Prices paid for spectrum in the 3.4–3.8GHz band vary widely. In 9 out of 14 awards we've tracked so far, operators paid less than 0.1 $/MHz/pop making it incredibly good value considering its importance for 5G. However this is not so in Italy where operators paid by far the highest price at 0.43 $/MHz/pop.
Rollout obligations have been commonplace, having been imposed in 12 out of 16 countries. However these more onerous conditions haven’t been reflected in cheaper lots. Operators face more demanding coverage requirements in three out of four countries where this band has been the most expensive.
Recognising the potential of this band for private networks and industrial applications, four regulators have set clear rules to facilitate these use cases. The majority haven’t, leaving it more in the hands of licenced operators. It’s probably too early to assess which of these approaches yields the best outcome, but the results obtained by Germany so far suggest that reserving part of the band for local licences sees private networks flourish.
Ensuring contiguous spectrum holdings for operators has been a relatively straightforward exercise. In most cases this has been easy due to the allocation of the whole band in one procedure. When sub-awards took place at different points in time, regulators have had to facilitate agreements between MNOs to swap spectrum holdings to achieve contiguity and allow operators to benefit from the efficiencies this generates.
Operators in Italy have had by far the worst deal in obtaining this spectrum
Prices for spectrum awarded in the 3.4–3.8GHz band have varied widely. In nine out of 14 completed awards we’ve tracked so far in our 5G Tracker, operators have obtained spectrum for less than 0.1 $/MHz/pop. Considering the importance of this band for 5G, this is very good value, and is less than half as much as paid for the 2.1GHz band (0.24 $/MHz/pop), and only slightly higher than spectrum in the 2.3–2.4GHz band (0.09 $/MHz/pop). Amongst Europe’s five largest countries (France, Germany, Italy, Spain, and the UK), operators have paid on average 78% more at 0.19 $/MHz/pop. Italy and Spain are clear outliers, with operators in Italy paying significantly more than MNOs in any other country (0.43 $/MHz/pop) whereas in Spain operators paid less than seven times as much ($0.06 $/MHz/pop). Dynamics in those two markets may partially explain the higher prices paid. In both instances operators could only bid for spectrum in the 3.6–3.8GHz band. Having to wait until 2029 for spectrum in the 3.4–3.6GHz band to become available, meant operators in Italy were bidding almost at any cost to obtain 5G ready spectrum.
Figure 1 shows how prices compare in the countries we’ve tracked.
In general, rollout obligations have been commonplace, having been imposed in 12 out of 16 countries. The nature of these obligations varies from detailed coverage obligations to more generic ones (e.g. deploying a minimum amount of base stations). The common adoption of these obligations reflects the importance that the 5G ecosystem is placing on these frequencies, which are particularly well suited to industrial use cases and FWA, which can go some way towards reducing the connectivity gap between urban and rural areas.
More onerous rollout obligations haven’t always been reflected in the price of lots. In three out of four countries where 3.4–3.8GHz spectrum turned out to be more expensive there were more demanding requirements. Conversely, no rollout obligations were imposed in some countries where this spectrum has been obtained relatively cheaply (Spain, Sweden). The most interesting approach is perhaps the one adopted in Hungary, where operators could benefit from discounts on the price of the licence if they committed to at least 10 of the ‘network development cases’ listed in the auction memorandum (these relate to covering existing or planned roads and railways in the country).
Regulators may not be doing enough to facilitate private networks
Due to the importance of the 3.4–3.8GHz band for local use and private networks, several regulators have sought to facilitate the leasing and sharing of these frequencies. Specific provisions have been introduced in four countries we’ve studied. Two types of approaches have emerged. Under one approach the regulator is directly responsible for the allocation of private permits in part of the band, whereas another is to make some of the spectrum awarded to national MNOs available to local providers through leasing agreements. What’s common to both these approaches is the focus on “Industry 4.0” i.e. industrial IoT which relies on interconnectivity, automation, machine learning, and real-time data. In most of the other cases, licence conditions make the leasing of these frequencies possible, without specifying further provisions, or otherwise are silent, thereby leaving licence operators to have more control over the spectrum.
The first of these approaches has been adopted in Germany and Sweden. In Germany, BNetzA launched the scheme in November 2019. Applicants can obtain multiple lots of 10MHz each, up to 100MHz in the 3700–3800MHz range, for 10 years with the option to renew until 2040. A use-it-or-lose-it clause requires licensees to use the spectrum within one year of award. In Sweden, the PTS has recently started to allocate spectrum in the 3720–3800MHz range with a view to granting five-years licences, renewable for another five.
Denmark and the Czech Republic have gone for the second approach. In the award of 3.4–3.8GHz spectrum, regulators in both countries attached leasing requirements to specific lots. In the Czech Republic, two lots of 20MHz each were subject to this obligation, whereas the Danish regulator made a 60MHz lot available for leasing. Greece also opted for a somewhat similar approach, whereby operators in ‘vertical’ markets are among those who can benefit from the wholesale access obligations imposed on the whole band, although it has not set out any further specific provisions. Table 1 compares the approaches taken by regulators in these countries.
While it is too early to assess which of these approaches yields the best outcome, it is worth noting that the German regulator reported satisfactory results a year into the scheme. As of July 2021, 139 lots of spectrum were assigned out of 142 applications. The list of companies operating these networks includes several industrial and automotive groups and universities. Operators such as Telefonica and Verizon are also on the list. Countries where detailed frameworks were not adopted may have missed the opportunity for private networks to flourish early on.
Regulators are facilitating contiguous spectrum holdings, where possible
Regulators are taking steps to facilitate contiguous holdings in the wider 3.4–3.8GHz band, in order to achieve a more efficient allocation of the spectrum. Contiguous holdings result in reduced costs for operators, since they are able to use their new spectrum without deploying new equipment (they can deploy in a band from the same radio). In 12 out of 16 awards, this has been a straightforward exercise since the whole band has been allocated in one single procedure. However, there are some cases in which the 3.4–3.6GHz and the 3.6–3.8GHz segment have been auctioned separately, or others where only one of the two segments of the band has been auctioned.
In the Czech Republic and UK, operators have obtained spectrum in each segment in two separate auctions, three years apart from one another. This has led both regulators to pursue agreements between MNOs to minimise fragmentation. In the UK, Ofcom left operators to negotiate the position of the lots among themselves. O2 and Vodafone eventually swapped the respective 40MHz lot, which resulted in O2 having a contiguous 80MHz lot in the 3720–3800MHz range. Vodafone’s holdings are not contiguous, but the operator is now satisfied with “good proximity”.
In the Czech Republic, the process saw closer regulatory oversight compared to in the UK. The CTU attached refarming obligations to the licences on offer in each of the two awards. In the 3.6–3.8GHz award of 2017, operators had to accept that spectrum holdings could be redistributed after the 3.4–3.6GHz tender, which eventually took place in 2020. In the 3.4–3.6GHz award, the CTU required MNOs to either agree to spectrum swaps between themselves, or to submit a request for reallocation within 60 days of receiving a call for request from the regulator. The CTU set out a mechanism to ensure contiguous frequency holdings even in the event that operators would not reach an agreement between themselves. In practice, this was not necessary since all operators struck agreements to that effect ahead of the deadline.
Operators in Italy and Spain have only been able to obtain spectrum in the 3.6–3.8GHz band so far. The Spanish Government has already pledged to reorganise the wider 3.4–3.8GHz band later this year to enable contiguous holdings. In Italy, this will take a lot longer since the Government will renew WiMAX licences until 2029 – a further setback for the operators that paid more than anyone else in Europe.
