Federal Office of Communications OFCOM Telecom Services Summary of the Swiss Spectrum Auction ITU Regional Development Forum for Europe and Seminar for Europe and CIS, 7 – 9 May 2012, Warsaw, Republic of Poland Urs von Arx, Head of Section Mobile and Satellite Services, 9 May 2012

2 Swiss Spectrum Auction I Summary Overview Frequency situation Existing licenses New frequencies Tender process Award alternatives Licenses Schedule Auction design Combinatorial Clock Auction (CCA) Spectrum packaging Spectrum caps Minimum bids Auction results Summary

3 Swiss Spectrum Auction I Summary Current licenses will end within the next years Today's GSM-licenses (900 MHz and 1800 MHz band) will end at (former Tele2 frequencies in the 1800MHz band are already available). UMTS licenses (2.1GHz band) will end at former Telefonica frequencies are already available New frequency bands for mobile use available 800 MHz band (digital dividend) from 2013 good propagation 2.6 GHz band (UMTS extension band): suitable for LTE Why a tender? Frequency situationTender processAuction designAuction resultsSummary

4 Swiss Spectrum Auction I Summary Spectrum Availability in Switzerland from now from from bandmodebandwidth 800 MHFDD2 x 30 MHz 900 MHzFDD2 x 35 MHz 1800MHzFDD2x 8.6 MHz 1800 MHzFDD2 x 75 MHz 2100 MHzFDD TDD 2 x 15 MHz 1 x 5 MHz 2100 MHzFDD TDD 2 x 60 MHz 1 x 20 MHz 2600 MHzFDD TDD 2 x 70 MHz 1 x 50 MHz Why Refarming Situation in Switzerland Small RefarmingTender ProcessConclusionTechnology Situation in Switzerland Objectives/ ChallengesTender ProcessConclusion from Frequency situationTender processAuction designAuction resultsSummary

5 Swiss Spectrum Auction I Summary Award alternatives Direct assignment Beauty contest Auction Auction chosen due to Transparency of the procedure Marked determines frequency values Marked determines the appropriate allocations not the regulator (small frequency blocks support tailor-made allocations to suit market needs according to the operators business models) Non discrimination of attendants (no privileges for incumbents and new entrants) Maximizing state revenue was not a target Frequency situationTender processAuction designAuction resultsSummary

6 Swiss Spectrum Auction I Summary Licenses Period Until end of 2028 (security of planning and investments); frequencies can be used from that point in time when they are available Transition period for frequency refarming (900/1800 MHz) Newly acquired spectrum must be available to operators nationwide by For the regions Basel and Geneva a deadline of applies. Operator proposal to ComCom Technology neutrality Flexible usage with regards to the future evolution of transmission technologies (beside GSM, UMTS and HSPA further new technologies HSPA+ and LTE) Obligations Coverage obligations: - 50% of population for frequencies < 1 GHz - 25% of population for frequencies in the 1800 MHZ and 2.1GHz (FDD) band - general utilization obligation for TDD frequencies and frequencies in the 2.6GHz band No further obligations with regard to QoS (left to the operators) Rights of use may be withdrawn without compensation (surveillance) if the required coverage is not provided (end 2018 (800MHz), end 2020(900MHz), end 2020 (1800MHz), end 2021 (2.1GHz), end 2019 (others)) Frequency situationTender processAuction designAuction resultsSummary

7 Swiss Spectrum Auction I Summary Schedule Analysis, definition of strategy2008 / 2009 Public consultation2009 Opening the invitation to tender30. November 2010 Postponement of the submission date Hearing Continuation of the invitation to tender Submission of candidature documents Decision on admissionNov Holding of the auction6. – 22. February 2012 License awardMay 2012 Frequency situationTender processAuction designAuction resultsSummary

8 Swiss Spectrum Auction I Summary Process overview Frequency situationTender processAuction designAuction resultsSummary

9 Swiss Spectrum Auction I Summary Combinatorial Clock Auction: Key features Flexible format, nearly independent from number of bidders The number of licenses as well as their frequency endowments is determined by market needs Bidder can bid on combination (packages) of different frequencies (depending from their business model) Aggregation risk minimized Strategic bidding minimized, CC format requires disclosure of real bidding willingness Second price rule to motivate truthful bidding Frequency situationTender processAuction designAuction resultsSummary

10 Swiss Spectrum Auction I Summary Combinatorial Clock Auction- the process Lot application Excess demand in any band Clock rounds Supplementary round Excess demand in any band Assignment round Yes Yes (increase price of band(s) with excess demand) No Principal Stage No Auction end Frequency situationTender processAuction designAuction resultsSummary

11 Swiss Spectrum Auction I Summary Combinatorial Clock Auction Principal stage/ clock stage Determination of the extent of frequencies that are to be awarded to each winning bidder and the base prices that have to be paid by winning bidders Bidder can bid on combination (packages) of different frequencies (depending from their business model) Limitations by spectrum caps Assignment stage Follows the principal stage Determination of the specific frequencies that are awarded to each winning bidder and any additional prices that must be paid by bidders for being assigned specific frequencies. single round of (sealed) bidding Winner determination The winning bids are the combination of those bids that generate the highest total value Second Price At most one bid from each bidder Frequency situationTender processAuction designAuction resultsSummary

12 Swiss Spectrum Auction I Summary Minimum bids Generally pricing is based on art. 23 OFMRL: Minimum bid must not be lower than the sum of the yearly frequency license fees over the total license period plus the costs for the tender procedure For most attractive frequencies (800MHz and 900MHz band) the minimum bid is determined significantly higher Note: Candidates must submit a bank guarantee; the amount guaranteed by the bank corresponds to at least 50% of the value of the frequencies applied for relating to the minimum bid Frequency situationTender processAuction designAuction resultsSummary

13 Swiss Spectrum Auction I Summary Spectrum packaging Package size: mostly 2 x 5 MHz Bid category Frequency block size # blocks Minimum bid (CHF) per frequency block Category A (800MHz) 2x5MHz621.3 million Category B (900MHz) 2x5MHz721.3 million Category C (1800MHz) 2x10MHz116.6 million Category D (1800MHz) 2x5MHz137.1 million Category E (2.1GHz TDD) 5MHz14.15 million Category F (2.1GHz TDD) 5MHz32.7 million Category G (2.1GHz FDD) 2x5MHz38.3 million Category H (2.1GHz FDD) 2x5MHz95.4 million Category I (2.6GHz FDD) 2x5MHz148.3 million Category J (2.6GHz TDD) 15MHz million Frequency situationTender processAuction designAuction resultsSummary

14 Swiss Spectrum Auction I Summary Spectrum caps Motivation: The acquisition of the total 900MHz spectrum by a sole bidder shall be avoided Suppression of any of the current operators shall be avoided Current UMTS-operators should be enabled to acquire at least the same amount of frequencies in the 2.1GHz band that they use today No bidder shall be enabled to acquire the major part of today's GSM spectrum (900 MHz, 1800 MHz) No bidder shall be enabled to acquire more than 50% of the total FDD spectrum Frequency situationTender processAuction designAuction resultsSummary

15 Swiss Spectrum Auction I Summary Spectrum caps (cont.) The following caps were determined: total 2x25 MHz over the two categories A (800 MHz) and B (900 MHz); i.e. the category A and B frequencies acquired must not exceed 2x25 MHz in total 2x20 MHz in category B (900 MHz) total 2x30 MHz over the two categories G and H (2.1 GHz paired) total 2x35 MHz over the two categories C and D (1.8 GHz) maximum 2x135 MHz of the total available FDD spectrum (categories A, B, C, D, G, H and I) Frequency situationTender processAuction designAuction resultsSummary

16 Swiss Spectrum Auction I Summary Modalities Electronic auction via internet Auction server on the business premises of DotEcon in London Control of the auction by the auctioneer on the business premises of OFCOM in Biel, Switzerland Bidders can join the auction at their headquarters In order to avoid collusion between the bidders all information with regard to name of bidders, name of winners, frequency endowments as well as the auction price for the acquired frequency will be published after the auction has finished Frequency situationTender processAuction designAuction resultsSummary

17 Swiss Spectrum Auction I Summary Auction process 4 interested parties submitted a candidature document 3 parties were approved by ComCom to take part in the auction Orange Communications SA, Sunrise Communications AG, Swisscom (Schweiz) AG Duration of the auction 6 – 22 February clock rounds (8 days, 4 – 8 round per day) Increment of 5% in categories with excess demand 2 day break between clock rounds and supplementary round 8 hours for the supplementary round 1 day break between supplementary round and assignment round 2 hours for assignment round Frequency situationTender processAuction designAuction resultsSummary

18 Swiss Spectrum Auction I Summary Auction results Frequency bandOrangeSunriseSwisscom 800 MHz20 MHz 900 MHz10 MHz30 MHz 1800 MHz50 MHz40 MHz60 MHz 2.1 GHz FDD40 MHz20 MHz60 MHz 2.1 GHz TDD GHz FDD40 MHz50 MHz40 MHz 2.6 GHz TDD0045 MHz Adjudication price Frequency situationTender processAuction designAuction resultsSummary Overall result of the auction: CHF 996'268'000 (64% above reserve price) 1 block in 2.6 GHz unsold TDD blocks in 2.1 GHz unsold

19 Swiss Spectrum Auction I Summary Distribution of the frequency spectrum (I) Frequency situationTender processAuction designAuction resultsSummary

20 Swiss Spectrum Auction I Summary Distribution of the frequency spectrum (II) Frequency situationTender processAuction designAuction resultsSummary

21 Swiss Spectrum Auction I Summary Allocation of the frequency spectrum Frequency situationTender processAuction designAuction resultsSummary

22 Swiss Spectrum Auction I Summary Summary: Goals of the allocation achieved Consumers benefit: Technological innovation continues; new broadband services. High quality and good coverage Technological progress supported: free choice of technology Operators can use LTE (high-speed broadband even in peripheral regions) A frequency allocation with a promising future: All network operators acquire good spectrum + more spectrum Long-term planning and investment security: Network operators can plan up to 2028 Appropriate proceeds from the auction: A scarce public resource valorised appropriatey Benefits the community Frequency situationTender processAuction designAuction resultsSummary

23 Swiss Spectrum Auction I Summary All information available under: or mail to Thank you for your kind attention Auction Workshop: 13 / 14 September 2012 Biel, Switzerland