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Spectrum Award for FWA at 3.4 GHz PFWACC Meeting 7 th May 2002

Spectrum Award for FWA at 3.4 GHz PFWACC Meeting 7 th May 2002. The Team. Radiocommunications Agency WS Atkins Management Consultants Schema Professor Ian Jewitt Denton Wilde Sapte. Presentation structure. What is on offer? Where are we in the award process? Licence Packaging

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Spectrum Award for FWA at 3.4 GHz PFWACC Meeting 7 th May 2002

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  1. Spectrum Award for FWA at 3.4 GHz PFWACC Meeting 7th May 2002

  2. The Team • Radiocommunications Agency • WS Atkins Management Consultants • Schema • Professor Ian Jewitt • Denton Wilde Sapte

  3. Presentation structure • What is on offer? • Where are we in the award process? • Licence Packaging • Award process • Payment mechanism • BIOLI • Auction details • What happens next?

  4. What is the process about? Award of radio spectrum licences at 3.4 GHz for Fixed Wireless Access or Radio in the Local Loop… … suitable for providing a range of broadband services; typically up to 2Mbps to the end user

  5. Available Spectrum - new arrangement Uplink Downlink 100 MHz Duplex 20 MHz FWA 20 MHz FWA 3580 3500 3480 3600 • CEPT Rec. 14-03 Compliant • 6 MHz extra • Compatiblewith other EU

  6. Analysis carried out so far…. • Market research • Market modelling • Technology review • Network and cost modelling • Economic value analysis • Business case valuation • Award process design • Spectrum re-alignment

  7. …the calendar ahead • Consultation process • One-to-one presentations • Regional road-shows Award Process Applications Notice/ Regulations Information Memorandum July July May / June Sept Oct

  8. Objectives of licence packaging design and award process • To ensure efficient and effective use of the available spectrum • To promote competition and innovation • To avoid spectrum sterilisation • To allow operators with viable business cases to bid

  9. Principles in determination of licence regions (1) • Iterative process • Segmentation of market at post-code level • Subscriber density • Propensity to purchase • analysis of SMEs and consumers • Types of services • Pricing – driven by market prices • Levels of competition from other service providers ….yields potential market share for the FWA operator

  10. Principles in determination of licence regions (2) • Engineering considerations: • Spectrum and Capacity • RF Performance and Range • Interference and Co-ordination • Products and Technologies • Trade-off: bandwidth requirements, QoS required, customer numbers and amount of spectrum (service contention ratio) • Modelling of network deployment • Financing assumptions ….to analysis of the business case • NPV • Sensitivity analysis

  11. Licence packaging • UK split into 8 areas: ‘hot spots’ + contiguous ‘provincial’ areas • 15 licence areas: • 7 “Metro” Licences • cover main metropolitan areas • 7 “Provincial” Licences • cover less densely populated areas, include smaller towns • 1 “combined” for Northern Ireland

  12. Map • Scotland • Central Scotland Metro • Scotland Province • North • Tyne-Tees Metro • North of England Province • North West & Yorks • Northern Metro • North West, Yorks and North Wales Province • Midlands • Midlands Metro • Midlands and Mid Wales Province • South West • Severnside Metro • South West and South Wales Province • South • South Coast Metro • Southern Province • South East • Greater London Metro • South East Province • Northern Ireland

  13. Subscriber Data Highlights (Metro) Licence Business Sites (by employees) Land Area (km2) Households 1-49 50+ 70% Coverage Greater London South Coast Severnside Midlands North West & Yorks Tyne-Tees Central Scotland 4,800,000 950,000 500,000 2,160,000 3,900,000 1,000,000 1,100,000 351,500 65,600 38,300 136,800 228,000 51,100 64,000 16,700 2,500 1,750 6,900 10,500 2,500 3,300 1,750 650 350 1,300 2,900 800 950 Sources : PAF, Yellow Pages

  14. Subscriber Data Highlights (Provinces) Licence Business Sites (by employees) Land Area (km2) Households 1-49 50+ 70% Coverage Scotland Northern England NW, Yorks & N Wales Midlands & Mid Wales South West & S Wales Southern South East Northern Ireland 1,130,000 400,000 1,370,000 1,460,000 2,150,000 580,000 2,670,000 660,000 60,300 17,500 63,300 87,100 30,200 24,000 89,400 43,900 2,000 200 1,750 2,350 950 600 2,800 2,250 10,900 3,600 5,750 5,100 7,250 2,350 9,300 6,544 Sources : PAF, Yellow Pages

  15. The Award Process (1) • Auction 1 • Simultaneousmulti-round ascending auction • 15 available licences • 1 licence per area • Auction 2 – unsold licences ‘on the table’ for 1 year • 1st price sealed-bid auction • Same reserve price as with SMRA • 30 days from initial bid

  16. The Award Process (2) • 15-year term • Licences for provision of FWA services • to end users • wholesale provision to ISPs and Telcos • backhaul of own FWA traffic incl. that resulting from wholesale • Technology neutral approach • No restrictions on number of licences • Full transparency on cross-ownership • Staged payments • BIOLI clause

  17. Payment mechanism • Staged payments with no requirement for bankers’ guarantees • 3 equal instalments over 15 years: • upon grant of licence • 5th anniversary of award • 10th anniversary of award • Option to return the licence at the end of the 5-year period, no further payments or penalties (12 months’ notice) … ‘renewable’ licence over 3 five-year periods

  18. Why staged payments? • Lower up-front costs for operators • Option to return the licence: • greater flexibility to operators • “unwanted” spectrum can be reallocated • Encourage participation

  19. BIOLI (1) • Build-It-Or-Lose-It requirement • Minimum number of base stations to be deployed by the end of year 5 • Equivalent mesh technology access points • Connectivity to core network

  20. BIOLI (2)

  21. SMRA auction details (1) • Eligibility depends on activity level previous round (first round = 15) • Activity level = Nr of licences on which current high bidder last round + Nr of licences on which bidder made valid new bid • Waivers – instead of valid bid • Allows bidder time to regroup • 3 waivers allowed

  22. SMRA auction details (2) • Withdrawals (of a single bid) • allows bidders to pursue and change ‘aggregation’ strategies • 4 withdrawals • Can withdraw current high bid • Penalty equal to difference of withdrawn bid and eventual selling price (or reserve if unsold) • No penalty if subsequently sold at higher price • New current price set by the RA (normally at previous high bid – but RA reserves the right to adjust subsequently)

  23. SMRA auction details (3) Info given to bidders at each round: • Current high bid on each licence • Identity of each current high bidder • Range of admissible bids on each licence • Eligibility level (bidding credits) of all bidders • Required activity level parameter

  24. SMRA auction details (4) Info given to bidders (cont’d): • Details of any withdrawals • Details of any waivers • Details of any retirements from auction • Nr of withdrawals each bidder has left • Nr of waivers each bidder has left

  25. SMRA bidding round Start of auction round waive not waive Licences on which NOT current high bidder Licences on which current high bidder • Proceed to next round • No loss of eligibility • With loss of 1 waiver hold Withdraw bid bid not bid

  26. SMRA round (cont’d) hold withdraw bid not bid Counts for act. level RA compares with other new bids to determine new high bid Does not count for act. level RA takes other new bid or reverts to previous high bid Counts for act. level RA compares with other new bids to determine new high bid Does not count for act. level RA takes other new bid or reverts to previous high bid Pay withdrawal penalty if no further higher bid No penalty if subsequent higher bid Pay winning bid Begin next round

  27. Unsold Licences? • Left on table until an application is made (1 year) • Application triggers: • Sale at reserve if no other interested party • Simple auction for each licence (not simultaneous) if 2 or more bidders • Initiator committed to bid at least reserve price • Sealed bid auction (30 days) • Straightforward: highest bid wins • Winner pays bid

  28. What next? • Closing date for comments 30 May 2002 • Summary to be made available by 10 June • Individual presentations by the Consultants to interested operators • Regional roadshows

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