Frequency Auction

German carriers anxiously awaiting 5G auction

5G network, telecoms in germany
He's ready to connect customers. Now if only the government were, too. Source: Picture Alliance

Network operators in Germany, eager to know more about the government’s plans to auction frequencies for new 5G wireless networks, will have to wait until a new government is in place to approve the final conditions, including, most importantly, the spectrum prices, Handelsblatt has learned. For the carriers, that means several more weeks of anxiously pondering the viability of bidding on the coveted spectrum allocated for the next-generation cellular technology.

The plan, as it currently stands, is to auction frequencies this year and begin network construction next year, with the first commercial services to be available in 2020. The Bundesnetzagentur, the federal network agency in charge of running the auction, planned a meeting to discuss the details on Monday. But it appears to have jumped the gun by circulating a paper with its own ideas about conditions and processes for that auction. Lawmakers, it seems, are insisting that a governing coalition needs to be agreed first.

Network operators in Germany have been pressing the network agency hard for more details on the spectrum auction, as governments around the world begin to sell the precious 5G frequencies.

What really makes the latest cellular technology stand out from previous generations is its industrial applications. The buzzwords are Industry 4.0 (also known as the “smart factory”) and the Internet of Things. Sure, the upgraded technology also has the potential to connect millions of people and provide them with higher speeds to stream HD-quality video or use virtual reality applications on their mobile devices. But more importantly, it promises to link trillions of machines, sensors and other devices used in sectors as divergent as manufacturing, logistics, health and energy.

... pondering the viability of bidding on the coveted spectrum...

The agency’s proposal includes a blueprint for where and when new 5G networks are to be built and a targeted date of 2040 for completion. But it’s a sensitive political matter. The rollout was criticized by several lawmakers who cited, among other concerns, a lack of coordination with the transportation ministry. In response to the criticism, the agency’s president, Jochen Homann, wrote to the head of its advisory committee, Olaf Lies, describing his recommendations only as “discussion material” and promptly agreeing to withdraw his plan.

The licensing conditions and, in particular, the spectrum pricing require government approval, and are among a long list of issues now being discussed by Chancellor Angela Merkel’s conservative CDU-CSU bloc and the center-left Social Democrats to form a new government. According to an agreement reached in their exploratory talks, the parties hope to raise a minimum €10 billion ($12.4 billion) to €12 billion from the auction.

The aim is to use that money to help fund the roll out of fiber-optic infrastructure, which will be needed to transport ever-higher volumes of data over longer distances. Plowing funds into creating a “gigabit society” by 2025, with nationwide ultra-fast glass-fiber and wireless networks, is seen by Ms. Merkel’s conservatives and the Social Democrats as vital to defending the competitiveness of Europe’s biggest economy.

29 p22 The new mobile communications standard 5G-01

The more than €10 billion the 5G auction is expected to generate is far less than the record €50.8 billion raised in the government’s previous auction of 3G frequencies. That sum, however, eventually broke the back of a couple of network operators. Against that background, the carrier community is concerned that a competitive, no-limit auction could see prices soar once again.

“We paid €8.5 billion for (3G) frequencies,” Markus Haas, the head of Telefònica Deutschland, told Handelsblatt. “That should never be repeated.” Mr. Haas warned that if the government tries to squeeze the most out of bidders again and expect them to extend coverage into scarcely populated rural areas, “it’s not going to happen.”

John Blau is a senior editor with Handelsblatt Global. Daniel Delhaes covers politics and transportation for Handelsblatt in Berlin. To contact the authors: blau@handelsblatt.com and delhaes@handelsblatt.com

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