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Estonian Competition Authority

Competition must be trusted in granting 5G frequency licences

The Competition Authority formed an opinion about the competition of frequency licenses in the frequency band of 3,410-3,800 MHz, as a result of which, the undertakings acquiring the licenses will start building a so-called 5G network for communications services.

The Competition Authority finds that the frequency band should not be divided into three or four parts, and sees instead an opportunity to put the frequency licenses on auction as smaller blocks of frequencies. Frequency licenses for 3,410-3,800 MHz band in 5 or 10 MHz blocks have been auctioned in several other European Union countries. This situation would stimulate competition not only between the three major mobile communications operators but would also provide players with new business model with an opportunity to develop a 5G network in Estonia. The estimated application range of the 5G technology is much wider and more varied than merely higher data communication speeds.

The development of the offered communications services will depend on the manner of building the 5G networks. One choice, highly likely to be followed by the owners of nationwide mobile communications networks, is to establish the 5G network on top of the existing network and as an addition to it. Another, differing developmental direction is to establish the new network for 5G services as a stand-alone network, with respect to the choices stemming from the new standard. In the latter case, the owners of the 4G network will have no technological advantage. Business models with a future outlook are the competitive ones.
Pursuant to the European Commission’s guidelines, the frequency band should be divided into sufficiently large blocks, preferably with the bandwidth of 80-100 MHz. The Competition Authority estimates that the efficient use of the frequency range is not hindered by the blocks sold at auction for being significantly smaller than the total frequency range that a communications company will acquire in the end. Relevant criteria can be deployed at the auction in order to ensure equal opportunities for all participants, while also preventing fragmentation and inefficient use of the frequency range.
Märt Ots, the Director General of the Competition Authority, finds that the government should be consistent in trusting the market: “Communications undertakings have been granted the freedom of independent network planning in their frequency bands and a development obligation has not been deemed necessary in the competitive situation, so hope in those matters is being vested in competition, which is presumed to ensure the entire country’s coverage with mobile communication networks. It should similarly be presumed that the competition for 5G licenses will ensure an efficient use of the frequency range because the provider with the best business model will win.” The government does not have to foresee the exact final use of the frequencies being issued. “Every enterprise knows best its plans and needs and is able to estimate the risks entailed in buying the frequency licenses. The balance of supply and demand should determine whether an enterprise buys one, four or twelve 10 MHz blocks,” noted Ots.
Before publishing its opinion, the Competition Authority sent its draft to the Estonian Association of Information Technology and Telecommunications, to the Ministry of Economic Affairs and Communications, and to OÜ Levikom, the applicant. The feedback received did not indicate any significant hindrances to auctioning the aforementioned frequency range in Estonia as small blocks. The Competition Authority recommended that the Ministry consider this solution also when preparing the planned spectrum auction of the 700 MHz frequency range.