Spectrum Award for FWA Spectrum Award for FWA at 3.4 GHzat 3.4 GHz

PFWACC MeetingPFWACC Meeting

77thth May 2002 May 2002

The TeamThe TeamThe TeamThe Team

Radiocommunications AgencyWS Atkins Management ConsultantsSchemaProfessor Ian JewittDenton Wilde Sapte

Radiocommunications AgencyWS Atkins Management ConsultantsSchemaProfessor Ian JewittDenton Wilde Sapte

Presentation structurePresentation structurePresentation structurePresentation structure

What is on offer?Where are we in the award process?Licence PackagingAward process

– Payment mechanism– BIOLI

Auction detailsWhat happens next?

What is on offer?Where are we in the award process?Licence PackagingAward process

– Payment mechanism– BIOLI

Auction detailsWhat happens next?

What is the process about?What is the process about?What is the process about?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

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

3480 3500 3580 3600

100 MHz Duplex

20 MHzFWA

Uplink

20 MHzFWA

Downlink

Available Spectrum - new arrangementAvailable Spectrum - new arrangementAvailable Spectrum - new arrangementAvailable Spectrum - new arrangement

CEPT Rec. 14-03 Compliant 6 MHz extraCompatible with other EU

Analysis carried out so far….Analysis carried out so far….Analysis carried out so far….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

– Market research– Market modelling– Technology review– Network and cost modelling– Economic value analysis– Business case valuation– Award process design– Spectrum re-alignment

……the calendar aheadthe calendar ahead……the calendar aheadthe calendar ahead

May / June July Oct

Consultation process One-to-one presentations Regional road-shows

Notice/ Regulations

Information Memorandum

Applications

July

AwardProcess

Sept

Objectives of licence packaging design Objectives of licence packaging design and award process and award process Objectives of licence packaging design Objectives of licence packaging design and award process 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

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

Principles in determination of licence Principles in determination of licence regions (1)regions (1)Principles in determination of licence Principles in determination of licence regions (1)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

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

Principles in determination of licence Principles in determination of licence regions (2)regions (2)Principles in determination of licence Principles in determination of licence regions (2)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

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

Licence packagingLicence packagingLicence packagingLicence 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

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

MapMapMapMap– 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

– 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

– 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

Subscriber Data Highlights (Metro)Subscriber Data Highlights (Metro)Subscriber Data Highlights (Metro)Subscriber Data Highlights (Metro)

Licence Households Business Sites(by employees)

1-49 50+

Land Area (km2)

70% Coverage

Sources : PAF, Yellow Pages

Greater LondonSouth CoastSevernsideMidlandsNorth West

& YorksTyne-TeesCentral Scotland

4,800,000 950,000 500,0002,160,000

3,900,0001,000,0001,100,000

1,750 650 3501,300

2,900 800 950

351,500 65,600 38,300136,800

228,000 51,100 64,000

16,700 2,500 1,750 6,900

10,500 2,500 3,300

Subscriber Data Highlights Subscriber Data Highlights (Provinces)(Provinces)Subscriber Data Highlights Subscriber Data Highlights (Provinces)(Provinces)

Licence Households Business Sites(by employees)

1-49 50+

Land Area (km2)

70% Coverage

Sources : PAF, Yellow Pages

ScotlandNorthern EnglandNW, Yorks &

N WalesMidlands &

Mid WalesSouth West

& S WalesSouthernSouth EastNorthern Ireland

1,130,000 400,000 1,370,000

1,460,000

2,150,000 580,0002,670,000 660,000

10,900 3,600

5,750

5,100

7,250 2,350 9,300 6,544

2,000 200

1,750

2,350

950 600 2,800 2,250

60,30017,500

63,300

87,100

30,20024,00089,40043,900

The Award Process (1) The Award Process (1) The Award Process (1) The Award Process (1)

Auction 1Simultaneous multi-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

The Award Process (2)The Award Process (2)The Award Process (2)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

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

Payment mechanismPayment mechanismPayment mechanismPayment 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

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

Why staged payments?Why staged payments?Why staged payments?Why staged payments?

Lower up-front costs for operatorsOption to return the licence:

– greater flexibility to operators– “unwanted” spectrum can be

reallocatedEncourage participation

Lower up-front costs for operatorsOption to return the licence:

– greater flexibility to operators– “unwanted” spectrum can be

reallocatedEncourage participation

BIOLI (1)BIOLI (1)BIOLI (1)BIOLI (1)

Build-It-Or-Lose-It requirementMinimum number of base stations to

be deployed by the end of year 5Equivalent mesh technology access

points Connectivity to core network

Build-It-Or-Lose-It requirementMinimum number of base stations to

be deployed by the end of year 5Equivalent mesh technology access

points Connectivity to core network

BIOLI (2)BIOLI (2)BIOLI (2)BIOLI (2)

Metro Provincial

Greater London 15 South East 5 Midlands 10 Midlands and Mid

Wales 3

Northern 15 N.West, Yorks. and North Wales

3

Cent. Scotland 5 Scotland 5 South Coast 5 Southern 5 Severnside 5 South West and

South Wales 3

Tyne-Tees 5 North of England 5 Northern Ireland 5

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

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

SMRA auction details (1)SMRA auction details (1)SMRA auction details (1)SMRA auction details (1)

SMRA auction details (2)SMRA auction details (2)SMRA auction details (2)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)

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)

SMRA auction details (3)SMRA auction details (3)SMRA auction details (3)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

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

SMRA auction details (4)SMRA auction details (4)SMRA auction details (4)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

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

SMRA bidding roundSMRA bidding roundSMRA bidding roundSMRA bidding round

waive not waive

Proceed to next round

•No loss of eligibility

•With loss of 1 waiver

hold Withdraw bid

bid not bid

Licences on which current high bidder

Licences on which NOT current high bidder

Start of auction round

SMRA round (cont’d)SMRA round (cont’d)SMRA round (cont’d)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

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

Begin next roundPay winning bid

Pay withdrawal penalty if no further higher bid

No penalty if subsequent higher bid

Unsold Licences?Unsold Licences?Unsold Licences?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

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

What next?What next?What next?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

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