The Irish 3.6 GHz award Webinar Thursday 26 th October, 11 am 12 - PowerPoint PPT Presentation

The Irish 3.6 GHz award Webinar Thursday 26 th October, 11 am – 12 noon (GMT) (c) DotEcon Ltd 2017

Why the 3.6 GHz band is interesting ● 5G use ● Lots of spectrum in one band for the first time ● Strong demand, but also unprecedented supply ● Complex auction design issues, especially if regionalisation is used (c) DotEcon Ltd 2017

3.6GHz auctions since 2014 Where When Belgium Mar 2015 Beauty contest with single applicant Spain Mar 2016 20 MHz national block (alongside 2.6GHz in a sealed bid) Hungary Jun 2016 16 blocks of 2x5MHz in 3.4-3.6 GHz and 40 blocks of 5 MHZ TDD at 3.4-3.6 GHz in sealed bid Slovakia Aug 2016 National licences in 3.4-3.6 GHz Four 5 MHz TDD blocks and one 2x5 MHz FDD block Montenegro Apr 2017 FWA Czech Rep July 2017 Five 40MHz blocks at 3.6-3.8 GHz Highly competitive Slovakia Oct 2017 Regional auction of 40MHz blocks of 3.6-3.8 GHz 16 winners (c) DotEcon Ltd 2017

Available spectrum in Ireland ● 350 MHz available in two categories • 3410 – 3435 MHz (25 MHz) in a single A-lot • 3475 – 3800 MHz (325 MHz) in 65 B-lots of 5 MHz each ● TDD band plan ● 15-year licences (c) DotEcon Ltd 2017

Regionalisation ● Usually a headache for auction design ● Possible FWA use or migration of existing FWA operators’ business plans may need regionalisation ● Complete flexibility of licence boundaries is impossible and some tailoring to likely demand will be needed (c) DotEcon Ltd 2017

Irish 3.6 GHz regionalisation ● 9 regions (4 rural, 5 cities) ● Aligned with National Broadband Plan ● Smaller bidders might need a consortium or to use the secondary market (c) DotEcon Ltd 2017

Issues arising out of regionalisation ● Aggregation risks ● Switching between regions • Do we need it? • How do we design sufficiently flexible switching rules? ● Frequency fragmentation across regions ● Reasons for coordination of frequencies across winners (c) DotEcon Ltd 2017

Addressing these issues Aggregation risks CCA Switching Relaxed bidding flexibility Assignment Frequency option pruning fragmentation algorithm Frequency Alliance bidding coordination for for frequencies small winners (c) DotEcon Ltd 2017

Combinational clock auction ● Irish 3.6 GHz award uses a similar CCA format as the 2012 Multiband Spectrum Award ● Bids are always for packages of lots, so regional aggregation risks overcome ● Rules provide for flexible switching through activity rules based on revealed preference ● Eligibility point scheme fairly unimportant (c) DotEcon Ltd 2017

CCA rules ● Main stage • Determines how many lots in the A/B categories each bidder wins, but not specific frequencies • Open clock rounds • Supplementary bids round (with multiple bids) • Winner determination taking all bids • Second price (minimum revenue core pricing) • 150 MHz competition cap in any region ● Assignment stage to determine frequencies • Single round of bidding • Mutually exclusive frequency options • Bidding alliances possible (c) DotEcon Ltd 2017

Frequency alignment principles ● Minimise ’untidiness’ of frequency allocations across regions … ● A winner getting the same number of lots everywhere gets common frequencies across regions ● Give choices about location across the whole band (c) DotEcon Ltd 2017

Generating frequency options Step 1 Step 2 Step 3 Permute Arrange Present branches of Use any bidders on a options to tree to move unsold lots as tree to keep each bidder bidders padding to frequencies and collect tidy up further around the tidy bids band (c) DotEcon Ltd 2017

Defining ‘untidiness’ when splitting up the band ● Regional Bandwidth Variation (RBV), defined for a bidder or group of bidders to be • the greatest number of B-Lots assigned in a region less • the smallest number of B-Lots assigned in a region Bidder A Bidder B Region 1 RBV=4 Region 2 (c) DotEcon Ltd 2017

Simple example First find the partitions of all bidders that minimises RBV: • Partition {A}, {B,C,U} has RBV = 1 + 1 = 2 • Partition {B}, {A,C,U} has RBV = 4 + 4 = 8 • Partition {A,B}, {C,U} has RBV = 3 + 3 = 6 • …and so on (c) DotEcon Ltd 2017

Step 1: Partitions of bidders Cases with lowest {A}, {B,C,U} {A}, {B}, {C,U} Total RBV of 2 {B}, {A,C,U} {A}, {C}, {B,U} {C}, {A,B,U} {A}, {U}, {B,C} {U}, {A,B,C} {B}, {C}, {A,U} Tie break rule: {A,B}, {C,U} {B}, {U}, {A,C} • Greatest number of groups {A,C}, {B,U} {C}, {U}, {A,B} • Smallest largest group {A,U}, {B,C} {A}, {B}, {C}, {D} • Random {B,C}, {A,U} {B,U}, {A,C} {C,U}, {A,B} Largest group of size 2, so take this one (c) DotEcon Ltd 2017

Step 1: Tree of successive splittings {A,B,C,U} Minimum RBV Smallest largest group {A,U} {B,C} Pairs split to singles (trivial in this example) {A} {U} {B} {C} (c) DotEcon Ltd 2017

Step 2: Swapping order of branches {A,B,C,U} {A,B,C,U} {A,B,C,U} {A,B,C,U} {A,U} {B,C} {A,U} {B,C} {A,U} {B,C} {A,U} {B,C} {U} {C} {B} {A} {U} {A} {B} {C} {A} {U} {C} {B} {A} {B} {C} {U} A,U,C,B A,U,B,C U,A,C,B U,A,B,C {A,B,C,U} {A,B,C,U} {A,B,C,U} {A,B,C,U} {B,C} {A,U} {B,C} {A,U} {B,C} {A,U} {B,C} {A,U} {C} {U} {A} {B} {C} {A} {U} {B} {U} {A} {B} {C} {B} {C} {A} {U} B,C,U,A C,B,U,A B,C,A,U C,B,A,U Creates only 8 of the possible 24 orderings of 4 bidders (c) DotEcon Ltd 2017

Step 3: Using unsold lots to improve alignment ● Measure of frequency misalignment for a bidder: • Gap between lowest block in any region and highest block in any region less • The maximum number of B-Lots assigned to the bidder in any region Misalignment = 4 – 4 = 0 Misalignment = 6 – 4 = 2 Misalignment = 8 – 4 = 4 (c) DotEcon Ltd 2017

Step 3: Move unsold blocks to pad 1 2 3 4 0 + 0 + 1 + 0 = 1 Unallocated lots only moved to the extent een them. However, we can reduce Bidder 3’s Misalignment by placing one this reduces misalignment 1 een them. However, we can reduce Bidder 3’s Misalignment by placing one 2 3 4 0 + 0 + 0 + 0 = 0 (c) DotEcon Ltd 2017

Alliances ● Possibility of network sharing, joint equipment purchase etc. might arguably require coordination of frequencies across winners ● An Alliance is a group of winners participating in the Assignment Stage as one • Lead member bids for all • Total number of B lots across all members combined for generation of frequency options • Lead member tells ComReg who gets which frequencies ● Not allowed if the total spectrum to be awarded to the Alliance would exceed the spectrum cap of 150 MHz in any region ● Anti-collusion rules maintained for main stage of CCA (c) DotEcon Ltd 2017

Auction results (c) DotEcon Ltd 2017

Lessons learned ● Regional structure allowed demand from operators other than the incumbent MNOs ● Auction design more complex as a result … ● … but bidder experience fairly simple ● Prices below level of key mobile bands due to large amount of supply (c) DotEcon Ltd 2017

Forthcoming 3.6 GHz auctions ● Latvia ● France ● Greece ● Italy ● Austria ● Switzerland ● Belgium (c) DotEcon Ltd 2017