Israeli mobile operators Cellcom and Golan Telecom have asked the country’s minister of communications (MOC) and minister of finance for approval to jointly bid in the country’s spectrum auction, which should occur in early December. The operators are protesting terms of the auction that require them to bid separately, saying that their existing network-sharing agreement is justification for the joint bid. Both MNOs have stated that the auction’s requirement that they each hold 20 MHz of spectrum will force each of them to pay much more for spectrum separately. The joint bid reportedly has been rejected by the MOC, which has also agreed not to set a time frame on when each operator must have its 4G network deployed.
While Israel’s first 4G spectrum auction is said to be set for this upcoming December (there has been talk of such an auction occurring since 2007), the country’s mobile operators were provided temporary access to 4G LTE frequency bands in July. At the time, each provider was able to request two 5 MHz blocks of spectrum. In the auction, a total of 65 MHz of spectrum in the 1800 MHz band can be bid on by the operators in blocks of 5 MHz each, at a starting price of ILS 10 million (US $2.8 million) per block. Israel’s largest and second-largest operators, Cellcom and Partner, can obtain up to two blocks, while the smaller operators can win up to four.
Israel was one of the first countries to offer 3G service in 2000; however its adoption and deployment of 4G has not been nearly as rapid. According to a statement by the MOC, Israel does not have enough 4G frequency bands to support all of the country’s operators, and due to the high cost of developing frequencies, it will allow MNOs to share networks. Conversely, the MOC will not agree to joint spectrum bids because it fears this would set a precedent and open the way to a joint bid by Hot Mobile and Partner, Israel’s other major operators. Additionally, the MOC would like to use the auction to bring new players into the market, and it fears joint bids may prevent that from happening.
While it would appear that the MOC has denied the request as a way to ensure fairer competition for smaller new players, its actions may actually bring about the opposite result. If claims made by Cellcom and Golan Telecom are correct, the MOC’s rejection of their request will result in some providers having more than 20 MHz of spectrum, of which the overage will need to be returned and rebid on. The ensuing prices will then be higher, due to the smaller number of frequencies available.
Decreasing competition through joint spectrum bids has been of concern in other global regions, as well. In the U.S., it has been reported that the regulator, the Federal Communications Commision (FCC) circulated a proposal in August that would bar mobile operators Sprint and T-Mobile from creating a joint venture to bid for spectrum in the 2015 auction of the 600 MHz broadcast TV spectrum. According to FCC wireless bureau chief Roger Sherman, the change to these rules, which were written in the 1990s, will ban national carriers from bidding together, although smaller wireless providers can continue to do so.
The above item appeared in a recent issue of The Tarifica Alert, a weekly resource that analyzes noteworthy developments in the telecoms industry from around the world. To access all of the latest articles and issues: http://www.tarifica.com/TarificaAlert.aspx