Europe Makes Way for WiMax
These early auctions will set a precedent for how much 2.6 GHz spectrum will be set aside for operators wanting to deploy WiMax versus 3G cellular technologies such as UMTS.
The national regulators in these markets have adopted a flexible approach to spectrum allocation because they believe there is strong demand from those wanting to offer WiMax services in these frequencies. (See Table 1.)
The key decision facing regulators is how much of the spectrum to allocate for time division duplex (TDD), or unpaired spectrum, and how much for frequency division duplex (FDD), or paired spectrum.
TDD, which is used by WiMax systems, allows data to be sent and received over the same channel, while FDD, which is used by UMTS systems, requires two channels.
According to the recommendation from the European Conference of Postal and Telecommunications Administration (CEPT), regulators should allocate this spectrum as 50 MHz for TDD and 2 x 70 MHz for FDD. But some regulators find this guideline doesn't correspond with what market players want and are prepared to diverge from those guidelines.
In Norway, which is planning its spectrum auction for November 5, the regulator is not adhering to the CEPT band plan because of demand from the WiMax fraternity.
"There is a big demand for TDD spectrum," says Garl Sgerdingy, head of section for strategy and frequency planning at Norwegian regulator. "The cry for TDD spectrum is much louder than the cry for FDD."
The most likely reason for the big interest in unpaired spectrum is that the Norwegian government wants broadband to be ubiquitous. As many regions of Norway are sparsely populated, wireless broadband technologies such as WiMax are the best way to cover these areas.
In the Norwegian band plan for 2500–2690 MHz, 2 x 40 Mhz are allocated to FDD and 100 MHz is allocated to TDD.
And in order to ensure the most flexible use for the spectrum, the regulator will allow operators to change their spectrum allocations after they have bought a license. For example, if an operator buys TDD blocks, it can request to change the license conditions to FDD, if technical considerations such as interference will permit it.
The Swedish regulator will also allow these requests to change the frequency allocation between FDD and TDD after licenses have been purchased. Sweden plans a 2.6 GHz auction in the second quarter of next year. (See Want Swedish Spectrum? and PTS Plans Spectrum Auction.)
In the U.K., the 2.6 GHz auction is planned for early next year. U.K. regulator Ofcom has engineered the most complex and flexible auction for the 2.6 GHz spectrum. The auction will have two phases. In the first phase, operators will bid for generic lots, which will determine how much spectrum is allocated for FDD and TDD. In the second phase, operators will be for specific blocks of spectrum.
Ofcom states in the consultation document that there is "significant potential interest in gaining access to 2.6 GHz spectrum for unpaired use and the level of interest is likely to exceed the limit of 50 MHz... that would be available under the CEPT plan."
So, the U.K. auction could also differ from the CEPT band plan, and Ofcom seems to expect this outcome. Like Norway, there may be more demand for unpaired TDD spectrum (i.e., WiMax) in the U.K.
The Norwegians admire Ofcom's auction structure but are unable to adopt it.
"It's a very expensive and cumbersome procedure, but may get a more optimal result," says Sgerdingy. "We could not undergo such a complex auction procedure, so we chose a middle way."
But will the competing interests between WiMax and UMTS drive up the prices in these auctions? The standard answer is that it's too soon to tell, but that the prices for these licenses won't reach the heady heights of 2000, when operators paid a staggering £22.5 billion ($45.8 billion) for 3G licenses in the U.K. alone.
"This [U.K.] spectrum is going to be fairly highly valued," says Dean Bubbley, founder of Disruptive Analysis Ltd. "The existing operators and BT Group plc (NYSE: BT; London: BTA) are the likeliest candidates... someone with deep pockets." (See BT Wants WiMax.)
"It's very difficult to predict how expensive this is going to be, but we should get a really decent price for this spectrum," says Sgerdingy.
In Austria, the regulator launched a consultation in August to determine how best to allocate its spectrum based on market demand. It plans to hold its auction in 2008.
All these countries are examples of how European regulators are now adopting a so-called "technology neutral" approach to spectrum auctions. The intention is to let the market decide how spectrum should be used and not to dictate specific technologies for specific frequencies. (See Spectrum up for Grabs in Europe.)
The upcoming 2.6 GHz auctions will be the first time this approach has been implemented on any notable scale across Europe, and the impact on future spectrum allocation processes and mobile broadband technology deployments in the region will likely be significant.
— Michelle Donegan, European Editor, Unstrung