Fourth generation networks in Europe: a rollout at different speeds
European Union (EU27) digital dividend assignment plan, as of 1 January 2013 Source: European Commission, Wireless Intelligence, Visualisation: GSMA Intelligence.
2013 is said to be the very year of the 4th generation mobile network roll out, labelled 4G or Long Term Evolution (LTE). Still LTE network coverage in the European Union looks like a patchwork blanket. Reasons for the different speeds in building and offering the next generation internet protocol based mobile broadband network vary.
Many European countries have not yet allocated the so called digital dividend frequencies. The 800 MHz band has been abandoned by broadcasters after the switch to digital instead, from the larger analogue signals. These frequencies are technically better suited for LTE networks in rural areas, as they allow larger cells. The higher frequencies – in the Gigahertz bands - like 1.8 or 2.6 GHz frequencies - are in turn suited for smaller cells, and therefore used in more densely populated cities.
Two thirds of EU countries ignore deadline for allocating spectrum
According to an analysis by GSMA Intelligence (see their map), a consulting and research body of the mobile industry association dated February 2013, only nine member states have confirmed allocating digital dividend spectrum by January 1 of this year - the deadline that was aimed for by the European Commission's Radio Spectrum Policy Programme. Eighteen member states on the other hand announced delays for various reasons.
Of those eighteen, eight are expected to allocate 800 MHz during the second half of 2013, while five said they would follow suit in the first half of 2014, GSMA Intelligence wrote. Estonia has not announced any plans and Bulgaria wants to keep using the 800 MHz band for military communication. The patchwork persists.
The continued use of the frequencies for other services – like the military or broadcasting – is said to be one reason for the delay.
Different frequency bands auctioned off
Since the publishing of the GSMA Intelligence figures, several countries made steps forward. In the United Kingdom for example, the Office of Communication (Ofcom) in February allocated in sum 60 MHz in the 800 MHz range, and 185 MHz in the 2.6 GHz range to Everything Everywhere Ltd, Hutchison 3G UK Ltd, Niche Spectrum Ventures Ltd (a subsidiary of BT Group PLC), Telefónica UK Ltd and Vodafone Ltd. The winning bids added up to 2.3 million British pounds, a little less than expected, experts said.
High auction prices
On the other hand, the Czech colleagues of Ofcom, the Czech Telecommunication Office (CTU), hand-stopped their first auction process when bids rose to more than 780 million Euro. The reason invoked was a concern about drying up the market and thereby cannibalising the investment needed for the infrastructure rollout. Meanwhile, CTU received another objection to its restarted process. According to the Prague Daily monitor, Vodafone's Richard Stonavsky said on June 11, that firms could not be bidding for the frequencies in a situation in which the market regulation rules were changing. Vodafone and the other bidders mainly criticise the conditions imposed to the auction, especially the potential allocation of 800 MHz space to a fourth operator, the Prague Daily monitor reports.
Competition from 3G networks
Austria too, has postponed auctions several times. In Austria, the acquisition of Orange by Hutchison 3G UK Ltd (with the ‘Three’ brand) was said to have made the delay necessary. The new date that the Austrian regulator has set is in September 2013. Yet, Austria is a good example when it comes to the sole allocation of 2.6 GHz frequencies. The country had allowed operators (T-Mobile, A1 and Three, the latter the only service without volume caps) to start of with LTE in the 2.4 GHz range. But operators and regulators had to realise that in the cities, where higher frequencies can be put to use, LTE offerings face tough competition from the well established – and much cheaper - 3G services.
The incomplete coverage (only cities) and the use of different frequencies also creates a barrier with regard to a broader choice of LTE-enabled devices, turning away many users. The iPhone for example does not support lower frequencies. Europe-wide, there are also those countries where users just are not prepared to pay high prices for the LTE-enabled devices or promises of higher mobile download speeds. In crisis-ruffled countries such as Spain, or Greece (Cosmote offers LTE in Athens and Thessaloniki), for example where telecom revenues have decreased, operators are much slower to make the necessary investments.
Is Europe falling behind?
With the patchwork looking quite odd, concerns grow that Europe could fall behind the faster developing Asian and US markets. In their recent report, the GSMA warned that “US data connection speeds were now 75 percent faster than EU average“ and the “US was deploying LTE at a much faster pace“. By the end of 2013, nineteen percent (19%) of US connections would be to LTE networks, compared with less than two percent (2%) in the EU. The GSMA, while acknowledging that users do pay less on average in the EU for 4G, recommends that beside better harmonisation in spectrum policy in the EU, regulators should be much more lenient on mergers and much more caution on remedies.
Less regulator intervention?
A May 2013 report by Rewheel - the Finnish telecom market consultant - commissioned by Berec - the EU regulators’ association, on the other hand comes to a very different result and asks for much more competition for what it calls “protected markets”.
Contrary to the GSMA it recommends that consolidation by the takeover of independent challenger operators by incumbent operators should be blocked when the incumbent is already present in the national market. Regulators should carry out much more regular checks on the minimum number of national mobile operators necessary to foster competition.
Rewheel recommends inter alia to effectively break up “protected markets“ like those of Germany, Greece, Hungary, the Czech Republic or Belgium. According to the Finish consultants, Germany is, despite its early success in LTE coverage, no model for the EU’s 27 countries, as prices paid there by consumers were ten times higher than in the Scandinavian markets. In these markets, radio spectrum utilisation is interestingly ten times higher.