ARCEP actions in the area of frequency allocation for the development of

broadband and ultra fast mobile networks

Press conference, 5 March 2009

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Contents

• Introduction: French strategy for allocating frequencies for high and ultra fast mobile networks………………………………………….………… 3

•Ultra fast mobile (4G): ARCEP public consultation on the award of licences in the 2.6 GHz and 800 MHz bands ..…………………………………..…..……… 5

•Mobile broadband (3G): 4th 3G licence and remaining frequencies in the 2.1 GHz band ……24

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French strategy for allocating frequencies for broadband and ultra fast mobile networks

• On 12 January 2009, the Prime Minister announced the overall strategy concerning spectrum:

– a combined call for candidates for licences in the 800 MHz and 2.6 GHz bands, enabling the rollout of broadband and ultra fast mobile services that will replace UMTS; the awards procedure is due to be launched before the end of 2009

– in light of this objective, the remaining UMTS frequencies in the 2.1 GHz band (15 MHz) need to be allocated rapidly, with 5 MHz set aside for a new entrant (the new entrant will also be allocated 5 MHz in the 900 MHz band)

• Today, ARCEP made its first decisions concerning the implementation of this strategy

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Ultra fast mobile (4G)

ARCEP public consultation

on the 2.6 GHz and 800 MHz frequency bands

Ultra fast mobile (4G): consultation on the award of licences in the

800 MHz and 2.6 GHz bands

ARCEP is launching a public consultation today whose purpose is to gather feedback from all parties interested in the system to be used for awarding spectrum licences in the 800 MHz and 2.6 GHz frequency bands.

This consultation is the first stage in the frequency allocation process.

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Consultation on the award of spectrum licences in the 800 MHz and 2.6 GHz frequency bands

• Regional development: a central issue

- Vast national coverage for ultra fast mobile

It was with the goal of achieving vast coverage for ultra fast mobile that digital dividend frequencies in the 800 MHz band were identified. This goal is one of the key points of the call for candidates procedure.

- Complementing the fixed networks

Ultra fast mobile will help reduce regional inequalities in fixed access. In sparsely populated areas where fibre cannot be deployed quickly ultra fast mobile networks will be able to supply consumers with faster connections than those provided by the copper network, within a relatively short timeframe.

Ultra fast mobile also provides a complement to fixed networks to deliver a continuity and a convergence of the services used at home or in the workplace and those consumed on a mobile device.

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Spee

d

Mobility

10 to 50 kb/s

100 to 400 kb/s

512 kb/s

5 Mb/s

50 Mb/s

100 to 300 Mb/s

Increasingly fast fixed and mobile networks

Mobile

55.1 million subscribers (30/09/08)

Mobile broadband

9.4 million 3G subscribers

(30/09/08)

Très haut débitUltra fast mobile

Fixed broadband

17.1 million subscriptions

(30/09/08)

Fixe40.2 million subscriptions34.7 million phone lines

(30/09/08)

Ultra fast Fixed broadband

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Wide array of mobile devices being developed, from smartphones to Internet-ready laptops, by way of

portable video players and cameras

91990 2000

1G: analogue systems

2G: GSM and its evolutions

3G: UMTS and its evolutions (HSDPA, HSPA)

~10 kbit/s ~30-40 kbit/s384 kbit/s

Voice, multimedia, high-speed mobile Internet

VoiceLow-speed data

VoicePacket mode dataPermanent connection

Voice

Services

Speeds and volumes

Technologies

2010

2Mbit/s

10 Mbit/s100+ Mbit/s

4G (LTE, mobile WiMAX)

2020

Peak bitrate

Sharp rise in traffic

The technologies that will replace UMTS have already been announced

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Commercial offers that allow consumers to control their invoice emerging

• Initially, operators sold data services by volume (kb Mb)

Customers cannot view or control data volume: failure

Since late 2007, operators have been innovating by marketing offers based on time spent online and/or speed which are becoming increasingly popular.

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What is ultra fast mobile?

• Ultra fast mobile networks will replace UMTS networks during the next decade

– Increased performances thanks to the implementation of new technologies, notably LTE (Long Term Evolution) and mobile WiMAX

– More powerful technologies have been announced, delivering peak rates of over 150 Mbps and average rates for users of several dozen Mbps

– Ultra fast mobile makes it possible to reproduce the fixed Web experience on mobile, anywhere, anytime (ubiquitous access), and to create new solutions that employ mobility such as location-based services

– They can also help complete the coverage of fixed networks for providing residential access

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What to expect from ultra fast mobile?

• Respondents are invited to share their analysis of what contribution the deployment of ultra fast mobile will make from an economic, social and cultural perspective

– Improved competitiveness and productivity for businesses

– New ways to consume digital content (available on-demand, self-produced and interactive) and to access culture, notably in relation to the user’s environment at any give time (public space, monuments, etc.)

– Renewal of social ties thanks to new ways to communicate, relationship between government services and the public, applications in the area of healthcare (telemedicine, remote care for patients, the elderly or people with restricted mobility), security systems…

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New frequencies for ultra fast mobile

• To introduce ultra fast mobile and enable the deployment of faster technologies, new frequencies need to be employed

• The 800 MHz and 2.6 GHz bands were identified for this purpose

The goal of the public consultation being launched today is to obtain the analysis of all parties interested in the system to be used for the allocation of this spectrum

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Spectrum availability: national and international situation

• 2.6 GHz band

– This frequency band has already been allocated outside of Europe (in the United States, Japan and Hong Kong) as well as in Norway and Sweden. It is expected to be allocated in several other European countries in 2009

– In France, the 2.6 GHz band, which is currently used by the Ministry of Defence, is to be freed up region by region, for the most part between 2010 and 2012

• 800 MHz band (digital dividend)

– The switch from analogue to digital terrestrial TV (DTT) broadcasting will free up a large quantity of frequencies as DTT requires fewer spectrum resources than analogue. The spectrum made available by this switchover is what is referred to as the digital dividend.

– In France, the Prime Minister has ruled on the allocation of a portion of the digital dividend (the 790-862 MHz band) for mobile services, starting on 1 December 2011. The frequency band currently used by the audiovisual sector and the Ministry of Defence, must be liberated by that date.

– In Europe, the 800 MHz band was also identified for providing ultra fast mobile services in Finland, Sweden and Switzerland and, more recently, in the UK and Germany. Other countries will follow suit shortly.

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800 MHz and 2.6 GHz bands are complementary for the deployment of ultra fast mobile

• The 2.6 GHz band (2500 – 2690 MHz) for supplying capacity in densely populated areas

– Large quantity of spectrum (190 MHz)

– But propagation properties ill-suited to broad coverage of the population

Example: in Sweden, the country’s four 3G operators + a new WiMAX provider were awarded licences in this band in 2008

• The 800 MHz band (790 – 862 MHz), from the digital dividend, for achieving broad national coverage

– A small quantity of spectrum (60 MHz usable), which limits the capacities available in this band and allows for a maximum of two 30 MHz licences or three 20 MHZ licences

– But propagation properties well suited to achieving broad coverage and indoor coverage

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800 MHz and 2.6 GHz bans will be complementary for the deployment of ultra fast mobile

National coverage (99% of the population)

Currentbitrate

National coverage (99% of the population)

Need for more lower frequencies (<1000 MHz)

Ultra fast mobile

Densely populated areas

Currentbitrate

Ultra fast mobile

With high Frequencies at 2.6 GHz

Need for more higher frequencies (>1000 MHz)

With high (2.6 GHz) and low (800 MHz)

frequencies

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Regional development and rollout obligations (1/2)

The 800 MHz band is well suited to achieving broad coverage for ultra fast mobile services, and its allocation is thus central to successful regional development – giving rise to a number of questions

– What to expect in terms of coverage? Within what timeframe?

– What features for the expected coverage (bitrates, services)?

– What coverage target? Equal to GSM (i.e. over 99% of the population)? Within what timeframe?

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Regional development and rollout obligations (2/2)

Questions are also being raised concerning the coverage obligations to be attached to 2.6 GHz and 800 MHz band licences

– Should the same rollout obligations be attached to both bands?

over sharing the installations

– Should all players involved in providing ultra fast mobile, with access to the 2.6 GHz band, also be given access to 800 MHz frequencies?

– Should there be an obligation to offer roaming services on 800 MHz networks?

over exposing the public to electromagnetic fields and environmental issues

- How should these issues be factored into the award of licences for these frequencies?

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Competition issues (1/2)

• Questions are being raised over the impact that the allocation of new frequencies will have on the competition dynamic between mobile operators

– How does access to these frequencies fit into the overall strategy of operators that are already present in the 2G or 3G market?

– Is there an economic space for a new entrant in the ultra fast mobile segment? Using which business model?

• Over opening networks to MVNOs

– How should hosting MVNOs (virtual network operators) be factored into allocation procedures for each of the two frequency bands?

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Competition issues (2/2)

•Contributors are also invited to express their views on the topic of having open and technology-neutral networks with respect to services and content

– Must an obligation for networks to be open to all types of service be imposed (including VoIP and bandwidth-hungry applications)?

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Combining the two bands

• Should the 800 MHz and 2.6 GHz frequency bands be allocated separately, or should they be combined into a single licence?

– The 800 MHz frequencies, which are well suited to achieving nationwide coverage, and the 2.6 GHz band frequencies which provide additional capacity, are complementary

– Combining them would immediately mean operators in both bands, but would limit their number to 2 (or 3 at most)

– Should the call for candidates be simultaneous?

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Allocation system

• Several types of procedure could be used

– A beauty contest wherein candidates are compared to one another based on selection criteria such as scope and speed of deployment, the service offering and price plan, quality of service, relations with service providers (including MVNOs), environmental protection measures and the clarity and feasibility of the project and the business plan; a financial criterion may be included, if necessary;

– Auctions which can be based solely on the candidates’ bids or which can be combined with other selection criteria for which candidates would made commitments (coverage, access for MVNOs, etc.)

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Provisional timetablefor preparing the procedure for allocating

frequencies in the 800 MHz and 2.6 GHz bands

• 5 March 2009: launch of the public consultation

• 15 June 2009: deadline for receiving contributions

• Summer 2009: examination of feedback from consultation and public hearings

• Late 2009: decision proposing that the Government launch the procedure

• 2010: award of licences

4th 3G licence and remaining 2.1 GHz frequencies

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4th 3G licence and remaining frequencies in the 2.1 GHz band: a two-step procedure

• There are still three 5 MHz duplexes in the 2.1 GHz band that have yet to be allocated

• The allocation of these frequencies will take place in two stages

– The frequencies set aside for a new entrant (5 MHz duplex) will be allocated during the first stage

– During the second phase, which is open to everyone, the remaining frequencies will be allocated (2 x 5 MHz duplex or, if there is no recipient during the first stage, allocation of 3 x 5 MHz duplex)

SFR Bouygues Telecom Orange

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Decision-making process: Parliamentary debate and Government announcement of the financial terms

• A statement from the Government was followed by a debate in the National Assembly on 5 February, and in the Senate on 11 February

• At that time, the Government announced the financial terms for the 1st stage

– A set cost for a 5 MHz duplex

– A variable annual portion equal to 1% of revenue

– An annual licensing fee for the 900 MHz band

– A contribution to the spectrum reengineering fund

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Launch of the procedure (1/3)

• ARCEP recently adopted the decision proposing the launch of the procedure, and is transmitting it to the Government

The procedure provides for:

– Minimal obligations that are identical to those established during previous calls for candidates, notably with respect to coverage: 25% of the population within 2 years and 80% within 8 years

– Selection criteria similar to previous calls for submissions, to which candidates may add by making commitments that go beyond the set minimal obligations (notably with respect to coverage, the clarity and feasibility of the project, financial capacity, access for MVNOs etc.)

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Launch of the procedure (2/3)

The selection criteria proposed by ARCEP are the following: - Consistency and feasibility of the project

- Service offering and pricing plan

- National coverage: scope and speed of network deployment

- Consistency and credibility of the business plan

-Quality of service

- Relations with service providers

- Relations with consumers

- Environmental protection measures

- Job creation/employment

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Launch of the procedure (3/3)

- New entrant’s rights

They are identical to those contained in previous calls for candidates and include:

• Access to a 5 MHz duplex in the 900 MHz band (associated with a licensing fee identical to the one that current operators are paying)

• Roaming rights on one of the three GSM mobile networks for a period of 6 years (provided 25% coverage of the population has been achieved for voice services and 20% for data services)

• Rights of access to the three other mobile operators’ GSM sites when used for 3G, for the collocation of 3G equipment

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Next steps

• Based on ARCEP’s proposal, it is now up to the Government to launch the procedure for allocating the frequencies set aside for a new entrant, in the form of a notice in the Official Journal (Journal Officiel)

• To this end, the Government will issue a decree on the financial terms attached

• The deadline for filing a submission is 30 June 2009

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Next steps

•ARCEP will then be responsible for selecting the winning candidate

• The 2nd phase (remaining frequencies in the 2.1 GHz band) will be launched as soon as the 1st phase is complete

– The system to be used for this 2nd phase should be announced before the deadline for submissions for the 1st phase, i.e. 30 June 2009