1.1 Growing success of the mobile internet
Mobile communication services are currently on the same development path as fixed services, in other words an accelerated shift to high-speed and ultra high-speed services.
More and more, mobile access is becoming an extension of fixed broadband and superfast broadband services - providing users, both consumers and businesses, with continuous and ubiquitous individual access to internet services over a broad range of devices, when outside the home or office. These services should soon be available anywhere, anytime, offering the same ease of use and wealth of applications as fixed services at home.
1.2 The mobile internet's societal, cultural and economic contributions
The success of the mobile internet is altering mobile consumption habits as a new generation of services, such as internet access and multimedia content, is gradually being added to existing voice and messaging services. It is also opening up new vistas in the area of entertainment, in how users consume digital content and access culture. The new devices that are available in the marketplace, and particularly smartphones and tablets, enable access to richer multimedia content and alter users' behaviour as they consume more and more data services.
The development of mobile access is also having a significant impact on the economy. It is helping to stimulate economic growth, especially for carriers and manufacturers. It is contributing to sustainable regional development by directly or indirectly helping to create jobs and improve businesses' competitiveness and productivity.
1.3 The advent of ultra high-speed mobile
The next stage of development is now underway in Europe and around the world.
Rollouts have begun on new fourth-generation systems that will gradually replace current 3G mobile networks over the course of the next decade.
The new mobile technologies that will make it possible to deliver performances that match market demand already exist, and particularly LTE, or Long Term Evolution. These technologies supply connection speeds of several dozen Mbps, and even in excess of 100 Mbps thanks to the use of broad channels of up to 20 MHz, which are non existent with 3G, and which offer latency that is low enough to enable the development of high-speed interactive applications.
To help usher in these new-generation technologies and handle the surge in data traffic, federal governments need to make new spectrum resources available, and guarantee that the frequencies are used as efficiently as possible.
2 Harmonised European regulation for ultra high-speed mobile
2.1 How 4G is progressing in Europe
Europe has chosen a harmonised approach to the deployment of ultra high-speed mobile whose implementation is already underway.
A number of countries across Europe have already awarded mobile licences that allow for the launch of fourth-generation mobile networks, while auction procedures are in progress in others.
Spain and Italy, for instance, recently concluded their spectrum allocation procedures which concerned different frequency bands. In Scandinavia and Germany, LTE rollouts have already begun, and ultra high-speed mobile offers are commercially available.
In France, 4G licensing procedures got underway in June 2011. The first round of awards was recently completed, and the second one is due to occur in the coming months. I'll come back to the specifics of the procedure in France a little later.
2.2 800 MHz and 2.6 GHz bands identified at the European level
I would like to say a few words about the harmonised approach that Europe has chosen for the development of new mobile networks.
Ultra high-speed mobile systems will launch in the same frequency bands in every country in Europe, with the 800 MHz and 2.6 GHz band having been identified at the European level for this purpose.
The European Commission harmonised the 2.6 GHz band inside the European Union in 2008, and a second decision from the Commission on the 800 MHz band resulted in its harmonisation in 2010. European Member States are therefore required to make these two frequency bands available for ultra high-speed mobile systems.
The harmonisation of frequency bands allows for the creation of a European market for network equipment and devices. The industry's maturity is a crucial ingredient in the success of a new technology. So the European approach aims to create a market on a scale that is large enough to stimulate more efficient technological developments, hardware at more competitive price and interoperability for users travelling inside the European Union.
From a technical standpoint, the harmonisation of frequency bands also enables better cross-border coordination for Europe's network operators.
This is the same approach that has led Member States across Europe to define harmonised frequency assignment plans in tandem with market players.
The arrangement chosen for the 2.6 GHz band was a division into two sections: two times 70 MHz of FDD spectrum and 50 MHz of TDD spectrum.
For the 800 MHz band, which is not as wide, it has chosen to arrange in two times 30 MHz of FDD spectrum and no TDD spectrum.
2.3 A neutral technological framework
European directives also instil a technologically neutral framework for the use of these frequencies.
Historically, the frequency bands used for mobile services were assigned to specific technologies. In the 1990s, the 900 MHz and 1800 MHz bands were dedicated for use by GSM systems, in other words second-generation ones, and the launch of 3G began with the assignment of the 2.1 GHz band which was to be used for IMT 2000 standards, which include UMTS.
Technological neutrality is the guiding principle in the allocation of the 800 MHz and 2.6 GHz bands today: the licences do not impose the use of any one technology in particular. This gives carriers the freedom to choose the most technically and economically suitable solution according to their needs and existing industry ecosystems.
For regulators, this once again means not setting industry developments and innovation in stone ahead of time. The central objective being to achieve greater efficiency, both economic and in the spectrum's management.
In future, this principle of technological neutrality will apply to all frequency band allocations. A transitional period from 2011 to 2016 has been set to allow regulators to gradually lift restrictions on the technological standards can be used with the different frequencies.
The ultimate outcome then is that mobile carriers should eventually be able to deploy LTE networks on all of their frequency bands.
3 4G objectives and frequency allocations in France
3.1 Timetable for spectrum allocations
In France, the process of preparing the terms of allocation for the 800 MHz and 2.6 GHz bands was consistent with these efforts being devoted across Europe to making new harmonised frequencies available for the deployment of 4G mobile networks.
ARCEP began its preparatory work back in 2009, with an approach rooted in transparency and broad consultation. This process was carried out in tandem with all of the stakeholders, from both the public and private sector. ARCEP performed two public consultations where it expressed its perception of the central issues surrounding ultra high-speed mobile, and proposed guidelines for addressing these issues.
The stakeholders - i.e. carriers and industry players, along with local authorities - therefore had two opportunities to fully express their views on the development outlook for 4G, from all angles: economic, technological and societal.
At the same time, these consultations allowed ARCEP and the French Government to set an overall roadmap for ultra high-speed mobile, which included a sequential processing of the different spectrum resources that were available, taking into consideration the needs expressed by market players and the industrial maturity of the equipment:
- first, the allocation of the FDD portion of the 2.6 GHz band;
- next, allocation of the 800 MHz band, which is part the digital dividend;
- then, once these two frequency bands have been allocated, a new round of efforts will be devoted to setting the terms of allocation for the TDD portion of the 2.6 GHz band, and to introducing technological neutrality in the mobile bands that operators are already using (900 MHz, 1800 MHz, 2.1 GHz).
The allocation of the 2.6 GHz FDD and 800 MHz bands is already underway, with both procedures having been launched in June 2011. The deadline for applicants wanting a licence to use the 2.6 GHz band was 15 September, and the results were made public on 22 September 2011. The deadline for the 800 MHz band is still a little ways off, having been set for 15 December.
Here, I'd like to talk a little about the French experience in allocating these two frequency bands, in regard to the terms set for the call for applications and the initial results of 4G licence awards.
3.2 Core objectives set for 800 MHz and 2.6 GHz band allocations
Several objectives have been set for the award of 2.6 GHz FDD and 800 MHz frequency band spectrum, of which three are major, core objectives:
a) digital regional development;
b) effective and lasting competition in the mobile market;
c) monetising the State's intangible assets.
a) Chief imperative: digital regional development
To begin with, French Law requires that the allocation of the 800 MHz band make digital regional development a top priority. This objective is specific to 800 MHz frequency bands that are part of the digital dividend, and whose propagation properties enable broad coverage.
Digital regional development guarantees that balanced social welfare and economic development is maintained across France's many regions, in both town and country. Information and communication technologies now have a tremendous influence on people's and businesses' choices of where to live and operate.
To satisfy this top priority of digital regional development, ARCEP defined the following four provisions.
First, ambitious coverage targets, both nationwide and at the departmental level.
Licences to use 800 MHz band frequencies set ambitious national and regional coverage targets. The rate of coverage of the French population that must be reached within 15 years is set at 99.6%. For mobile networks, these terms also include coverage targets for the population of each department (a department in France is roughly comparable to a small province).
Second, an obligation to perform rollouts in sparsely populated areas first.
The priority rollout area has been defined. It corresponds to the more sparsely populated parts of France, representing around 18% of its population and 63% of its surface area. These are areas that are hard to cover with high frequencies (above 1 GHz). Specific deployment obligations are attached to these areas to ensure that coverage there progresses apace with the rollouts being performed in more urban areas.
Third, the system includes measures for encouraging operators to share their network and their frequencies in these areas that are hard to cover.
Network sharing allows operators to reduce their rollout costs. These provisions will therefore make it easier for them to achieve their coverage targets, but also to supply high-speed connections thanks to the use of broad channels.
Lastly, a selection criterion tied to digital regional development.
In their licence application, candidates can commit to covering 95% of the population of each department. Making such a commitment will improve the applicant's scores during the selection stage.
b) Lasting competition in the mobile market
The second core objective in the frequency allocations is mobile market competition.
There are three "incumbent" mobile carriers in France, which rolled out their 2G services in the 1990s and which were the first to be awarded 3G licences in the early 2000s.
In 2010, ARCEP issued a licence to a fourth 3G mobile network operator, Free Mobile, which is already an established player in the broadband (ADSL) market. The upcoming introduction of this new carrier's services is already creating added momentum in mobile market competition, which naturally benefits end users.
The approach that ARCEP has taken to the award of 4G licences is in keeping with the competition analysis that resulted in issuing a licence to this fourth operator. Provisions have therefore been established to guarantee a fair distribution of the 4G frequencies between the four operators in France.
For the FDD portion of the 2.6 GHz band, there was a guarantee that the procedure would result in at least four winning candidates (provided there were at least four applicants). The maximum and minimum amount of spectrum that could be allocated to any one candidate was also set: a given operator could be allocated, at most, a duplex frequency block of 30 MHz. In addition, it was stipulated that in the case of an allocation to four candidates, each would obtain at least a duplex frequency block of 15 MHz (provided they had applied for that amount of spectrum).
The 800 MHz band, meanwhile, was divided into four blocks of frequencies - which therefore makes it possible to issue four licences in the 800 MHz band. This is not mandatory, however, since a given applicant can be awarded up to two of these blocks. It is therefore the procedure, depending on the bids made by the different candidates, that will determine how many licences are issued and the quantity of spectrum attached to each licence.
In a bid to sustain a state of balanced competition, there is a condition attached to the combination of blocks in the 800 MHz band: an operator who is awarded two blocks must provide roaming in the 800 MHz band to an operator who has been awarded spectrum only in the 2.6 GHz band, and was not awarded spectrum in the 800 MHz band allocation procedure. This roaming solution would therefore allow that second operator to gain indirect access to the 800 MHz band frequencies which are needed to achieve broader coverage nationwide.
In both allocation procedures, applicants are also invited to make commitments to host MVNOs. Virtual network operators can play a critical role in stimulating market competition, provided they have enough independence from their host carrier from a contractual, technical and economic perspective.
c) Monetising State assets
The final core objective is monetising the frequencies, which are a State asset. Given the value of this spectrum, and particularly the low frequencies, their monetisation represents a considerable stake.
Here, the candidates' financial bids to acquire the frequencies are one of the selection criteria for each of the procedures, added to which reserve prices are set for the different blocks of spectrum to be awarded in both bands.
3.3 Results of the procedure for 2.6 GHz band FDD spectrum
So I have given you a brief outline of the principles that guided ARCEP a few months back when establishing the awards procedures for 4G licences in France. And I can tell you now that, at least for the first stage of the process which concerned the 2.6 GHz band, the stated objectives were met.
ARCEP announced the results of the 2.6 GHz FDD frequencies awards procedure in late September. The applicants were the four French mobile operators. As a result, as provided for in the terms of the call for applications, all four operators were selected.
Each of the operators was awarded a different quantity of spectrum. Two of them, Orange and Free, were awarded a duplex frequency block of 20 MHz. Free Mobile was therefore allocated a large quantity of spectrum that will allow the carrier to supply its customers with very high-speed 4G services. Meanwhile, the other two operators, SFR and Bouygues, were each awarded slightly less spectrum: a duplex frequency block of 15 MHz.
So the result was a very balanced distribution of the 2.6 GHz frequency band between the four operators. Which means that each one can employ large channels of 15 or 20 MHz, and so guarantee high quality services on their future 4G networks.
The allocation procedure for 2.6 GHz band FDD spectrum also resulted in operators making sizeable commitments in terms of hosting MVNOs. Three of the four applicants committed to granting requests from virtual operators wanting to develop a full-MVNO business on their network. This gives MVNOs greater autonomy and allows them to become more competitive in the retail market, which in turn will help stimulate competition.
The outcome of the procedure was also satisfying in terms of monetising the frequencies. The auctions resulted in a very high valuation of the State asset, bringing in a total €936 million.