Paris, 9th July 2015
On 2 July 2015, ARCEP adopted the decision that proposed to the French Minister responsible for Electronic Communications the methods and terms for allocating frequencies within the 700 MHz band. Today, Emmanuel Macron and Axelle Lemaire are issuing their invitation to tender based on this decision.
The frequencies will be allocated through a multi-round ascending auction for six 2 × 5 MHz blocks. A more detailed description of the auction process can be found in the annex.
There are several objectives attached to the procedure:
- Monetising intangible State assets: the Government has set a reserve price of 416 million euros per 2 × 5 MHz block, or 2.5 billion euros for the entire band.
- Stimulating investment and regional development: The licences will include coverage obligations as strong as those attached to the 800 MHz band, as well as new obligations pertaining to on-board coverage of everyday trains.
- Effective and fair competition: all mobile operators are able to obtain frequencies through a transparent procedure that allows them to manage their outcome. In addition, to limit spectrum imbalances between operators, a single candidate cannot acquire more than 2 × 15 MHz in the 700 MHz band or more than 2 × 30 MHz of low frequency spectrum.
Interested parties are invited to submit their application to ARCEP before 12 pm on 29 September 2015. ARCEP plans to conduct the auction and to award the licences to the winning candidates before the end of 2015.
The 700 MHz band is currently being used by digital terrestrial television (DTT) services. The Government decided that, with improvements to DTT compression standards, it was possible to free up the 700 MHz band, and to allocate 2 × 30 MHz to mobile operators to enable them to keep pace with the exponential increase in mobile data traffic. This band will be freed up progressively across the country between 2016 and 2019.
Annex 1 - Description of the French 700 MHz band allocation process
The 700 MHz band will be allocated through a multi-round ascending auction, described hereunder.
1. Main auction
Six 2 × 5 MHz blocks will be auctioned simultaneously with a single unit price. Throughout the procedure, ARCEP, as the auctioneer, will gradually increase this unit price.
At the beginning of the first round, ARCEP asks the bidders about the amount of blocks they are willing to buy at the reserve price (416 million euros each).
At the beginning of each subsequent round, ARCEP increases the unit price for each 2 × 5 MHz block by 5 million euros. The bidders then submit the number of blocks they are willing to buy at this price. They can either maintain their demand, relative to the previous round, or reduce it by one block. Bidders are not allowed to increase their demand, or reduce it by more than one block at a time.
Throughout the auction, bidders are subjected to a spectrum cap:
- they are not allowed to bid on more than three blocks ;
- their demand, should it be satisfied, cannot lead them to hold more than 2 × 30 MHz of lower band spectrum (700 MHz, 800 MHz and 900 MHz).
When the aggregate demand (i.e. the sum of all the bidders' demands) reaches six, the auction ends and the blocks are allocated at the round price.
For instance:
- The demands of the bidders evolve as follows:
o Bidder A is bidding on three blocks at 416 million euros each. At 421 million euros, it is still bidding on three blocks. And so forth until the price reaches 486 million euros for each block, at which point bidder A reduces its demand to two blocks.
o Bidder B is bidding on three blocks at 416 million euros. At 426 million euros, it reduces its demand to two blocs. At 501 million euros, it is bidding on just one block.
o Bidder C is bidding on three blocks at 416 million euros. At 446 million euros, it reduces its demand to two blocs. At 486 million euros, it is bidding on just one block.
o Bidder D is bidding on three blocks at 416 million euros. At 466 million euros, it reduces its demand to two blocs.
- As a result:
o At 416 million euros for each block, aggregate demand is 12.
o At 426 million euros, it decreases to 11.
o At 446 million euros, it decreases to 10.
o At 466 million euros, it decreases to 9.
o At 486 million euros, it decreases to 7.
o At 501 million euros, it reaches 6.
- Bidder A wins 2 blocks. Bidder B wins 1 block. Bidder C wins 1 block. Bidder D wins 2 blocks. All bidders pay 501 million euros for each block they won.
In the unlikely event that demand should decrease below 6 (which would mean several bidders reduced their demand on the same round), an ad-hoc tie-breaking mechanism allows the determination of the winners. All 6 blocks will be allocated at the end of the auction.?
2. Positioning auction
After the main auction, the winners, their respective allotment and the final price of the blocks are all known. However, even though ARCEP guaranties contiguous allocations, the positioning of the winners within the band must be determined: leftmost, rightmost, in the middle…
In order to do so, ARCEP runs a single round sealed bid positioning auction: each winner submits a list, in order of decreasing preference, of positions within the band and a price it is willing to pay to get its preferred position within the band. ARCEP then sorts the winners in order of decreasing bid first and meets their preferences if possible. The winners pay the amount they submitted if they get their preferred position and nothing if they get their last choice. Should a winner get an intermediate choice of positioning, it pays an intermediate amount.
For instance:
The main auction results are as follows: Bidder A wins 2 blocks. Bidder B wins 1 block. Bidder C wins 1 block. Bidder D wins 2 blocks. Consequently, there is a total of four possible positions within the band, numbered from 1, for the leftmost position, to 4, for the rightmost position.
- The winners submit the following bids:
o Bidder A bids 50 million euros for the following positioning list: 1, then 2, then 3, then 4.
o Bidder B bids 40 million euros for the following positioning list: 2, then 1, then 3, then 4.
o Bidder C bids 30 million euros for the following positioning list: 1, then 2, then 3, then 4.
o Bidder D bids 20 million euros for the following positioning list: 1, then 2, then 3, then 4.
- The result of the positioning auction is as follows:
o Bidder A gets position 1 for 50 million euros.
o Bidder B gets position 2 for 40 million euros.
o Bidder C gets position 3 for 10 million euros (a third of what it bid).
o Bidder D gets position 4 and pays nothing for this position.
3. Payment for frequencies
For a 20-year license, winners pay the sum of the amount bid on the main auction and the amount resulting from the positioning auction. This total amount is paid in four equal instalments: the first is paid at the license delivery; the subsequent three are paid annually. Licensees will also be required to pay annually an amount equal to 1% of the revenue attributable to these frequencies.
Linked documents
Texts relating to the invitation to tender (in French)
ARCEP Decision No. 2015-0825 of 2 July 2015 proposing the methods and terms for allocating 700 MHz band frequency licences in Metropolitan France to establish and operate a public mobile radio access network, to the Minister responsible for electronic communications (pdf - 1.56MB) (Journal officiel of 9 July 2015)
The lists of municipalities in the annex to the decision are contained in a separate (zip) file (zip - 8.55MB) Order of 6 July 2015 on the methods and terms for allocating 700 MHz band frequency licences in Metropolitan France to establish and operate a mobile terrestrial system (pdf - 66KB) (Journal officiel of 9 July 2015) ARCEP Opinion No. 2015-0828 on the draft order on the methods and terms for allocating 700 MHz band frequency licences in Metropolitan France to establish and operate a mobile terrestrial system (pdf - 187KB) (Journal officiel of 9 July 2015)
Useful links: Draft legislation on the second digital dividend and ongoing upgrades to digital terrestrial television/Dedicated page on the French National Assembly (Assemblée nationale) website Information available on the French national frequency agency's (ANFR) website on the terms and conditions for making spectrum available to mobile operators/Dedicated page on the ANFR website Technical trials: the list of the trials authorised by ARCEP in the 700 MHz band, referred to in part I.2.3 of document I in the annex to the decision on the invitation to tender, is contained in the following document/List of authorised trials (pdf - 142KB) List of existing frequency licences issued for public mobile networks (pdf - 326KB) Press release of 19 June 2015