Czech telecoms regulator suspends the country’s 4G spectrum auction – Analysys Mason comment
On the 8 March 2013 the Czech Telecommunication Office (CTO) took the decision to halt the Czech Republic’s multi-band auction for spectrum at 800MHz, 1800MHz and 2.6GHz frequencies. The decision may raise some eyebrows given that the main reason cited for the cancelation was that the prices were excessively high.
Mark Colville, Senior Manager at Analysys Mason provides a brief insight into the reasons behind the cancellation.
1. Were the prices excessively high? The CTO has indicated that auction prices had reached CZK20 billion (EUR785 million). That translates to around EUR75 per head of population, or given the total of around 300MHz of spectrum on offer, EUR0.25/MHz/pop. These prices are undoubtedly high, but are they excessive? For comparison, the recent UK auction raised around EUR2.7 billion or EUR0.17/MHz/pop. Granted, the spectrum on auction in the UK didn’t include the 1800MHz band, but the prices were over 30% lower than those already reached in the Czech Republic. In contrast, the Netherlands auction of late 2012 raised around EUR0.63/MHz/pop. This auction included 900MHz spectrum, but the prices paid are considerably higher than those reached in the Czech Republic at the time of cancellation of the auction.
2. Why might excessively high prices be a problem? The CTO believes that high spectrum prices were likely to lead to excessive prices for consumers, particularly for 4G internet services. Perhaps more pertinently it also points out that the high prices might lead to a “time delay when placing next-generation networks in commercial operation”. These points echo some made by Neelie Kroes at the recent Mobile World Congress in Barcelona. Whilst it is not impossible that high spectrum prices could be passed on to consumers in the form of higher retail prices, this does assume a lack of competitiveness in the market. In the absence of coverage obligations and the like, high prices could though dampen incentives / ability to roll-out new networks quickly.
3. What does this mean in the context of the recent UK auction? It was widely commented that the prices fetched at the recent UK auction were below expectations. At the time Ofcom made the point that their aim had not been to maximise revenue and that their chosen format would have been very different had they wished to do so. It wasn’t that Ofcom’s approach was likely to artificially dampen prices to too great an extent, it’s more that that’s the way things worked out. This latest news from the Czech Republic though helps to further re-enforce Ofcom’s point that the relatively low UK auction prices may ultimately be to the benefit of UK consumers, one way or another.
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