"Excessive bids" cause Czech regulator to suspend 4G spectrum auction

While most governments are determined to parlay the action and push bidders into stumping-up as much as they can possibly afford, and more, for the privilege of being granted access to new spectrum allocations (just think back to the feeding frenzy that characterised the 3G spectrum auctions a decade and more ago) for the operators these days it is very much a matter of "once bitten, twice shy" and thus the auctioning of so-called "4G" bandwidth, in some markets, is turning out to be a rather more sedate and careful process than the one that preceded it.

Except, that is, in the Czech Republic where madness was in the air until the regulator stepped in to pour digital Largactyl down some inflamed throats to calm the situation.

The CTU stopped the auction when escalating bids exceeded 20 billion Czech crowns (that is more than US$1 billion in a small country with a limited potential 4G market) and would result, in the regulator's judgement, in "unrealistically high prices of future 4G mobile services whilst seriously slowing the rate at which such services could be deployed and made operative."

In a press release the regulator's office reminded all interested parties that the main motivation of the auction is to provide the Czech people with fast, easy and inexpensive access to 4G networks.

Meanwhile, Pavel Dvorak, the chairman of the CTU said that "Any profit accruing to the state will be incidental to the [bidding] process, not the raison d'etre for it. When announcing the conditions in the first half of last year, we stressed that the main motivation of the auction was the quick availability of a 4G network for Czech citizens and the possible entry of a fourth operator. It was never about profits for the state."

He added, "Unfortunately, the reality is such that nobody from the new holders of the frequencies would be able to implement the new technology properly under these [auction and bidding] conditions. The state would indeed make a profit, but end-users would suffer the consequences of highly priced, partial services in the end."

To prevent this happening, the CTU is to revisit the auction's terms and conditions and will announce changes "in due course and certainly by later this year."

The 4G bandwidth auction actually began back in November last with Telefonica, T-Mobile, Vodafone and newcomer, PPF Mobile, all in contention for spectrum in the 800, 1800 and 2600 MHz bands, divided into 40 blocks.

There are suspicions that the three big players, with deep pockets, may have upped the ante in their bids in an attempt to keep the new player out of the market wherever possible, and in so doing, quite literally overbid to such an extent that the regulator had to step in to prevent further escalation

Although the auction was not designed to make money for government coffers, the Czech Ministry of Finance still wants some cash and has asked the regulator to provide it with a date, timetable and schedule for the re-commencement of the auction. The Czech Finance Minister, like the UK's Chancellor of the Exchequer before him, has egg on his face a having counted his chickens before they were hatched and factored income from the auction into the nation's accounts books. Now he'll have to undertake an embarrassing budget revision.

Mark Colville, Senior Manager at Analysys Mason has looked in detail into the Czech auction and concludes that bid prices in excess of 20 billion Czech crowns converts to about around €75 per head of population. To put it another way, given the total of around 300MHz of spectrum on offer it equates to €.25/MHz/pop. Mr. Colville concludes that whilst these prices are high, they are not necessarily excessive given what happened in the recent Dutch and UK auctions.