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Wednesday, May 05, 2010

Does the outcome of the Dutch 2.6GHz auction represent skepticism on LTE?

There are various spectrum auctions ongoing at present or the near future. The big ones are the 3G bands in India (2100 and 2600MHz), as well as a multi-band auction (800 / 1800 / 2000 /2600 MHz) in Germany.

But there is a smaller one that has just finished in the Netherlands, for the 2.6GHz band only. The outcome has been pretty lacklustre - just €2.6m. Martin Sauter has the breakdown of it here.

Trying to analyse this is a bit further, my current thoughts are:

- The two newcomers both have extensive fixed broadband assets - Tele2 has 431k subscriptions and the other (Ziggo) is a joint venture between cable operators. That potentially points to an "inside-out" strategy at 2.6GHz, plus Tele2 attempting to switch some traffic (data?) away from its MVNO arrangement.
- There are only three incumbents, which means that competition for spectrum in other bands is not as harsh as in other markets. Nevertheless, it seems odd that they only bid for 2x5 and 2x10MHz - although it's not immediately clear how those fit with the spectrum caps under the auction rules. The 5MHz is particularly strange, as it potentially means lower peak and shared rates for devices running in a "hotspot" 2.6GHz band location, rather than a wider macrocell.
- We can pretty much write off any opportunity for mobile WiMAX or TD-LTE in the Netherlands for the forseeable future, given the lack of bids for unpaired TDD spectrum.

One interesting possibility is that the Netherlands' very high fixed broadband penetration might mean that operators are looking to WiFi and femtocells rather than spectrum additions for capacity enhancement. The Dutch are already among the leaders in the deployment of picocells as well - both for public locations and for low-power GSM.

Another questionmark is around LTE. The results of the auction suggest that 2.6GHz (the main likely band for LTE in Europe) is not seen as particularly strategic - which may reflect reticence overally for the technology in Holland. I've suggested before that operators should lean on their vendors (and chipset suppliers) for support of 2.6GHz HSPA, which would seem to fit better with the allocations.

I'll try and catch up with the German, Danish and Indian auctions over the next week or so.

(There is also an ongoing 2.1 / 2.6GHz auction in Denmark)


Anonymous said...

In The Netherlands, the incubators were not allowed to bid on the 20MHz.

John Davies said...

KPN and Vodafone have less spectrum than T-Mobile in the Netherlands following T-Mobile's takeover of Orange, which explains why they were able to get more in the auction. The spectrum is tradable after ~2.5 years, with minimal rollout obligations. It is possible that the other winners therefore have effectively bought an option rather than having serious plans.
They could also use the threat of building a network to lean on the incumbents for lower MVNO pricing.

Sami said...

>it seems odd that they only bid for 2x5 and 2x10MHz
T-Mobile, KPN and Vodafone all got the maximum allowed under the rules. Considering the money they had to spend, I think it makes perfect sense.

> 2.6GHz is not seen as particularly strategic
It is not a question of strategy, if the incumbents have a hard limit on the spectrum they can get.

>The outcome has been pretty lacklustre - just €2.6m.
I think the resulting low sum is indication of the cap placed on the incumbents, rather than scepticism on LTE (or WiMAX or HSPA). As long as there is no competition in an auction, there is no need to pay higher price.

>We can pretty much write off any opportunity for mobile WiMAX.
Perhaps, but I'm wondering why in the title you chose to cast doubts on LTE, not WiMAX?

It will be interesting to see your analysis on the German auction.

As before, these opinions are mine, not my employer’s (Nokia).

Dean Bubley said...

Thanks for the comments on this.

OK, I mentioned I knew there were spectrum caps, but I didn't know exactly they fitted with this.

I also recognise the option pricing argument - but it's still fascinating to see that other possible bidders from the cellular community shied away from the potential for something "disruptive".

Clearly there's a supply/demand situation, but it's really telling that in this case, it isn't spectrum price that's the entry barrier for really innovative business models, such as public-sector networks, clever combinations with WiFi, fixed-wireless and so on.

This could also be a reflection that there's quite a bit of fibre in the Netherlands, so less argument for fixed BWA.

Sami - I didn't mention WiMAX in the header as there really isn't much sign of enthusiasm for 2.6GHz WiMAX in Europe anywhere. TD-LTE, however, seems to be "flavour of the month".