5G

Germany’s imminent 5G spectrum auction comes under fire

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By David Morelo, Telecom Times Europe Correspondent

Germany’s upcoming 5G spectrum auction has been subject to heavy criticism within the country since the Federal Network Agency, known locally as the Bundesnetzagentur or BNetzA, published its 119-page draft in September 2018. The regulator has now said it will move ahead with its action plan, and major telcos in Germany, as well as industry lobby group GSMA, are flagging the plan as a commercial nightmare.

The Federal Government considers the fifth generation of cellular mobile communications, which promises faster data speeds and lower latency, to be a key technology in enabling the upcoming digital transformation, offering enormous innovation and value creation potential.

“In the future, there will be billions of objects, sensors or machines worldwide that communicate with each other. The consumer internet will be enlarged and will become an industry internet,” explained The Federal Ministry of Transport and Digital Infrastructure (BMVI), in 5G Strategy for Germany. “This industrial and intelligent interconnection creates unprecedented challenges in terms of connectivity, capacity, safety and security, as well as service quality.”

Even though Germany’s 5G strategy is clear, the country currently does not meet the standard for 4G coverage, so the political pressure to improve the situation is huge. That pressure might have been a reason why the proposed 5G auction plan won a nod from lawmakers after months of controversy, with the BNetzA agency immediately opening applications and saying the auction would kick off in early 2019.

“Our decision sets vital preconditions for the digital transformation of industry and society. Through the award of frequencies, we are creating planning and investment certainty, and contributing to a fast, needs-based rollout of the mobile radio network in Germany,” said Jochen Homann, BNetzA President.

In the first 5G auction round, the BNetzA aims to auction spectrum in the 2.0 Gigahertz and 3.6 Gigahertz bands, which are ideal for industrial applications but not suitable for boosting Germany’s patchy data coverage due to their relatively short range. However, the 3.7–3.8 Gigahertz and 26 Gigahertz ranges, which are suitable for local applications, will be on offer as well.

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Jochen Homann, Bundesnetzagentur President

“A nationwide buildout with 5G technology would be excessively costly,” said Homann, who cautioned that the frequencies on offer were not suitable for countrywide coverage and noted that longer-range frequencies could be auctioned in future licensing rounds.

The BNetzA included several conditions for the upcoming 5G auction. Coverage obligations for the 3.6 GHz band include a population coverage of 98 percent with 100 Mbps and 10 ms latency by the end of 2022, as well as all major transport routes, and they will not be applicable to any new entrant.

Spectrum license holders are also required to negotiate with other players seeking network access, with the regulator acting as an arbitrator in the event the companies are unable to reach commercial agreements. Also, each existing carrier must install 1,000 5G base stations and 500 other base stations in certain areas by the end of 2022.

The requirement for operators to provide coverage across the country and the fact that newcomers are allowed to meet significantly lower coverage requirements and invoke a negotiation requirement for national roaming immediately led to pushback from Germany’s telcos and GSMA.

“The mobile industry is essential to delivering on Germany’s vision for 5G leadership. We are alarmed that—despite real and substantial concerns raised by the mobile industry on the original proposals—the proposed terms make the situation worse by doubling down on unrealistic conditions that put Germany’s 5G future at risk,” said Mats Granryd, Director General at GSMA.

“Although the frequencies on offer can provide very high capacity, they only cover a relatively small area and are not well suited to wide area coverage such as countryside roads, waterways, and railways. The investment needed to achieve the obligations far outweighs the value of the licenses. The auction rules contain massive advantages for newcomers that undermine fair competition by allowing them to meet significantly lower coverage requirements and to invoke a negotiation requirement for national roaming,” added GSMA.

Vodafone, one of Germany’s three major mobile operators—along with Deutsche Telekom and Telefonica Deutschland—even threatened legal action, arguing that the proposed terms are too onerous and “clearly unlawful.” The operator would like to see any attempt to ease the entry of a fourth network operator removed from the auction conditions because new operators would otherwise have no incentive to invest in their own infrastructure or expand coverage outside metropolitan areas.

Vodafone has even provided some data to disprove the idea that a new operator, most likely United Internet and its subsidiary 1&1 Drillisch, is needed to drive competition in the German market. According to the company, prices have been falling 2.1 percent per year since 2010, and, at 23 percent, Germany already has the highest share for virtual operators in Europe.

Increasing the number of virtual operators in the country could further the digital divide between urban and rural environments and decrease the telcos’ ability to invest just as the industrial and intelligent interconnection is creating unprecedented challenges and causing connectivity demands to grow at a massive rate.

Categories: 5G, EU, telco

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