Frequency Auction

Broadband for the Masses

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Germany needs better connections to the Internet world.

Less than 15 minutes after the president of Germany’s Federal Network Agency, Jochen Homann, symbolically pressed the start button on Wednesday, the results of the first round of bidding appeared on the wall in a small conference room at the agency’s field office in the southwestern city of Mainz: €1.3 billion, or $1.42 billion.

The final amount is expected to be much higher, given that all frequency blocks haven’t yet been submitted.

The same process will continue every day over the next few days or even weeks until the bidders, Deutsche Telekom, Vodafone and Telefónica, have carved up the spectrum among them.

Germany is selling licenses in the 700-megaherz band, becoming the first European country to open up the spectrum band deemed ideal for broadband deployments. Also on the block are spectrum licenses in the 900 MHz, and 1.5 GHz  and 1.8 MHz frequency bands.

The government's plan is for households to access the Internet at speeds of at least 50 megabits per second by 2018.

The federal government aims to share the proceeds with the states to improve the nation’s broadband infrastructure.

According to the United Nation’s International Telecommunication Union, less than a fifth of German households had a broadband connection faster than 10 megabits per second last year. With that penetration, Germany, Europe’s largest economy, trails behind poorer countries such as Hungary and Portugal.

The frequencies will allow successful providers to offer mobile high-speed Internet in remote areas where expanding fiber-optic networks is costly.

The government’s plan calls for households to access the Internet at speeds of at least 50 megabits per second by 2018, either through the fixed network or the mobile communications network.

The expansion of the fixed network, however, will take time. That’s why the government is pushing wireless broadband to fill the gap.

The 700-MHz wavebands can help in a couple of ways: They have further reach in terms of distance and penetration into buildings than most of the higher frequencies used by mobile operators. For decades, they have been used by to carry analog signals of regional television stations, which are in the process of coverting to digital transmission.

The government in Berlin hopes that mobile phone operators using the 700-megahertz frequencies, together with the other bands, can supply broadband service to 98 percent of Germany within three years, including continuous connectivity along highways and on high-speed trains.

But some doubt lingers about whether that level of penetration can be achieved in such a short time.

It will require broadcasters to release the 700-MHz frequencies and “quickly,” said Ulrich Lange, the transportation policy spokesman for the center-right Christian Democratic Union parliamentary group.

 

German Mobile Phone Market-01

 

Many broadcasters are still using the frequencies for digital terrestrial television, or DVB-T. Although they are allowed to use them until 2025, they are expected to switch to DVB-T2 in 2017, freeing up space within the band.

Another problem is that neighboring countries also use the frequency ban, and if they continue to do so, it will create interference in border regions.

In many cases, these are rural areas and are precisely those currently underserved with high-speed Internet.

As for the 800-MHz frequencies auctioned off five years ago, German providers are still unable to use the infrastructure built specifically for this purpose, because neighboring countries are still using the same frequency.

The auction is estimated to bring in €4.8 billion, or $5.2 billion, including about €800 million for the 700-MHz band. Those proceeds would be in the same ballpark as the results of the last frequency auction in 2010: €4.3 billion.

But they arere far cry from the €50.8 billion raised by the government, when it auctioned frequences for the third-generation, or 3G networks, in 2000.

 

 

Daniel Delhaes covers politics and transportation for Handelsblatt from Berlin. Ina Karabasz is a reporter. John Blau is a senior editor at Handelsblatt Global Edition. To contact the authors: delhaes@handelsblatt.com, karabasz@handelsblatt.com, blau@handelsblatt.com

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