ARCEP hands telcos a 4G opportunity

OvumFrench communications regulator ARCEP has announced that from October 1, 2013 Bouygues Telecom will be permitted to refarm its spectrum in the 1,800-MHz band in order to provide 4G services.
The regulator has decided to lift the GSM restrictions from Bouygues’ 1800-MHz license, provided that it relinquishes a certain amount of its holding beforehand. In addition, all spectrum licenses in the country will become technologically neutral from May 2016.
Unexpectedly, rival operators have been opposed to ARCEP’s decision, arguing that it hands Bouygues an unfair advantage. However, we are unlikely to witness the same drama that has occurred in the UK, given that a timely spectrum auction in 2011 has allowed all four operators to offer 4G commercially since 3Q12.
France’s Competition Authority has also called an end to the now-infamous roaming agreement that Free has used to make its dramatic entrance to the French mobile market.
ARCEP has allowed Bouygues to refarm its 1800MHz spectrum
On March 14, ARCEP announced that it had formally authorized Bouygues Telecom’s request to deploy 4G using its current spectrum holding in the 1800MHz band. The operator submitted its request to refarm this spectrum - which it currently uses for 2G services - in July 2012. In response the regulator issued a public consultation.
The process led ARCEP to conclude that there was no reason for Bouygues’ 1800MHz license to continue to restrict the operator’s use of the band to GSM technology. In light of current spectrum assignments, the regulator believes that a more balanced allocation of the 1800MHz band would help to ensure equality between operators and the conditions for effective competition.
As Ovum’s report The Regulatory Consequences of Spectrum Refarming explains, French operators have generally been proactive in requesting the refarming of their GSM spectrum. SFR and Orange actually triggered the process by asking ARCEP to repurpose their 900MHz spectrum before the regulator had decided to address the subject. The new entrant Free Mobile has taken advantage of the spectrum freed up as a result of the process, and has used it (in addition to the 2.1GHz spectrum it has been awarded) to offer 3G services at 900MHz since January 2013.
Bouygues should use its 1800MHz spectrum to its advantage
The regulator’s decision is unlikely to cause the same drama as occurred in the UK, where Ofcom’s proposal to allow EE to refarm its 1800MHz spectrum for 4G further angered rival operators that were already fighting over the 800MHz and 2.6GHz auction rules. Ofcom’s eventual decision to allow EE to proceed was seen as firmly pro-consumer, but was met with threats of legal action.
In France, SFR and Orange have stated their opposition to Bouygues’ request, claiming that it would give the operator an advantage over its competitors. However, the timely allocation of frequencies in the 800-MHz and 2.6-GHz bands in 4Q11 has already ensured the swift deployment of 4G mobile services; Orange, SFR, Bouygues, and Free have all offered commercial services since 3Q12.
Nevertheless, ARCEP’s decision still presents Bouygues with an opportunity in terms of supporting its 4G network and encouraging some of its 2G customers to upgrade to more advanced technologies.
 As Ovum’s report The LTE1800 Opportunity explains, the 1,800-MHz band is rapidly becoming one of the most important bands for 4G. Spectrum in the band is valuable as it combines the good propagation characteristics associated with lower frequencies with the capacity necessary for users to have a good browsing experience. In addition, some popular devices, including the iPhone 5, are currently running 4G services in Europe only at this frequency.
Free should purchase relinquished spectrum
The French Competition Authority has made public its decision on the terms governing mobile network sharing and roaming. It has stated that, while roaming and network sharing are not incompatible with a competitive marketplace, infrastructure-based competition is the ultimate goal.
Free entered the French mobile market by negotiating national roaming agreements, but the aggressive tactics it has used to amass subscribers have angered its competitors, in addition to putting a strain on its host’s network. The Competition Authority’s decision to switch off national 3G roaming in 2016 or 2018 will require Free to make sure that its 3G rollout schedule complies with the obligations contained within its license.
As part of the 1800MHz refarming decision, Bouygues is required to hand over a duplex block of 6.6MHz worth of spectrum (approximately a quarter of its existing holding) over the next three years.
ARCEP has noted the possibility of Free acquiring this spectrum, although it is unclear whether this will come at a price, and might not be sufficient to help Free cope with the end of the national roaming agreements. Free currently offers 4G at 2.6-GHz and it will be given roaming rights to SFR’s 800-MHz spectrum only in priority rollout areas.
It is likely that Free will require supplementary 1800-MHz spectrum from Bouygues to supply 4G in the areas not specified by ARCEP. Free should not miss the opportunity to acquire all of the spectrum Bouygues is required to surrender, although such a small amount could make it difficult for Free to compete with its rivals in the longer term.
James Robinson is an associate analyst for policy and regulation at Ovum. For more information, visit