3G spectrum auction kindles clashes in Chile
Commercial 3G services first reached the Latin American market in late 2006, launched by Puerto Rico’s Cingular in November and by Chile’s Entel in December. By end-2007, Chile’s three mobile companies were all offering mobile broadband over Universal Mobile Telecommunications System (UMTS) networks. But all three operators had to launch 3G services using their existing frequency bands, resulting in limited network capacity.
Chile’s regulator Subtel announced already in late 2006 that it would launch an auction for 3G mobile licences by end-2007. It would tender 45MHz of spectrum in the 1.71-1.755GHz and 2.11-2.155GHz bands, and would reserve spectrum in the 1.755-1.77GHz and 2.155-2.17GHz for future auctions. At the time, Subtel expected to award 20-30MHz to a new entrant, and maybe 5-10MHz to the three existing mobile operators. But considering all the conflicting interests at stake and the need for the relevant authorities to conduct appropriate investigations, the 2007 date proved to be over-ambitious. The planned auction has been delayed to the second half of 2008, and may be further postponed to 2009.
In preparation for the auction, in June 2007 Subtel asked the Tribunal for the Defence of Free Competition - Tribunal de Defensa de la Libre Competencia (TDLC) - to decide if Chile’s existing mobile operators (Movistar, Entel, and Claro) should be allowed to participate in the 3G auction. TDLC, before even considering the issue, required Subtel to provide a report on the state of the market. Subtel submitted its findings to TDLC in September 2007.
Then, in November 2007, Chile’s National Economic Prosecutor - Fiscalía Nacional Económica (FNE) - recommended that mobile operators should be limited to 60MHz of spectrum. This would effectively disqualify Entel from participating in the 3G auction since it already has 60MHz of spectrum. Movistar and Claro both hold 55MHz of spectrum, therefore would only be able to bid for 5MHz each. According to FNE, unless limits are placed on existing operators’ maximum spectrum, new entrants would stand little chance in Chile’s mobile market. The final decision on spectrum limits rests with TDLC.
Entel has complained that even if TDLC were to allow existing operators to bid for 5MHz-10MHz, it would be insufficient, and that while Chilean operators only have 55-60MHz, European operators have 120MHz. Entel claims it needs at least another 20MHz to ensure decent quality for its mobile broadband service.
Triple player VTR has been striving to enter the mobile market since 2005, and fixed-line operator Telsur has expressed interest in the auction, since it faces declining revenues from its fixed-line business and is keen to enter the more profitable market of mobile telephony.
Nextel is also staking its all on the 3G auction, since it has had difficulty making an impact on the Chilean market. In November 2007, Nextel submitted a paper to TDLC arguing against the participation of existing mobile operators in the forthcoming 3G auction. Movistar, Entel, and Claro, Nextel claimed, did not need any additional spectrum; moreover, they had unethically formed a private club to jointly fight against any new market entrant.
In June 2008, a lively battle was being wagered between existing mobile operators, prospective new market entrants, Subtel, and FNE. According to existing mobile operators, VTR is only interested in the 3G auction so as to block the development of mobile broadband, which competes with its own cable modem service. According to VTR and others, existing mobile operators are simply trying to block any new operator from entering the mobile market.
See also: Chile - Mobile Market - Overview and Statistics
