Israel Ministry of Communications publishes 5G frequencies auction
Israel’s Ministry of Communications is publishing the auction for 5G frequencies today. The tender winners will be announced in the fourth quarter of the year, after which the frequencies will be allocated to the companies.
The auction utilizes the Vickrey method – a public auction in sealed envelopes. The party making the highest bid wins the auction, but will pay the second highest price. The state is using this method in order to get the maximum value, while at the same time avoiding inflated prices.
As first reported by “Globes,” the Ministry of Communications will try to allocate the most desirable frequencies, 700 MHz, to all of the cellular companies. These frequencies are the best and most effective of all the 5G frequencies. Two other frequencies are being offered in addition to 700 MHz.
In order to support the venture, the state will provide substantial incentives to operators in the form of a NIS 500 million refund to encourage the operators to act quickly. The current government cannot make the decision, because it is a transition government, but the Ministry of Communications has agreed in principle not to increase the yearly fees paid by the cellular companies.
All of the cellular operators currently pay NIS 300 million annually, and this figure is not expected to change in the next four years. The cellular operators will pay a one-time amount in the tender framework, but part of it will be refunded to them on the basis of meeting targets.
The participants in the tender will pay the license fee only in January 2022. This postponement will enable them to allocate the money in the first two years to investments in technology. The Israel government will later allow the operators to bid in another tender in which they will provide wireless Internet for homes.
The auction will be managed using a method called combinatorial clock auctions. This method enables bidders to compete simultaneously in all of the frequency areas. The frequencies in the auction will be offered only to companies agreeing to found a shared network. The aim is to avoid an inefficient allocation of frequencies.
The systems of incentives for deployment is composed of two tracks: reducing the fees for the frequencies – a annual reduction of 28% of all the frequency fees for four years. The operators will be required to meet engineering targets each year. The benefit will be provided at the beginning of each year, assuming that the operator meets the targets.
In the second track, the state will provide an incentive of up to NIS 200 million. The cellular companies will have to establish 250 5G broadcasting centers. The operator that builds the most sites will receive up to NIS 82 million – 41% of the total incentive. The builder of the second most sites will get NIS 66 million, and the operator in third place will receive NIS 52 million.
The Ministry of Communications believes that the public will begin benefiting from the new technology in 2020. Minister of Communications David Amsalem said today, “This technological measure will leave its mark for decades from now. With the introduction of the new 5G technology, the smart digital revolution will get underway and affect all spheres of life: smart homes, smart cities, smart medicine, making the outlying areas closer to the central area, education. autonomous vehicles, advanced industry, etc.
“The financial state of the companies at this time has not escaped us, and the tender also takes this situation into account. I congratulate my friends and participants in the tenders committee for their professional work. The dedication and responsibility exercised is what made it possible to lay the cornerstone today for the next era of technology.”
Amsalem added, “All of our lives are going to change as a result of 5G. Human life is going to develop concurrently with the industrial revolution, and the technology is therefore of critical importance. There is of course an amazing team here that has been working on this for over 18 months. It is a difficult, complicated matter, as are the tenders. There is something extremely sophisticated here. I want to take this opportunity to thank the ministry’s employees for what they have done up until now, and it has to be pushed forward as much as possible. The revolution has two arteries: the frequencies tender and the other story that completes it, which is fiber-optics. Both of them together will enable us to make progress, so that Israel adapts itself to global technology. Today, if you lag behind in some aspect, you become an underdevelopment country.”
Published by Globes, Israel business news – en.globes.co.il July 14, 2019
Also see these previous Globes articles:
4 thoughts on “Israel Ministry of Communications publishes 5G frequencies auction”
“We are aware of the companies’ current financial situation and the tender takes this into account,” said Israel Communications Minister David Amsalem.
The ministry has said 5G is necessary to develop health, agriculture and education, as well as smart cities and self-driving cars.
Israel’s three main telecom operators—Cellcom, Partner Communications and Pelephone—are struggling to stay profitable in a country with 9 million people and nine mobile providers after a sector shake-up in 2012.
In the shake-up a host of new operators sparked a price war that led to steep drops in subscribers, revenue and profit at the three incumbents. All-inclusive calling, surfing and text packages are on offer at a price of 29 shekels, or $8, a month.
Revenues in the mobile sector fell 5.6% in 2018 but the carriers will probably invest in 5G to bolster their networks to meet growing demand, analysts say.
Despite its vibrant tech sector, Israel lags countries like South Korea, Switzerland, Britain and Spain that have already started to roll out 5G services, which are at least 10 times faster than 4G.
As part of the tender, Israel is auctioning frequencies ranging from 700 MHz and 2100 MHz, which are also used for 4G, to 2600-3800 MHz that will solely be used for 5G services, such as self-driving cars.
Israel is offering incentives of up to 500 million shekels ($141 million), including delaying the need to pay for the license until 2022. The Communications Ministry will give grants to operators who deploy at least 250 5G antennas.
“We built the tender so it might not cost anything to the companies,” said Ofer Raz-Dror, deputy director general of the ministry, adding Israel will not follow the high-priced tenders in Italy and Germany.
Cellcom and Partner, declined to comment on their plans but smaller rival Golan Telecom said it would bid together with Cellcom. Another provider, HOT Telecom, is believed to be bidding with Partner. Pelephone, a unit of Bezeq Telecom, also said it would participate.
“Golan will participate in the frequency tender because … it is important for us to be at the forefront of progress and to give our customers a quality network,” the company said.
Looking at the frequencies available, the Government will attempt to ensure all telcos have a slice of the most desirable bands, 700 MHz for example, while a series of other lots will be available. The assets bought in the 2.6 GHz to 3.8 GHz frequencies will only be useable for 5G, while the other frequencies can be used to bolster 4G.
Only time will tell whether this approach will lead to a net-gain in terms of investment and network rollout, but the Israeli Government should be applauded for taking an alternative approach which is potentially better suited to local market dynamics.
Have the auction results been published?
Israel postponed the 5G auction:
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