Finland to award 3.4 – 3.8 GHz in September

Finland to award 3.4 – 3.8 GHz in September

Finland aims to become a global leader in 5G and as a step in that direction plans to award the whole 3.5 GHz band to mobile in September 2018. The band has been identified as the primary 5G band in Europe and can be seen as a major enabler for higher data rates and increased capacity. The bandwidth is larger than in any previous mobile frequency award: a total of 390 MHz.

The key authorities, the Ministry of Transport and Communications (Mintc) and the Finnish Communications Regulatory Authority (Ficora), published draft award documents for consultation in May and the consultation runs until 25 June. According to the draft documentation the band has been divided in two parts, namely 3410 – 3600 MHz and 3600 – 3800 MHz, with somewhat different objectives and rules. The key facts can be summarized as follows:

3410 – 3600 MHz

  • Divided in 3 blocks, A1 – A3, 1 x 70 MHz & 2 x 60 MHz
  • Roll-out obligation: 99% of the population in mainland Finland within 5 years
  • In general, the coverage built at 700, 800, 1800, 2600 and 3600 – 3800 MHz counts towards the roll-out obligation
  • Specific roll-out obligation for the 3410 – 3600 MHz band: 60%
  • Spectrum cap: maximum of 1 block per operator
  • Operators can share networks, an operator’s own investment needs to cover a minimum of 35% of the whole
  • Some restrictions apply in the eastern border region (coordination with Russia still pending)
  • Valid until end of 2033
  • Reserve prices: 19 M€/70 MHz, 16 M€/60 MHz
  • Payment in 5 annual instalments

3600 – 3800 MHz

  • Divided in 3 blocks, B1 – B3, 2 x 70 MHz & 1 x 60 MHz
  • No roll-out obligation
  • Spectrum cap: maximum of 1 block per operator
  • Lower priority in the band; fixed access and satellite maintain the priority (practical implications somewhat unclear)
  • Significant geographic restrictions
  • Valid until end of 2033
  • Reserve prices: 5 M€/70 MHz, 4 M€/60 MHz
  • Payment in 5 annual instalments

In short, the upper band has less obligations but more limitations. These limitations, presumably together with higher and less efficient frequencies, make the band less attractive than the lower band. Thus also the reserve prices are clearly lower.

Finland is among the first countries to award the 3.5 GHz band for mobile. As expected elsewhere, also in Finland the new award is likely to mean a transfer of the band from Wimax or other fixed wireless users to mobile operators. As a consequence, the band is becoming more attractive that in turn may lead to high auction prices. For example, the recent auction in the UK for the lower part of the band raised a total of EUR 1.4 billion, or about 0.14 €/MHz/pop. On the other hand, in Finland the market is rather stable with the three big operators controlling the mobile sector; in consequence, the auction is unlikely to attract new entrants. Even more unlikely since the new award rules include no special safeguards for increased competition; e.g. no overall spectrum cap or set-asides for newcomers. In consequence, the three established operators are likely to share the band between themselves. It is worth remembering, however, that despite stability the Finnish market setting has delivered good results with the Finns being among the top users of mobile data. Based on the draft documentation the authorities see no need to change the well-functioning setting.

The 3.5 GHz band auction is planned to start on 26 September 2018 and it is run in SMRA format. Based on the proposed reserve prices the minimum auction revenue totals EUR 65 million, or about 0.03 €/MHz/pop. In comparison, the 700 MHz band auction in 2016 raised 66 M€ while the 800 MHz auction in 2013 raised 108 M€. The both of these were rather artificial as auctions and the frequencies were sold almost at the reserve prices. The forthcoming auction may well follow the same path.