700 Mhz Spectrum Usage
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Ireland, the combinatorial clock is ticking. Mobile operator Three Ireland is petitioning the Irish High Court to issue an injunction that would prevent the country’s telecoms regulator, Comreg, from pursuing a new system for auctioning wireless spectrum, which was due to be introduced later this month.
Three’s argument is that the new auction process should be stayed pending a final ruling on Three’s earlier legal challenge to Comreg’s decision, made in December 2020, to award spectrum across four bands for the next 20 years. Comreg contends that there should be no delay to this month’s auction because it would severely impact the rollout of 5G technology across Ireland, to the disadvantage of both enterprises and consumers, and cause the Irish state to miss long-set and agreed EU targets for the provision of 5G.
Three’s main bone of contention is that Comreg’s 2020 decision would see new spectrum rights allocated in the 700 MHz, 2.1 GHz, 2.3 GHz and 2.6 GHz bands, via a mechanism known as a combinatorial clock auction (CCA) whereby interest parties bid for generic lots of spectrum rather than individual lots.
The CCA is an important recent innovation in auction design and has been adopted for many spectrum auctions worldwide. Three Ireland says this method puts it at a competitive disadvantage. Brian Kennelly, senior counsel for Three, submitted that should a stay not be granted, the judgement on the main appeal “could land” in the middle of the auction process itself, which would result in “great uncertainty in the market”. He added that both Vodafone and Eir (formerly Eircom) support the application for the stay despite being Three’s major competitors.
Brian Kennelly added that if the auction goes ahead as planned on 25 July, “strategic bidding” by others would prejudice Three’s ability to compete in the Irish market and thus harm consumers by denying them a better competitive environment. He branded as “insufficient” Comreg’s system to compensate Three for any losses found to have been incurred during the process.
In response, Margaret Gray, senior counsel for Comreg, argued that the status quo should remain and the auction proceed to meet the EU timetable for the introduction of 5G. She added that, for Comreg, “the issue stands or falls” on whether there would be serious irreparable harm to Three, and there wouldn’t be any given that the only possible harm, the loss of money, would be compensated for in full. For its part, Comreg reiterated that the auction will take place on 25 July, and that the entire bandwidth allocation and licensing process will be over by the end of October this year.
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Three took part in the 2 previous CCA auctions, MBSA1 in 2012 and the 3.6 GHz auction, what's their issue with this one?
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Three's objections are here.
Three's objection is that because of its existing holdings and the sub-1GHz spectrum cap it will have fewer combinations to choose from and Meteor and Vodafone could bid strategically to "each get a price discount on their first lot that is not available to Three."
Summarised later here including others objections.
In general, the issues that remain on the auction mechanism seem to be with the use of time- slicing; the expiry of Lots in the 2.1GHz band; and the asymmetric cap which produces a discriminatory effect particularly in the 700MHz band. There is then also the overriding issue with the choice of auction mechanism. Overall, we note that there remains opposition to the proposed use of Time-Slicing from all respondents. We note that Eir (like Three) does not believe that the Combinatorial Clock Auction (CCA) mechanism proposed is appropriate for this award but instead favours an award based on a Simple Clock Auction (SCA). Three agrees with Eir on this point and has previously submitted a proposal for an award based on a SCA. Vodafone it seems only favours the use of a CCA if the “complex set of lots emerging from the Time Slice structure“ remains. We also note the view from Imagine that CCA disadvantages smaller bidders but they are reluctant to change to a different format if that would add complexity and disadvantage smaller bidders. It would seem that the format which most suits respondents is one where Time Slices are eliminated and a Hybrid SMRA is used, or alternatively if Time Slices are retained then a SCA similar to that proposed by Three is used.
We note that neither the respondents nor ComReg have put forward any reasoned/considered factual argument for limiting Three’s activity in the auction to less than the other MNOs, while both Vodafone and Eir objected to being limited to bidding on 2 lots of 700MHz spectrum as is currently the case for Three under ComReg’s proposed rules. No analysis based on concrete evidence has emerged from ComReg or the other competitors to show why it is appropriate to limit Three in this way but not the other two mobile network operators. It has been portrayed that we are somehow trying to get some advantage in the auction, which is clearly not the case – we are only seeking a level playing field. We also reiterate that Three has not objected to ComReg’s proposed spectrum caps on their own, it is the combination of the caps and the CCA auction mechanism which is our main objection.
Three's legal issues seem to be that ComReg have not provided sufficient 'reasoning' to support the claim of harm to competition (if an alternative format was used) or that their current remedy is 'proportionate' and 'non-descriminatory', i.e handing back some of their sub-1Ghz spectrum prior to auction.
Good luck to the judge.
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By coincidence Colm Burke TD asks a question about shared infrastructure to address coverage.
...if consideration will be given to using a portion of the funds to the Exchequer to invest in collaboration with the telecoms industry on a shared rural network, including all three operators to address coverage black spots...
The Minister replies
The proposals [licence conditions] include significant coverage obligations for prospective winning bidders.
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Warning over decline in mobile service quality as Covid measures are withdrawn | Business Post
Article in yesterday's SBP on the ending of the Covid temporary spectrum licences
Some critics have suggested Comreg's plan to withdraw the temporary spectrum may be a tactical move to force mobile operators into an auction of new mobile radio spectrum.
The auction has been delayed after Three Ireland last year initiated court action against the regulator, claiming its decision to impose caps on how much spectrum individual operators could have left it at a disadvantage.
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Some critics have suggested Comreg's plan to withdraw the temporary spectrum may be a tactical move to force mobile operators into an auction of new mobile radio spectrum.
Odd view of the world. Looks like positioning for a blame game. Not sure if author is representing some interest.
Presumably the judge would first decide on whether a stay on the auction is appropriate while he decides whether there's any merit in Three's arguments about the auction, and if so whether he should impose a remedy of his own or hand it back to ComReg.
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Looks like Mr Justice McDonald will deliver his judgement tomorrow
High Court 20th July 2022
IN COURT 13 MR JUSTICE MCDONALD AT 14.30 O'CLOCK
2021 9 MCA THREE IRELAND -V- COMREG
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Judgement reserved and hearing adjourned yesterday, on the advanced warning list today, likely to give his decision on the stay today.
The High Court will give a decision on Thursday on an application by Three Ireland for a stay on the communications regulator’s move to go ahead later this month with a new auction system for the awarding of spectrum bands for mobile and wireless broadband services.
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The judge said any stay he granted was likely to be in place for just a few months until the judgment in the main appeal was delivered. Comreg would be entitled to apply to the court if it was considered there was any harm to the process of awarding the new spectrums, he said.
Among the reasons in favour of granting the stay, the judge said, was that Three would suffer serious and irreversible harm if it is successful in its main appeal and a stay had not been granted.
Decision due on Three’s request for stay on Comreg auction move – The Irish Times
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Short stay granted by the high court today, until the decision is made on the main appeal.
Decision delayed from yesterday to allow Three give an undertaking to compensate Comreg if they suffer any loss because of the stay.
High Court stay puts Comreg's imminent broadband auction on hold (irishexaminer.com)
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Comreg information notice on the auction process and court appeals to date
• In June 2021, a number of Interested Parties submitted the Phase 1 Application Documents to ComReg and subsequently became Applicants in the MBSA2.
• On 27 May 2022, Applicants submitted the Phase 2 Applications Documents and deposits to ComReg, and shortly thereafter, on 31 May 2022, Applicants were informed by ComReg whether they had qualified as Bidders in the MBSA2. In this communication, ComReg also notified Bidders that a Main Stage (i.e., an Auction) would be required, and ComReg subsequently set the start date 11 July as the start date for the Main Stage.
• On 2 June 2022, Three applied to the Commercial Court for a stay on the commencement of the Main Stage of the MBSA2 Auction (the “Stay Application”) pending determination of the Appeal.
• On 17 June 2022, ComReg informed Bidders that the start date of the Main Stage would be deferred to 25 July 2022, in light of the hearing of the Stay Application, and in circumstances where the time available from 25 July 2022 to 15 October 2022 could accommodate the MBSA2 being run, and necessary steps being taken, in order to award licences in advance of that later date.
The stay could affect exiting spectrum short term rights in certain bands, consultation process underway to get views from interested parties. Possible extension to the temporary licence process beyond October maybe?
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In opposing the Stay Application, ComReg, with the assistance of its external economic advisor Dr Maldoom(6) emphasised the importance of proceeding with the Auction and awarding long term licences. Dr Maldoom and a report prepared by an independent witness, Professor Peter Clinch, put the overall cost to the economy of a delay in the award of these long-term licences in the order of magnitude of €1billion per annum. Therefore, even a 3-month delay could cost the Irish economy in the region of €250m.
(6) Doctor Dan Maldoom is a founding Partner of DotEcon Limited and expert economic advisor to ComReg.
Hard to feel any sympathy for ComReg. They've neglected to mention that DotEcon is the chief beneficiary of the CCA auction process.
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How does a UK company benefit from the auction process?
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This is due back before Justice McDonald in the High Court, listed for October 17th.
Not know why but it'll be approx 3 months since the order was made to stay the auction by that date.
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Not sure why Comreg are throwing a tantrum over the court stuff and threatening to withdraw the 700mhz band completely and not just extend it till the judge makes his decision.
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I think that listing was posted before he granted the stay.
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No, it came after.
The High Court goes on "long vacation" now until early October, no judgement on the main appeal until at least early October. I wonder if there is a 3 month review in the stay Order?
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ComReg appeal the 'Stay' to the Court of Appeal. Hearing set for 19th October.
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That doesn't explain the Oct listed High Court date, for Mon that week
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Possibly the listing is a placeholder for Judge O'Moore's reserved judgement on the main proceedings heard last year. So if it doesn't happen, the rationale for the stay is undermined.
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It's listed for Justice McDonald so maybe linked someway with the Court of Appeal hearing a few days later, often difficult to follow how the courts work.
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Brace yourselves.
Eir, Three and Vodafone think that the current (€100/qtr) 700MHz Spectrum license regime should continue until Justice O'Moore issues a judgement.
"All temporary or short term rights should be provisioned on the administrative fee basis of the Temporary COVID Licensing framework. Once the long-term award process is concluded all fees should be effective from 15 October 2022 and backdated as appropriate." - Eir
"ComReg has in the past issued temporary licences for various purposes, including under the Test and Trial scheme, and also the 700MHz Covid-19 licences. In these cases, the licence fees are essentially nominal as the licences have a fixed short-term duration. We believe ComReg could apply this approach again in this case." - Three
The simplest way to allocate for this short-period of a few months, taking into account case is to continue allocations on existing conditions and spectrum usage fees for the short period required. - Vodafone
ComReg suggests (tetchily) that Three is not being entirely candid and that Three's approach...
"is simply a construct used by Three to justify little or no fees for the use of an important and valuable spectrum resource and arises only because because of the judgement of Mr Justice McDonald which has necessitated a proposed administratively determined decision focussed on MNO’s solely to avoid any potential for consumer disruption. As Three knows, this situation would not have arisen if ComReg was able to proceed with the long-term assignment process."
ComReg instead proposes another 3 month licence:
700MHz - €0.466 per MHz per capita or €401,000 per 2 x 5MHz per quarter
2100MHz - €0.273 per MHz per capita or €212,000 per 2 x 5MHz per quarter.
As for coverage, ComReg's legendary commitment is as ever.
"Coverage obligations on the 700 MHz band set out in the MBSA2 Decision (which would negatively impact on the value of long-term rights of use) do not apply;"
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In the summary Comreg also says
it creates continuing incentives for MNOs to seek to delay MBSA2: this is a rational outcome because it allows MNOs to postpone costly investment decisions while at the same time making significant economic gains without having to compete for this valuable spectrum in an auction or being subject to the risk of new entry;
Three still keeping the lawyers busy
• On 25 July 2022, ComReg lodged a notice of appeal to the Courts in relation to the Mr. Justice McDonald’s judgment on the Stay Application. On 29 July a hearing date of 19 October 2022 was set for ComReg’s appeal of the judgment on the Stay Application.
• On 12 August 2022, Three submitted its responding notice to ComReg’s appeal of the Stay Application judgment, and also submitted a notice of cross-appeal on certain aspects of this Stay Application judgment.
An initial 3 month temporary licence with the possibility of another up to 3 months if required
ComReg’s preliminary view is that the duration of any short-term licensing framework needs to be for the minimum duration necessary and that an approach where licences could be issued for up to 3 months is appropriate. ComReg will make provision for the possibility for a short renewal of no more than a further 3 months, although this was not considered likely by Mr Justice McDonald in his judgement.
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ComReg instead proposes another 3 month licence:
700MHz - €0.466 per MHz per capita or €401,000 per 2 x 5MHz per quarter
2100MHz - €0.273 per MHz per capita or €212,000 per 2 x 5MHz per quarter.
A lot more expensive than the licences issued over the last two and a half years, a nominal admin fee of €100/quarter, but small enough change for the MNOs I'd guess
Rough calculation, based on the spectrum licensed since 2021, per quarter -
eir - €802,000; Vodafone €802,000 + €636,000 (3 blocks); Three Ireland €802,000 + €1,272,000 (6 blocks) or €848,000 (4 blocks);
The figures might be different for the 2.1 GHz band as Vodafone's and Three's spectrum rights expire in Oct, a total of 2x15 MHz (3 blocks) and 2x20 MHz (4 blocks) respectively. 2x10 MHz (2 blocks) licensed to Three expired in July. eir's licence runs until 2027 and won't be charged a fee for the 2.1 Ghz band.
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@clohamon you used the word tetchy earlier, Three's response made me smile
Three and the commercial value of the licences and the resulting fees & the quantity of spectrum available
From their response
Spectrum Fees
ComReg should adopt pricing principles for the short-term licences that are appropriate and fitting to the purpose and circumstances of those licences. Logically then, the same principle should apply to all spectrum included in the short-term licences, albeit there might be different fees for different bands or quantities of lots. There are a number of different precedents and previous learnings that ComReg could draw on for guidance here:
1. Other temporary licences
ComReg has in the past issued temporary licences for various purposes, including under the Test and Trial scheme, and also the 700MHz Covid-19 licences. In these cases, the licence fees are essentially nominal as the licences have a fixed short-term duration. We believe ComReg could apply this approach again in this case.
2. Administrative cost recovery
Another approach which is in keeping with the current regulatory framework is to simply set fees as appropriate to recover the administrative cost of providing the licences. As no long-term rights are to be awarded here, this could also be an appropriate approach.
3. Opportunity Cost
ComReg has previously attempted to determine interim licence fees on the basis of opportunity cost. This is prone to difficulty and error as it is impossible to determine the opportunity cost accurately or fairly. In the current circumstances, given that the purpose of the licences is to simply provide for continuity of existing services over the short term it is likely that there is no alternative demand for the spectrum beyond existing use. This would mean that the opportunity cost is zero and that ComReg should just apply a nominal or administrative fee.
4. Commercial Value
We note that in paragraph 13 of the information notice ComReg referred to Justice McDonald’s judgment on Three’s stay application as follows: “ spectrum fees, noting that Mr. Justice McDonald in his oral judgement stated that such fees should be commensurate with to [sic] the commercial value of the radio spectrum which is a point with which ComReg agrees and which aligns with the regulatory framework”. This is a surprising misrepresentation of the position expressed by Justice McDonald, all the more so given that that ComReg was party to the proceedings and is in possession of the transcript.
Mr. Justice McDonald did not say that such fees should be commensurate with the commercial value of the radio spectrum, he said “For completeness, it should be noted that ComReg has expressed concern about State aid issues if the licence fee is pegged at the current rate of €100 but that seems to me to be capable of being addressed by imposing a commercial licence fee”. In fact he made no decision and gave no direction regarding the imposition of a licence fee. He merely reflected that ComReg had raised this as a concern but that he did not see as an impediment because it is capable of being addressed easily. He gave no instruction regarding how the fee should be set or on how to determine what is a commercial licence fee.
There is no established commercial value for such short-term licences. If ComReg was to seek a proxy for such value, then the only established reference would be the Spectrum Usage Fee that will apply to this spectrum following the award. This has been consulted on by ComReg previously and could be adopted on a pro-rata basis to the duration of the short-term licences to provide a proxy value for a licence fee. It would not be appropriate to include a component of the Spectrum Access Fee in the short-term licences. This component of the fee from the long-term licences reflects the value to licensees to obtain a 20-year licence. That does not apply in this case as licensees merely get short-term use of the spectrum.
Overall, we note that the purpose of the short-term licences is to provide for continuity of service for the benefit of consumers. The licence fee should not present an impediment to operators obtaining such continuity of spectrum. The licence fee imposed by ComReg for the Interim 2100MHz licences is excessive and has already acted as a barrier to Three extending its use of all 6 lots of 2100MHz spectrum, leaving 2 lots unused. This was pointed out to ComReg during the consultation process and has been acknowledged by ComReg’s own advisor Dr. Dan Maldoom in paragraph 23 a) of his recent report delivered to the court as evidence for Three’s stay application1
. In this Document, Dr. Maldoom states the following:
“a) The price paid for existing 2.1 GHz licences has already been acknowledged to likely be above reasonable estimates of current market value”
Whatever approach to licence fees is adopted, ComReg must ensure that it does not similarly become a barrier to the take-up of those licences. To do so would defeat the whole purpose of short-term licences in the first place.
Quantity of Spectrum
The purpose of the short-term licences is to provide for continuity of the status quo so as to avoid disruption brought about through loss of service. On that basis it would seem logical that they should provide for continuation of the currently licenced spectrum. For Three that means 2 lots of 700MHz and 4 lots of 2100MHz. As explained above, Three has had long standing use of 6 lots of spectrum in the 2100MHz band. We have been able to reduce to 4 lots during the Interim licence period, however this has not been without difficulty and [Confidential]. We have an open view at this time as to whether other bands which are covered by MBSA 2 should be included in the short-term licences. We also note that there are 2 unused lots of spectrum in the 2100MHz band at present. It might be possible to use these free lots during the Interim or short-term licence period to “tidy-up” the assignments or prepare for transition. We recognise that this may be beyond the scope of the main purpose of the short term licences however we are open to considering this if ComReg believes it might be useful or would contribute to the efficient use of this band.
We note in paragraph 13 iii of the consultation document that ComReg seems to have linked Three’s decision to apply for 1 lot of 2100MHz spectrum in the “A” licence to a lifting of Covid-19 restrictions and apparently to the fact that “growth in data has returned to normal and expected data growth, and consequently, capacity constraints previously due to COVID-19 are likely to have abated”. We would point out that this is incorrect and that this is not the reason for Three choosing to continue using 4 lots instead of 6. Three could well have continued to use all 6 lots to its benefit, however the excessive price imposed by ComReg for the Interim Licences forced a reduction to 4 lots. ComReg is well aware of Three’s position on this matter from previous consultations.
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Seeing as this thread has overspilled from 700MHz...
How might
be seen from a COMREG point of view ?
Just shrugged off as some US abberation ?
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Can't see that being a thing here, very low data rate from what I've read, country's a bit small and very well served by mobile networks. Maybe one of the MNOs might team up with starlink or other constellations using their own spectrum allocation.
That being said WRC-23 is looking at spectrum allocations for space to mobile. In ITU Region 1, this part of the world basically, a slice of spectrum in the 2100 MHz duplex gap, 2010-2025 MHz specifically, is being proposed. Different regions are proposing different allocations, no harmonisation for now.
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They'll be even more unhappy if they get overruled on the main issues or have to re-consider. That'd be another year of consultations, more temporary licences, reputations burned, their authority gone.
And then there's costs. Just looking at ComReg's payments to its lawyers, Mason Hayes and Curran, which now stand at €1.9M for 2021Q1-2022Q1. A large chunk of it (€1.3M) relates to Q2-2021 - the time of the original hearing. I presume that includes expert witness fees to Dr Maldoom of DotEcon. A further €256K has been paid directly to DotEcon in the same 5 qtr period.
Three have probably paid out something similar in legal costs, and not forgetting the three notice parties.
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Decision made; initial 3-month licence, Oct 2nd - Jan 1st, followed by a further 3-month licence if required.
Fees as per consultation; 700MHz €401,000 per 2 x 5MHz block, 2100MHz €212,000 per 2 x 5MHz block (pro-rata reduction to €179,739.13 for the initial 3-month licence as the period is less than 3 months, Oct 16th-Jan 1st)
Three Ireland will have a further licence fee to pay to bridge a gap as three of their four 2100 MHz licensed spectrum blocks expire Oct 1st and the new short-term licences commence Oct 16th, €120,508 per 2 × 5 block. They have applied for the extension according to the document. Comreg aligned Three Ireland's expiring licences with Vodafone's licence expiry date of Oct 15th.
As regards the short-term licence fees, what were the MNOs opinion of the fees
ComReg received responses from the incumbent licensees, the MNOs, Eir, Three and Vodafone. In the main, the MNOs supported ComReg’s proposals, with the exception of the proposed spectrum fees, which, among other things, they claim are “excessive”, “create a barrier to take-up” and “punitive”.
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