Germany's huge auction may be halted by legal action

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Germany's huge auction may be halted by legal action

E-Plus and O2 claim unfair rules, court to rule next week

By CAROLINE GABRIEL

Published: 11 March, 2010

READ MORE: Spectrum | Germany | O2 | E-Plus

Germany's plans to be one of the first European countries to auction digital dividend spectrum could be scuppered by legal action brought by two operators, in an echo of similar delays that have afflicted the UK's 2.6GHz plans. A regional administrative court could halt the process, even though the auction is due to commence on April 12.

According to Light Reading (http://www.lightreading.com/document.asp?doc_id=188954&), the administrative court of Cologne will review lawsuits filed by E-Plus and Telefonica O2 on March 17. The two operators have sued the regulator, BNetzA, and applied for suspension of the 800MHz auction, even though such a decision could delay plans to deploy LTE and increase rural broadband access. The Cologne court does have the authority to stop the process.

The two plaintiffs say that the auction is structured in an anti-competitive manner that favors the largest carriers, T-Mobile and Vodafone, which have already trialled LTE in the band. The smaller operators first brought legal action last November and the European Union could also intervene. At that time, Ad Scheepbouwer, CEO of E-Plus's parent company, KPN of Holland, commented: "Telefonica O2 and ourselves will look at this jointly, because we are in the same boat. We both are being discriminated in the spectrum process and we need to look at all of our options."

Germany aims to be the first major European economy to conduct an auction of the former broadcast TV bands around 800MHz, which are being earmarked for 3G, LTE and rural broadband expansion in most countries. But the smaller operators believe the rules will allow the big two to secure two-thirds of German spectrum below 1GHz, which is most suited to rural and low cost deployments. This is because T-Mobile and Vodafone mainly use frequencies in the 900MHz band for 2G, while E-Plus and O2 operate mainly in the 1.8GHz band.

E-Plus and O2 are also concerned that only three licenses will be auctioned, meaning one of the four cellcos will lose out - and analysts believe the unlucky company might well exit the market altogether because it will be disadvantaged in spectrum terms, especially for rural coverage and 4G.

The European Union - which is pushing for a harmonized approach to this band, almost entirely focused on mobile broadband - has already threatened legal action against the German process. Under EU law regulators have to allocate spectrum in an "objective and transparent way" that does not stifle competition or benefit incumbents.

If the sale goes ahead, the regulator will auction a total of 340MHz of spectrum in four bands - 1.8GHz, 2GHz, 2.6GHz and 800MHz.