year of another possibly unseemly scramble for sub-1GHz mobile spectrum, with the US's controversial incentive auction in the 600MHz band due to take place, and many countries round the world selling 700MHz licences. While some regulators in Latin America and Asia will be offering this spectrum as part of their initial digital dividend, which will transfer broadcast frequencies to mobile broadband use, Europe and the US are already embarking on their second dividends.
Even though most second-round LTE deployments will focus on adding capacity rather than increased coverage, the need to deliver even greater availability - especially if there are plans to turn off 2G or 3G - and to prepare for the Internet of Things, will keep carriers focused on sub-1GHz bands, and probably prepared to pay high fees for those licences.
Germany is to kick off Europe's sale of 700 MHz spectrum licences, the 'second digital dividend'. Its auction will begin on May 27, though any hopes of it ushering in new competition have been dashed - the participants will be the incumbent players, their number reduced to three by the merger of E-Plus and O2 Germany.
That deal was itself partly triggered by former KPN subsidiary E-Plus's failure to secure licences in the last auction of sub-1 GHz spectrum in Germany, which sold the 800 MHz airwaves of the first digital dividend. That result highlighted the importance of low frequencies, which help support the roll-out of wide coverage at affordable cost.
The remaining three operators are Deutsche Telekom/T-Mobile, Vodafone and O2, all three of which will vye for 2x30 MHz in the 700 MHz band, even though the current broadcast users will have to relocate, and the precise band plan has yet to be worked out at CEPT, the European standards agency.
There is debate over how far the EMEA region will be able to adopt the Asia-Pacific band plan for 700 MHz, which has also been accepted by most Latin American countries, but operators are generally keen to get as close to it as possible, to encourage a broad device ecosystem. There is also debate over proposals, backed by Qualcomm and others, to earmark a 2x3 MHz sub-section specifically for machine-to-machine usage, and the emerging LTE-MTC low power standard. Qualcomm and others believe that would help LTE operators be competitive in M2M markets such as smart cities, but others - including many carriers - want all spectrum to be usage-neutral and to have the freedom to deploy whatever seems most appropriate.
The German auction will also involve 900 MHz, 1.5GHz and 1.8 GHz spectrum, with a total of 270 MHz up for sale.
In 700 MHz, there will be lots of 2x5 MHz with minimum bids based on the fees set in 2013 (€75m per lot). There will be conditions attached, such as providing mobile broadband speeds of at least 10Mbps to 98% of the population and covering at least 95% of all states and 99% of all city states covered as well as 100% of the federal highways and ICE train tracks. These mandates must be met within three years from the start of the licences, which will run until 2031.
In the 900 MHz and 1.8 GHz GSM bands (in which licences expire soon), the regulator, BNA, has set a cap of 2x15 MHz per provider (three blocks) with a minimum bid of €75m for the 900 MHz band, €37.5m for 1.8 GHz and €18.75m for 1.5 GHz.
The Treasury is hopeful of higher takings than in the first digital dividend auction, in 2010, which yielded €4.385bn in total and €3.58bn from the 800 MHz licences. Analysts at Commerzbank are forecasting a figure of €4.5bn for the 800 MHz licences this time.
In France, the 700 MHz auction will also be held late this year, and the handover of the frequencies will take place between October 1 2017 and June 30 2019, a shorter timescale than some countries, such as the UK, are envisaging. In some areas of France, 700 MHz spectrum could even be available in 2016. The 800 MHz auction in France raised €3.5bn in December 2011 and the government hopes to secure an additional €2bn or more from 700 MHz.
Iliad's Free Mobile unit is likely to be a major bidder, as it has far less spectrum than its rivals and relies on MVNO deals with Orange (as well as its own extensive WiFi network). Adding sub-1GHz LTE to its dense deployment of WiFi homespots and 3G/4G femtocells could increase its disruptive effect, which has also sparked a vicious price war and a round of consolidation in France.
Despite all this activity in Europe, the 700MHz spectrum is likely to be incremental to many carriers, whereas in Africa, it will often be central to delivering broadband on an unprecedented scale, with the social and economic impact that delivers. There are signs of a coming mobile broadband boom in parts of this diverse continent - a recent report from the GSMA forecasts that the number of unique mobile subscribers in sub-Saharan Africa will pass the 500m mark in 2020.
For Region 1, incorporating Europe, Russia, the Middle East and Africa, a decision at WRC-12 created the possibility of allocating the 700MHz (694-790MHz) band after WRC-15 for mobile service in Region 1 (EMEA). 700MHz spectrum there - so from 2015 the region will be opening up 700MHz and 800MHz in the same timeframe in many countries.
The continent is likely to be one of the most significant drivers of decisions at the WRC-15 World Radio Conference in the fall. Africa surprised everyone at the 2012 conference by getting the ITU to agree that the 700MHz band, adopted in the Americas and much of Asia for mobile broadband, should also become a second digital dividend in Region 1 (EMEA), where 800MHz had been the initial area of broadcast spectrum to be repurposed.
Last September, a meeting of the ITU and the African Telecommunications Union (ATU), saw Africa become the first region in the world to come up with a harmonized band plan for both the digital dividend bands - both of which have often been implemented in a fragmented way in some parts of the world. This should be highly influential at WRC-15. The September meeting resulting in a coordinated mechanism for the dividend agreed by 47 sub-Saharan African countries. The consolidation of national plans conforms with the regulations originally set out in 2006 at the ITU's Regional Radiocommunication Conference (RRC-06), and with international switchover deadlines of June 2015 (for UHF) and June 2020 (for VHF in 33 countries).
Such landmark decisions highlight a world where new economies were putting their concerns firmly on the agenda. The same can be expected this time around, as Africa trades on the huge scale of its potential mobile growth, and pushes for regulatory and industry decisions which reflect its requirements, rather than having to adapt itself constantly to rules driven by Europe.
It remains to be seen how far Africa becomes a mobile products powerhouse, as opposed to a major source of business for outside suppliers. Its first homegrown handset maker to put its head above the global parapet, Mi-Fone, aims to be the Xiaomi of Africa, but generally, the region has not developed a native mobile ecosystem as yet.
However, the opportunities for suppliers will be huge during the later years of the decade. Even in countries where 3G never got beyond large cities, LTE is being embraced more wholeheartedly because its spectrum options and its technology make it able to support broader business models than 3G - rural coverage and fixed wireless broadband, using low frequency bands in underserved areas, as well as the classic capacity models in urban and high income areas.
All this potential is already driving a wave of acquisitions as local and outside multinationals seek to extend their reach in anticipation of the boom to come. Vodafone has several key ventures, such as its South Africa-based Vodacom group (based in South Africa, with other operations on Tanzania, the Democratic Republic of Congo (DRC), Lesotho and Mozambique), and Safaricom in Kenya. Orange and India's Bharti Airtel have also expanded rapidly in the region, while MTN is a major locally based multinational, also headquartered in South Africa.
There will be plenty of opportunities for these groups, and other entrants, perhaps from China, to snap up assets in high growth markets. Some African countries have large numbers of operators, and are ripe for consolidation, while others are just starting to transition from a state-owned monopoly situation, and opening up to outside investors or new players.