Spain: 5G networks in the CNMC’s sights to enhance competition

On 20 October 2022, the Spanish Competition Authority (the “CNMC”) published a new report about a draft order that modifies the current regulation governing the National Frequency Allocation Table (“NFAT”) related to the implementation of wireless communications systems (the ‘Draft Order’).

This Draft Order is related to the 5G Action Plan adopted by the European Commission in 2016, aiming to reach a homogeneous 5G network in the European Union. In its report, the CNMC analyses some key issues to the functioning and competition of 5G technologies.

Context and background

The radio spectrum is a public good that is limited and administered by the State. It is distributed in several frequency bands which are used to provide telecommunications and audio-visual services. Among the bands which are useful for 5G technologies, the only one that has not been tendered or made available to the market in Spain is the 26 Ghz band, which is the band between 24.25 and 27.5 Ghz (providing a high spectrum volume of 3.25 Ghz).

The importance of the 26 Ghz band lies in the fact that, due to its radioelectric characteristics, it is especially disposed to the development of services related to Industry 4.0 (i.e. those aimed at the digital transformation of companies) and to provide coverage in areas of high traffic demand or “hotspots”. As the radio spectrum is limited, the allocation of such spectrum volume can become essential for present operators to compete efficiently in the market.

Thus, this Draft Order, aside from incorporating the decisions taken at a European level, proposes two main modifications regarding the 26 Ghz band:

• On the one hand, it proposes to reserve 450 Mhz of the 3.25 Ghz available for self-provisioning demands (i.e. entities different from the electronic communications operators that provide services to third parties.). This would enable those entities to access the 26 Ghz band directly and develop new solutions and services independent of the electronic communications operators which could be better adapted to the needs of each sector.
• On the other hand, it limits to 1 GHz the number of frequencies that can be used by a single operator or a group of companies. As the 26 Ghz band offers 3.25 Ghz, limiting the number of frequencies to 1 Ghz would ensure that at least three different mobile network operators would be able to acquire a part of that spectrum volume.

CNMC’s considerations on the Draft Order

In its report, the CNMC analyses the Draft Order and concludes:

1. Regarding the reservation of 450 Mhz, the CNMC considers that this would have a positive impact on competition, as it would add some actors capable of deploying their own networks, whose services will compete with those offered by communications operators. This would certainly encourage innovation of 5G technology and make the Spanish market more dynamic and competitive, even in highly specialized areas.
   Also, this reserve would serve the demand of companies in the telecommunications sector. The same position has been followed by other EU countries (including Denmark, Finland and Sweden).
   The CNMC concludes that this amount would be adequate to ensure that the spectrum will be used efficiently. Nevertheless, in order for these new players to have access to the reserved spectrum, the CNMC clarifies that it would be better to implement a regulated procedure that favours free competition, instead of a “first come first served” system. Therefore, applicable conditions for granting rights of use for self-provisioning demands should be and clearly defined beforehand in the most efficient way possible.
2. In relation to the limitation of the number of frequencies that can be used by a single operator, the CNMC affirms that setting limits is beneficial to competition. This aims to ensure the existence of a minimum number of operators that are able to develop their own 5G networks, with all the potential offered by this technology, and to prevent the monopolization of rights of use of the public radio-electric domain.
   However, the CNMC is concerned that the 1 GHz limit permits the existence of just three operators and proposes to lower the limit to 800 MHz, with the objective of allowing at least four competitors to operate on the market, as is the case with the rest of the bands above 1 Ghz in Spain. In fact, this higher limit might reduce competitive intensity of the public bidding process.
   Furthermore, although differences between national market structures must be taken into consideration, this limit would be in line with the limits set at European level, (e.g. in Finland or Slovenia).

Government’s position considering CNMC’s report

This report was commissioned by the Ministry of Economic Affairs and Digital Transformation in the exercise of the CNMC's advisory powers.

There is no doubt that 5G networks are going to be crucial in the next few years and the CNMC will play a key role to ensure competition in the telecommunication sector. However, the Spanish Ministry seems to have decided not to follow all the recommendations provided by the competition authority to administer the radio spectrum.

On 5 November, 2022, administrative clauses and technical specifications applicable to the public bid concerning part of the 26 Ghz band were published (set forth in Order ETD/1059/2022). And, contrary to the CNMC’s advice, the Order sets the limit of the number of frequencies that can be used by a single operator at 1 Ghz. The reason for disregarding CNMC’s report is that the government considers that its proposal regarding the establishment of a limit of 800 Mhz would not be sufficient for the development of certain digital applications.

Nevertheless, the Order may be appealed within a period of no more than two months.

In particular, this bid concerns the section of the 26 Ghz band reserved to communication operators (i.e., excluding the 450 Mhz reserved for self-provisioning demands). Applications may be submitted until 7 December 2022.

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