Federal Office of Communications OFCOM Telecom Services Summary of the Swiss Spectrum Auction ITU Regional Development Forum for Europe and Seminar for.

Federal Office of Communications OFCOMTelecom Services

Summary of the Swiss Spectrum Auction

ITU Regional Development Forum for Europe and Seminar for Europe and CIS, 7 – 9 May 2012, Warsaw, Republic of Poland

Urs von Arx, Head of Section Mobile and Satellite Services, 9 May 2012

2 Swiss Spectrum Auction I Summary

Overview

• Frequency situation• Existing licenses• New frequencies

• Tender process• Award alternatives• Licenses• Schedule

• Auction design• Combinatorial Clock Auction (CCA)• Spectrum packaging• Spectrum caps• Minimum bids

• Auction results• Summary


Current licenses will end within the next 2 - 4.5 years• Today's GSM-licenses (900 MHz and 1800 MHz band) will end at

31.12.2013 (former Tele2 frequencies in the 1800MHz band are already available).

• UMTS licenses (2.1GHz band) will end at 31.12.2016 former „Telefonica“ frequencies are already available

New frequency bands for mobile use available• 800 MHz band (digital dividend) from 2013 good propagation

• 2.6 GHz band (UMTS extension band): suitable for LTE

Why a tender?

Frequency situation Tender process Auction design Auction results Summary


Spectrum Availability in Switzerland

from now from 1.1. 2014 from 1.1. 2017

band mode bandwidth

800 MH FDD 2 x 30 MHz

900 MHz FDD 2 x 35 MHz

1800MHz FDD 2x 8.6 MHz

1800 MHz FDD 2 x 75 MHz

2100 MHz FDDTDD

2 x 15 MHz1 x 5 MHz

2100 MHz FDDTDD

2 x 60 MHz1 x 20 MHz

2600 MHz FDDTDD

2 x 70 MHz1 x 50 MHz

Why RefarmingSituation in Switzerland

Small Refarming Tender Process ConclusionTechnologySituation in Switzerland

Objectives/ Challenges Tender Process Conclusion

from 1.1. 2013



Award alternatives

• Direct assignment• Beauty contest• Auction

Auction chosen due to

• Transparency of the procedure

• Marked determines frequency values

• Marked determines the appropriate allocations not the regulator (small frequency blocks support tailor-made allocations to suit market needs according to the operators business models)

• Non discrimination of attendants (no privileges for incumbents and new entrants)

• Maximizing state revenue was not a target



Licenses

• Period• Until end of 2028 (security of planning and investments); frequencies can be used from that

point in time when they are available

• Transition period for frequency refarming (900/1800 MHz)• Newly acquired spectrum must be available to operators nationwide by 01.01.2015. For

the regions Basel and Geneva a deadline of 01.01.2016 applies.• Operator proposal to ComCom

• Technology neutrality• Flexible usage with regards to the future evolution of transmission technologies (beside

GSM, UMTS and HSPA further new technologies HSPA+ and LTE)

• Obligations• Coverage obligations:

- 50% of population for frequencies < 1 GHz

- 25% of population for frequencies in the 1800 MHZ and 2.1GHz (FDD) band

- general utilization obligation for TDD frequencies and frequencies in the 2.6GHz band• No further obligations with regard to QoS (left to the operators)• Rights of use may be withdrawn without compensation (surveillance) if the required

coverage is not provided (end 2018 (800MHz), end 2020(900MHz), end 2020 (1800MHz), end 2021 (2.1GHz), end 2019 (others))



Schedule

• Analysis, definition of strategy

2008 / 2009• Public consultation

2009• Opening the invitation to tender

30. November 2010• Postponement of the submission date

8. 2. 2011• Hearing

28. 2. 2011• Continuation of the invitation to tender

19. 6. 2011• Submission of candidature documents

30. 9. 2011• Decision on admission

Nov. 2011• Holding of the auction

6. – 22. February 2012• License award

May 2012



Process overview

Decision: rejection of

candidature

Candidate cannot participate in the auction

Briefing, questions & answers + additional questions &

answers

Opening of the invitation to tender

Submission of candidature documents

Examination of compliance with licence conditions and conditions for participation

Decision : acceptance of

candidature

Notification of definitive auction

rules

Start of auction procedure

Award of licenses



Combinatorial Clock Auction: Key features

• Flexible format, nearly independent from number of bidders

• The number of licenses as well as their frequency endowments is determined by market needs

• Bidder can bid on combination (packages) of different frequencies (depending from their business model)

• Aggregation risk minimized

• Strategic bidding minimized, CC format requires disclosure of real bidding willingness

• Second price rule to motivate truthful bidding



Combinatorial Clock Auction- the process

Lot application

Excess demand in any band

Clock rounds

Supplementary round

Excess demand in any band

Assignment round

Yes

Yes(increase price of band(s) with excess demand)

No

Principal Stage

No

Auction end



Combinatorial Clock Auction• Principal stage/ clock stage

• Determination of the extent of frequencies that are to be awarded to each winning bidder and the base prices that have to be paid by winning bidders

• Bidder can bid on combination (packages) of different frequencies (depending from their business model)

• Limitations by spectrum caps

• Assignment stage• Follows the principal stage • Determination of the specific frequencies that are awarded to each winning bidder and any

additional prices that must be paid by bidders for being assigned specific frequencies.• single round of (sealed) bidding

• Winner determination• The winning bids are the combination of those bids that generate the highest total value• Second Price • At most one bid from each bidder



Minimum bids

• Generally pricing is based on art. 23 OFMRL: Minimum bid must not be lower than the sum of the yearly frequency

license fees over the total license period plus the costs for the tender procedure

• For most attractive frequencies (800MHz and 900MHz band) the minimum bid is determined significantly higher

• Note: Candidates must submit a bank guarantee; the amount guaranteed by the bank corresponds to at least 50% of the value of the frequencies applied for relating to the minimum bid



Spectrum packaging• Package size: mostly 2 x 5 MHz

Bid categoryFrequency block size

# blocks Minimum bid (CHF) per frequency block

Category A (800MHz)

2x5MHz 6 21.3 million

Category B (900MHz)


Category C (1800MHz)


Category D (1800MHz)


Category E (2.1GHz TDD)

5MHz 1 4.15 million

Category F (2.1GHz TDD)

5MHz 3 2.7 million

Category G (2.1GHz FDD)


Category H (2.1GHz FDD)


Category I (2.6GHz FDD)


Category J (2.6GHz TDD)

15MHz 3 12.45 million



Spectrum caps

Motivation:• The acquisition of the total 900MHz spectrum by a sole bidder shall be

avoided• Suppression of any of the current operators shall be avoided• Current UMTS-operators should be enabled to acquire at least the same

amount of frequencies in the 2.1GHz band that they use today• No bidder shall be enabled to acquire the major part of today's GSM

spectrum (900 MHz, 1800 MHz) • No bidder shall be enabled to acquire more than 50% of the total FDD

spectrum



Spectrum caps (cont.)

The following caps were determined:

• total 2x25 MHz over the two categories A (800 MHz) and B (900 MHz); i.e. the category A and B frequencies acquired must not exceed 2x25 MHz in total

• 2x20 MHz in category B (900 MHz)• total 2x30 MHz over the two categories G and H (2.1 GHz paired)• total 2x35 MHz over the two categories C and D (1.8 GHz) • maximum 2x135 MHz of the total available FDD spectrum (categories A, B, C,

D, G, H and I)



Modalities

• Electronic auction via internet

• Auction server on the business premises of DotEcon in London

• Control of the auction by the auctioneer on the business premises of OFCOM in Biel, Switzerland

• Bidders can join the auction at their headquarters

• In order to avoid collusion between the bidders all information with regard to name of bidders, name of winners, frequency endowments as well as the auction price for the acquired frequency will be published after the auction has finished



Auction process

• 4 interested parties submitted a candidature document• 3 parties were approved by ComCom to take part in the auction

• Orange Communications SA, Sunrise Communications AG, Swisscom (Schweiz) AG

• Duration of the auction• 6 – 22 February 2012

• 51 clock rounds (8 days, 4 – 8 round per day)

• Increment of 5% in categories with excess demand

• 2 day break between clock rounds and supplementary round

• 8 hours for the supplementary round

• 1 day break between supplementary round and assignment round

• 2 hours for assignment round



Auction results

Frequency band Orange Sunrise Swisscom

800 MHz 20 MHz 20 MHz 20 MHz



2.1 GHz FDD 40 MHz 20 MHz 60 MHz

2.1 GHz TDD 0 0 0

2.6 GHz FDD 40 MHz 50 MHz 40 MHz

2.6 GHz TDD 0 0 45 MHzAdjudication price 154‘702‘000 481‘720‘000 359‘846‘000


• Overall result of the auction: CHF 996'268'000 (64% above reserve price)• 1 block in 2.6 GHz unsold• TDD blocks in 2.1 GHz unsold


Distribution of the frequency spectrum (I)

Swisscom

Sunrise

Orange

0 50 100 150 200 250 300

93.8

96.2

99.4

255

160

160

Spectrum distribution before and after the auction

purchased at auction

to date

MHz



Distribution of the frequency spectrum (II)

255

160

160

Spectrum distribution Auction result (MHz)

SwisscomSunriseOrange



Allocation of the frequency spectrum

800MHz (paired)

900MHz (paired)

1800MHz (paired)

2100MHz (unpaired)

2100MHz (paired)

2600MHz (paired)

2600MHz (unpaired)

Sp

ect

rum

dis

trib

utio

n

0 10 20 30 40 50 60 70

20

30

60

0

60

40

45

20

30

40

0

20

50

0

20

10

50

0

40

40

0

Auction result Spectrum allocation

OrangeSunriseSwisscom

MHz



Summary: Goals of the allocation achieved

• Consumers benefit: ü Technological innovation continues; new broadband services.ü High quality and good coverage

• Technological progress supported:ü free choice of technology ü Operators can use LTE (high-speed broadband even in peripheral regions)

• A frequency allocation with a promising future:ü All network operators acquire good spectrum + more spectrum

• Long-term planning and investment security: ü Network operators can plan up to 2028

• Appropriate proceeds from the auction: ü A scarce public resource valorised appropriatey ü Benefits the community



All information available under:

www.bakom.admin.ch

or mail to

[email protected]

Thank you for your kind attention

Auction Workshop: 13 / 14 September 2012 Biel, Switzerland

http://www.bakom.admin.ch/

mailto:[email protected]

Federal Office of Communications OFCOM Telecom Services Summary of the Swiss Spectrum Auction ITU Regional Development Forum for Europe and Seminar for.

Documents

summary spectrum availability

frequency refarming

band clock

frequency endowments

frequency values

summary licenses period

summary current licenses

tdd frequencies