The Spanish Government, through the Ministry of Economic Affairs and Digital Transformation, published on May 31 in the BOE the Order of Bases that establishes the conditions that will govern the bidding of concessions in the 700 MHz band, one of the priorities for the deployment of 5G technology. The auction will begin before July 21 and the minimum starting price will be 995.5 million euros, 15% less than the initially announced to facilitate deployment. The operators that plan to attend the auction have been moderately satisfied with the announced conditions, especially the duration of the license for a minimum of twenty years, extendable for a maximum of twenty more years, although they consider that the established coverage conditions are high. .
The auction in Spain for the low band of the spectrum reserved for 5G mobile technology, that of 700 MHz, should have been held at the beginning of last year, but the pandemic caused it to be delayed until last spring and its persistence caused a new postponement. Finally, as established in the Order of Bases published in the BOE last Monday, the auction will begin before July 21 and, if there is enough competition between the operators to cover all the concessions, the award could be completed even the same month of July. .
The most substantial modifications of the definitive conditions that will govern the bidding of concessions in the 700 MHz band refer to the revision of the starting prices, whose global figure decreases by 15%, to 995.5 million euros, compared to the 1,170 million euros from the public consultation. The frequency concession has also been modified, which will have a minimum duration of 20 years, extendable only once for a further 20 years. Regarding the coverage obligations, they have been detailed in a more precise and concrete way by including the list with the municipalities, airports, ports, railway stations and highways to which the operators must extend the coverage with each concession. Likewise, the exact dates of the time milestones in which these coverage obligations must be met are included.
By the end of 2022, a minimum of 30% of the municipalities will have 5G coverage in the 700 MHz band and within three years 70%, apart from the main roads, airports and ports in Spain
A total of seven concessions will be tendered. Four concessions correspond to two 2×10 MHz blocks and two 2×5 MHz blocks, in the paired band from 703 to 733 MHz and from 758 to 788 MHz for upstream and downstream communications. Three concessions will also be tendered in the 738 to 753 MHz band, each of which will assign the use of a 5 MHz block for downstream communications only. All concessions are at the state level, given the strategic importance of this frequency band, the extensive territorial coverage it provides, the need to guarantee efficient use of the spectrum and the purpose of avoiding an irregular and fragmented deployment.
The starting price of the four concessions of paired bands, for upstream and downstream communications in frequency division duplex (FDD) operating mode, is 175 million euros for each of the two blocks of 2×5 MHz and 270 or 350 million euros for the two 2×10 MHz blocks (their price varies because the coverage conditions are different). The three concessions for only downstream communications (SDL) of 5 MHz will each have a starting price of 8.5 million euros, as established in the following table included in the Order published in the BOE.
The limit on the number of frequencies that an operator or business group can have, in any territorial area, is a maximum of 2 x 15 MHz with respect to the paired band of 700 MHz and a maximum of 2 x 35 MHz with respect to the whole of spectrum destined for electronic communications in the paired bands of 700 MHz, 800 MHz and 900 MHz. The tender will be developed through the mechanism of simultaneous ascending multiple rounds. The auction will take place over the Internet, using a secure Electronic Auction Platform (PES).
The deadline for submitting applications for the auction will end at 1:00 p.m. on July 2, 2021. The Adjudication Table will analyze the applications submitted, evaluate the accompanying documentation and decide, before July 12, 2021, about the admission or rejection of bidders. Before July 19 there will be a training session on the operation of the auction and the auction will start before July 21.
Hedging obligations
The holders of the first four concessions in the table above must provide coverage in the 700 MHz band before December 31, 2022 to 30% of the municipalities listed in the corresponding appendix of the Order’s specifications and to airports, ports. , railway stations and roads specified in the corresponding appendix.
By June 30, 2024, coverage must be provided to 70% of the municipalities listed in Appendix II and before June 30, 2025 to all of the municipalities mentioned in Appendix II, apart from airports, ports, railway stations and roads of the specified and non-scheduled appendices by the end of 2022.
In addition to these generic coverage obligations, the holder of the first 2×10 MHz concession in the table above will have to provide coverage, at each of the time milestones, to an expanded list of municipalities. Therefore, the starting price is 270 million euros and not 350 million as in the following concession, subject to generic coverage obligations. On the other hand, those operators that take over one of the blocks in the 2×5 MHz band will have to cover 100% of the populations with more than 50,000 inhabitants before June 30, 2025, one year longer than the set by public consultation.
A total of seven concessions will be tendered: two blocks of 2×10 MHz and another two of 2×5 MHz, in the paired band of 703-733 MHz and 758-788 MHz, and three concessions in the 738-753 band of 5 MHz only downstream, all state-wide
Thus, by the end of next year, at least 30% of the municipalities will have 5G coverage in the 700 MHz band; Within three years, 70% of the Spanish municipalities that appear in the corresponding list will also have coverage and in four years, before June 30, 2025, all municipalities, apart from roads, airports and ports.
Naturally, many of these municipalities, especially the most important ones, will also have 5G coverage in the 3.5 GHz medium band, which provides much higher signal transmission speed but with the counterpart of the shorter range and coverage of the network. signal, especially indoors, which is practically null if you do not have a specific antenna.
Four interested operators
It is expected that the four operators that attended the previous 5G auction of the 3.5 GHz band will do so again in this 700 MHz band. They are Telefónica, Orange, Vodafone and MásMóvil, although with this last operator there are doubts about to finally come forward, because he was not satisfied with the auction design.
Regarding the third band planned for 5G, that of 26 GHz, nothing has been decided yet. At the moment, the four operators already offer commercial 5G services in the 3.5 GHz band, especially Vodafone, which was the first almost a couple of years ago, and the rest towards the end of last year, but with relatively limited coverage.
A few weeks ago, a couple of blocks remaining in the 3.5 GHz band were auctioned because they were busy and it is expected that contiguous blocks will be reallocated very shortly for the four operators (until now only Vodafone had them). It will be then that there will be much greater 5G coverage in the 3.5 GHz priority band and that will coincide, predictably, with the greater 5G coverage in the 700 MHz band starting this fall. By the end of next year, 5G coverage in Spain should already be very broad, at least about a third of the surface of Spain, which in terms of population will be much higher.
Experts predict that the delay in the concession of the 700 MHz band will cost the Spanish Treasury dearly, because the expectations of the collection operators with 5G services among consumers have been reduced over time, since by the At the moment, for multiple and different reasons, the planned objectives are not being met. The awarding of the 700 MHz band, which is very interesting due to the population density and geographical characteristics of many parts of Spain, could not have been much advanced either because it was occupied by digital terrestrial television (DTT) services. The pandemic has delayed everything, but it must be recognized that the transfer of DTT to other frequencies is complicated, much more so with the pandemic.
A deployment of 5,000 million euros
The calculations that are being considered for an effective deployment of the 5G network throughout Spain are about 5,000 million euros, to which must be added the amount of the final auction bid, which will depend on the interest it arouses among the operators. The only reference is the 2,100 million that the Ministry of Finance of Spain set as a collection objective in the General State Budgets of 2021. Between the starting price of 1,000 million and the 2,100 million objective, the final price will probably be found for all bidding for the 700 MHz band.
To all this has been added the fierce competition in the last two years between the large established operators and the virtual ones for obtaining clients of 4G mobile broadband and fixed broadband. The prices of the so-called convergent tariffs, which include fixed and mobile connection, in many cases without limitation of time of use, have been falling, dragged down by the economic and social crisis and the need of consumers to achieve the lowest possible tariff.
Meanwhile, the costs for operators continue to increase, especially due to the need to provide greater 5G coverage, from now on in both bands. All together, the definitive takeoff of 5G, both for companies and consumers, is in some way an unknown in Spain in the next one to three years, as is also happening in the majority of neighboring European countries. For 2024-25, the forecast is already much more favorable, both for 5G and for the economic and social recovery.