Market newcomers shun Czech 5G auction, so govt rewrites rules

• Head of Czech regulator resigns over 5G spectrum sale
• Government changes auction rules without regulatory input
• Attracting a fourth player is state's top ambition for 5G
• But so far speculation on newcomers has come to nothing

Tensions between governments and regulatory bodies over mobile spectrum auctions are commonplace in this industry, but for a regulatory chief to become so impassioned about a government's handling of auction rules that he tendered his resignation...that's a bit more unusual.

One might almost believe that something else must be at play.

At face value though, that's what happened in Czechia this week. Jaromír Novák, chairman of the Czech Telecommunication Office (CTU), handed in his notice and published his resignation letter on Twitter, having – he claims – been excluded from government discussions on changes to the proposed 5G auction, changes that he could not countenance.

It appears he may have quit before he was pushed. Various Czech media outlets noted that his job was on the line at the weekend and local press reports this week quoted Karel Havlíček, Minister of Trade and Industry, as saying Novák was fired. In an official statement though, Havlíček simply announced that Hana Továrková will take over as the new head of the CTU, with immediate effect.

So, what's the problem between the government and the regulator, and what does it mean for 5G licensing in Czechia.

The latter point first. The government's decision to rewrite the auction rules means that the sale of 700 MHz and 3.5 GHz frequencies will not happen in the first half of this year, as previously expected. The Ministry now aims to have the rules clarified by mid-year.

Unravelling the tensions between Novák and the government is much less straightforward, in no small part because it's not altogether clear exactly what the state plans in its rewriting of the rules.

Havlíček insists the move was prompted by the lack of interest in the auction as it stood, or, more specifically, because the CTU's auction format did not attract a new player, either foreign or domestic, or any major investor, despite the fact that the regulator reserved a chuck of 700 MHz airwaves for a newcomer.

"The arrival of a fourth operator is very important in the context of making mobile data cheaper for the general public," Havlíček said in an official statement from the Ministry. "The current proposal of the 700 MHz frequency auction by the CTU did not allow a truly independent infrastructure operator to be established that could potentially be the fourth operator."

Further, the government feared the auction format could come under scrutiny from the European Commission for its discriminatory nature, Havlíček said. "Although we discussed the matter several times with the former head of the CTU Jaromír Novák, unfortunately, it had no effect."

Novák is standing by the auction rules he and his team have set out though.

The ministry's proposed changes to the auction conditions "will not improve the competitive environment in the Czech market, will jeopardize the goal of rapidly deploying the 5G network in the Czech Republic, and are likely to lead to a number of lawsuits between the [CTU] and some providers of electronic communications services," Novák warned in his Czech language resignation letter.

In the letter, which contains liberal use of terms like "transparent" and "investment environment," Novák defends the auction process the CTU set out. The conditions would allow for the entry of a fourth player in the 700 MHz band, but simultaneously dissuade would-be speculators whose presence would not benefit the market. The rules also include wholesale rules that would facilitate virtual players, he said. The letter also makes reference to the government's over-emphasis on the use of national roaming in the 3.5 GHz band, presumably to help a new market entrant.

To summarise, the government is hell-bent on attracting a fourth player to the market and is changing the rules of the auction in a bid to attract more interest, including – it seems – pushing the national roaming angle. The now former CTU chief disagrees with the government's stance, but with the Ministry pushing on regardless, felt he had no choice but to quit...especially as it appeared he was about to be shown the door anyway.

Now it's over to the new CTU chairwoman to sort out the spectrum sale.

"My priority...will be to prepare the new version of the auction for frequencies as transparently as possible," so that as many bidders as possible can participate," she said.

The big question, of course, is whether foreign players are really that interested in launching mobile services in Czechia. There have been rumours of companies like AT&T showing interest, or even a Chinese telco, aided by investment firm PPF, which already owns the O2 network in the country, but it's difficult to tell whether these names amount to anything more than idle speculation. It could well be that the rules of the auction are a red herring, and no matter what changes the government makes, newcomers will not come forward.

Whatever the outcome, the Czech government is – quite rightly – unconcerned about the potential delay in the 5G licensing process.

"The fact that the frequency auction will be announced later than originally anticipated has no impact on the development of 5G networks," the Ministry of Trade and Industry said.