Document 6516692

Transcription

Document 6516692

Report for the Ministry for Economic
Devel
opment
Renewal of
ManagementRi
ght
s
forCellularServc
ies
(800/900MHz)
The optimalspectrum quantity and
current util
isation
PUBLIC
NetworkStrategies Report Number 26019.24November 2006
0 Executive summary
The Ministry of Economic Development (MED) has requested a short study that examines:
• the optimal quantity of 800MHz and 900MHz spectrum for operators in New Zealand
over the period 2011–2031:
– the optimal quantity of spectrum required by the current management right holders
in the 800 MHz and 900 MHz bands
– the optimal quantity of 800 or 900 MHz spectrum that a new entrant would require
in the 800 MHz and 900 MHz bands to operate a nationwide cellular network.
• the amount of 800/900MHz spectrum substantially used by the current management
right holders.
Optimal spectrum in period 2011-2031
To determine the optimal spectrum we developed a bottom-up model that estimated the
effect of splitting each of the 800MHz and 900MHz bands into two parts: one to remain
with the incumbent (Telecom or Vodafone) and the other to be allocated to a new
nationwide operator (TelstraClear or Econet Wireless). The model examined the amount of
spectrum that should be allocated to each operator, varying in 5MHz steps between 0MHz
and 20MHz. Defining the optimal split of spectrum as that which gives the lowest overall
cost, we have determined that the optimal split is anywhere from a 5MHz:15MHz split to a
15MHz:5MHz split for both spectrum bands, assuming all operators are able to use their
spectrum in higher bands. Telecom is unable to its higher band spectrum with its current
CDMA technology; if this remains the case over the 2011–2031 period then the optimal
split is 15MHz (Telecom):5MHz (TelstraClear).
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ii
Network Strategies Report for the Ministry for Economic Development
The results show that it is very expensive to build a nationwide network without at least
5MHz of spectrum in the 800MHz or 900MHz bands.
Current utilisation of spectrum in the 800MHz and 900MHz bands
Using information provided by the operators to the MED and other publicly available data,
we have found that the Telecom substantially uses 5MHz–8MHz in the AMPS-A band and
at least 1MHz in the AMPS-B band. Vodafone appears to be substantially using all of its
900MHz spectrum.
We also undertook a benchmarking exercise as a means of comparing current spectrum
amounts of all the operators in sample countries. This found that Telecom and Vodafone
held more spectrum than nearly all the other operators within the sample. We considered
whether there was some justification to warrant a relatively large amount of spectrum, due
to the characteristics of the New Zealand environment. A regression model was used to
‘normalise’ the disparate operators within the sample for key factors that may influence the
amount of spectrum awarded to operators. Applying New Zealand data to the regression
model results in a estimated allocation of 2 × 9.4MHz for Telecom and 2 × 10.7MHz for
Vodafone, which is less than the actual holdings of the operators.
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Renewal of ManagementRih
g t
s
forCellularSer
ies
vc
(800/900MHz)
Report for the Ministry for Economic Devel
opment
Cont
ent
s
0
Executive summary
i
1
Introduction
1
2
Modelling optimal spectrum quantities
3
2.1
Introduction
3
2.2
Scope of the model
5
2.3
Outline of our methodology
6
2.4
Assumptions
9
2.5
Results
13
2.6
Analysis and conclusion
20
3
Current utilisation of spectrum
21
3.1
Introduction
21
3.2
Telecom
22
3.3
Vodafone
25
4
Frequency allocation: a comparison with other countries
29
4.1
Introduction
29
4.2
Selecting a sample of operators
29
4.3
How much spectrum do the operators in our sample hold?
37
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| Network Strategies Report for the Ministry for Economic Development
4.4
Comparative analysis of the sample data
39
5
Summary
43
Annex A: Detailed data for selected countries
A1
A.1
New Zealand
A1
A.2
Denmark
A2
A.3
Finland
A4
A.4
Hong Kong
A6
A.5
Ireland
A8
A.6
The Netherlands
A9
A.7
Norway
A12
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1 Introduction
The Ministry of Economic Development (MED) has requested a short study that examines:
• the optimal quantity of 800MHz and 900MHz spectrum for operators in New Zealand
over the period 2011–2031:
– the optimal quantity of spectrum required by the current management right holders
in the 800 MHz and 900 MHz bands
– the optimal quantity of 800 or 900 MHz spectrum that a new entrant would require
in the 800 MHz and 900 MHz bands to operate a nationwide cellular network.
• the amount of 800/900MHz spectrum substantially used by the current management
right holders.
Our findings for the first part of the study are based on a bottom-up modelling exercise that
determines the optimal amount of spectrum that could reasonably be forecast to be required
by the relevant players over the period 2011–2031 (section 2). For the second part of the
study we reviewed publicly available information and submissions to the spectrum renewal
process to estimate how much spectrum operators are currently using in these bands
(section 3). We also examined overseas data in order to draw on relevant experience for the
New Zealand situation (section 4). The report concludes with a summary of our findings
and recommendations (section 5).
In setting its policy on renewal of management rights for the 800 and 900 MHz bands, the
MED has a number of policy objectives:
• optimise incentives to invest for both current holders and new entrants
• promote competition in telecommunications markets
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2
•
minimise risk of stranded investment by current holders
•
minimise risk of supply discontinuity by current holders.
While we believe that our study supports the MED’s process in ensuring the above
objectives are achieved, it should be noted that the scope of the study does not extend to
any detailed welfare analysis. While a full welfare analysis would enable examination of
the issue of maximising the value of spectrum to society as a whole it would need to take
into account all spectrum allocation and not be limited to the 800 MHz or 900 MHZ bands.
Such an undertaking may well be worth considering but could not have been achieved
within the short time-frame of this desktop review.
Although this study was commissioned by the MED, the views expressed in this report are
solely those of Network Strategies. Confidential data is denoted in the report by square
brackets.
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2 Modelling optimal spectrum quantities
2.1 Introduction
We have developed a bottom-up Microsoft Excel model1 to determine the optimal amount
of spectrum in the 800/900MHz bands to allocate to operators.
The optimal spectrum for an operator is the amount of spectrum that results in the lowest
cost for that operator. We would normally expect to see network costs decreasing as the
amount of spectrum increased, with the rate of decrease slowing as the amounts of
spectrum increase, a trend shown in Exhibit 2.1 below.
1
A bottom-up model is one that generates a network design based on actual engineering rules, assumptions and capacities.
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Exhibit 2.1:
Relationship
between network
cost and spectrum
[Source: Network
Network cost
4
Strategies]
Spectrum
The optimal split of spectrum amongst several operators is that at which the total network
cost (over all operators) is minimised.
A key assumption in this model is that a variation in spectrum will only affect the wireless
access network, which includes the sites and backhaul. The core network (switches and
transport network) remains essentially unaffected. To avoid the difficulties of forecasting
network costs over the next 25 years, and noting that backhaul is dependent on the number
of sites, we have assumed that the number of sites required for coverage can be used as a
proxy for the cost of the spectrum-dependent part of the network.
In order to discount the costs of deployment of sites in the future back to the
commencement of the licence period (2011), we have assigned a ‘relative cost’ of $1 to
each urban site and $2 to each rural site, reflecting that rural sites generally cost more than
urban sites. We also assume that each site incurs a capital cost of $0.10 (10 per cent of the
urban site cost) each year, to represent the ongoing technology upgrades. This allows us to
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Renewal of Management Rights for Cellular Services (800/900MHz)
use an Net Present Value (NPV)2 calculation to find a relative value of the network in
2011.
It is important to note that, apart from costs, there are a number of other factors which will
affect the design of a mobile network that extends 25 years into the future. These include
take-up rates, traffic rates and network capabilities. We have not attempted to capture
realistic forecasts for these factors as we do not believe that the absolute values will have a
significant impact on the optimal allocation of spectrum3. Rather, we have focussed on
trends and the differences between the operators.
2.2 Scope of the model
Our understanding of the MED’s intention was that we should examine one new entrant in
each band: Econet Wireless in the 900MHz band and TelstraClear in the 800MHz band.
While more than one new entrant in each band is certainly possible, it cannot be considered
cheaper than one new entrant, as each new entrant requires the deployment of a costly new
nationwide network. Naturally, the status quo is optimal if considering the total cost: each
band only incurs the cost of one nationwide network. The cost of one operator can be
obtained from our model as the cost of the incumbent when the full allocation of 20MHz is
retained.
The model does not take into account technology transitions in which an operator operates
two networks alongside each other. While two networks in a spectrum-constrained
environment can be difficult and expensive to deploy, developing a model of a migration
may not be meaningful, because we have no reason to believe that any operator will
migrate from one technology to another in the 800/900MHz spectrum bands in the
timeframe, any more than they will not migrate. For example if Telecom were to migrate to
UMTS/LTE4 in its 800MHz band, it is likely to also deploy UMTS/LTE in its 2100MHz
band, which it would use in heavily populated areas where it is better suited than the lower
2
3
4
A method of evaluating long term projects, based on the present value of future cashflows.
These factors will however have a significant impact on actual network design and costs which are beyond the scope of this study.
Long Term Evolution (of the GSM/UMTS family of technologies).
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5
6
frequency bands, and only roll out UMTS/LTE in the 800MHz band in rural areas where it
requires the superior coverage of the lower frequencies. Since networks generally are not
spectrum limited in rural areas there is no additional cost or difficulty in deploying two
networks in the same spectrum. [
]. It is therefore difficult to develop a scenario that
might represent any realistic migration.
We have not modelled spectrum slack. Indeed we are not aware of any mobile operators
specifically reserving spectrum for future technologies (that is, spectrum slack), especially
when they already have copious amounts of unused spectrum in higher frequency bands.
Even if they did, we doubt it would have any material effect on the results of the model as
it would affect all operators.
2.3 Outline of our methodology
To determine the relative cost for an operator, the following calculation steps are used:
Determine
We have implemented three types of customers: voice, handheld
customers
data and modem.
Calculate network
Each customer type contributes to the overall peak-hour network
traffic
traffic (it is the peak-hour traffic that determines network
dimensions and therefore cost). The traffic varies with time, and
between urban and rural areas. (Rural traffic is lower than urban
traffic mainly because rural network deployment is not as
progressive as in urban areas. We expect the network in rural areas
to be coverage driven, and capacity driven in urban areas).
Calculate traffic
The key driver of the number of sites over the period of the licence
density
will be traffic density. This is in contrast to 2G and current 3G
technologies which are simply driven by traffic volume.
Forthcoming systems, which will be in use over the licence period,
such as LTE and EVDO Revision C, are expected to use OFDM
(orthogonal frequency-division multiplexing), an adaptive rate
system whereby small sites can carry more traffic than large sites
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because the system makes use of stronger signals (over shorter
distances) to transmit at higher data rates.
We have assumed that when a cell is at its maximum radius, the
capacity is some proportion of its maximum capacity (see the
following section on assumptions) and that the capacity increases
linearly as the cell radius decreases, until some point where the
maximum capacity is reached. This is illustrated in Exhibit 2.2.
Exhibit 2.2:
Variation of
capacity against
cell radius [Source:
Capacity
Network Strategies]
Radius
Capacity of
The capacity of a cell at maximum range depends on the spectral
800/900MHz cell
efficiency of the system (bits per second per hertz), the amount of
at maximum size
spectrum owned by the operator (at 800 or 900MHz), and the
capacity factor (describing how much lower the capacity is when
the site is at maximum range than the maximum capacity).
The maximum traffic density when the cell is at its maximum range
is the capacity at maximum radius divided by the area covered by
the cell at maximum radius.
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8
Number of
If the traffic density is less than the traffic density capacity when the
800/900 MHz-only
cell is at its maximum range then there is no need to extend the cell
sites
by using equipment operating at higher frequencies. The number of
sites required is the total area to be covered divided by the
maximum coverage area per site.
Number of all-
If the traffic density is more than the maximum traffic density when
spectrum sites
the cell is at its maximum range, then additional capacity is
required. This could be achieved either by cell-splitting (adding
more sites) or by adding additional capacity to existing sites, in the
form of equipment using higher frequencies. We have assumed the
latter method on the basis that additional sites will be a last resort
because of the high cost of sites.
The number of sites is calculated by assuming all sites have
equipment to operate using the operator’s higher frequency
spectrum. It is assumed that cells are centred around locations of
high traffic, such as rural towns in the case of rural coverage. This
means that we assume that the traffic in the centre of the site is of
sufficient density in order that the higher frequency (1.8 or 2.1GHz)
equipment can operate at full traffic density. Any remaining traffic
is carried by the low frequency equipment (800 or 900MHz). If the
low frequency equipment is not sufficient to carry all the remaining
traffic then additional sites are deployed until the are sufficient to
satisfy demand.
The model does not attempt to model any umbrella/hotspot cell
arrangements (for example, macrocells, microcells and picocells).
Net present value
To find a present value of sites installed in the future, urban sites are
of sites
allocated a simple relative capital cost of $1 and rural sites are
allocated a relative capital cost of $25. Relative costs for rural sites
are higher because rural sites are significantly more expensive than
5
The use of relative costs enables us to avoid having to forecast actual costs, which is extremely difficult.
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urban sites. In particular they often have higher civil works, tower
and backhaul costs6.
All sites are also incur a further annual capital cost of $0.10 which
represents ongoing upgrades in technology and capability.
Thus future sites can be discounted back to the start of the model
period (2011) using an NPV calculation.
2.4 Assumptions
We have attempted to make the model as technology-independent as possible. In fact, the
only differentiation between the 800MHz case (i.e. Telecom and TelstraClear) and the
900MHz case (i.e. Vodafone and Econet) is the amount of spectrum held by the operators
at the higher frequencies (see Exhibit A.2).
Spectrum
We have assumed operators in both bands have a maximum of
20MHz (paired). The amount of spectrum was varied in 5MHz
blocks from 0MHz to 20MHz. (We recognise that this allows
scenarios that are not currently possible in the 900MHz case
because not all spectrum is up for renewal, but 5MHz is the basis
for UMTS carriers, and is also likely to be the basis for CDMA
carriers in the future.)
In the higher frequency bands (1.8GHz and 2.1GHz), the actual
amount of spectrum for each operator was used.
We examine two options for spectrum in the higher bands: the first
option is that each operator will be able to use all spectrum it holds
in all bands. In particular this means that Telecom will be able to
6
In reality costs will vary with other factors as well, such as the equipment required (some sites will require only 800/900MHz
equipment, while some will require equipment at 800/900 MHz, 1800 MHz and 2100 MHz), the cost of the site (building-mounted
site versus rural hill-top site), difficulty of access, etc.
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10
use its 1800MHz and 2100MHz bands, which it cannot currently do
with CDMA technology. CDMA may develop so that it can be
operated in these bands, or Telecom may migrate to UMTS/LTE
which can also use these bands.
The second option assumes Telecom cannot use its spectrum in its
higher bands (as is the case today).
Coverage
Neither Telecom nor Vodafone publish coverage areas.
However both Telecom and Vodafone advertise their coverage
as 97% of the population. We combined this information with
urban and rural profile data from Statistics New Zealand to
estimate the area covered.
We have assumed that coverage does not vary over time.
Population
We have used Statistics New Zealand forecast population growth
data, and have forecast the population split between urban and rural.
We have assumed that there will be no change in the proportions of
customers living in urban and rural areas over time.
Mobile penetration
We have assumed three types of usage: voice, handheld data (data
on the handheld) and modem (a data card or built in to a laptop).
Voice: we have assumed voice penetration will be saturated by
2010, and will remain constant at 120%.
Handheld data: penetration will start at 10% in 2010 and increase
linearly to 50% in 2031.
Modem: penetration will start at 10% in 2010 and increase linearly
to 50% in 2031.
Migration
We have assumed that initially customers are split evenly between
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the two incumbents. Customers start migrating in 2011 to the new
operators at a constant rate, and after ten years (2015) customers are
split evenly between all four operators.
Traffic
We have made basic assumptions about the peak-hour traffic
generated per customer:
Voice: We have assumed 0.04 Erlangs in 20107 (similar to current
rates), increasing linearly to 0.20 Erlangs in 2031, a trend reflecting
mobile phone usage replacing fixed phone usage. We have assumed
voice has a data rate of 12kbit/s.
Handheld data: Future data rates are entirely speculative as it
depends on the applications that find success on the mobile
platform. We have assumed different data rates for rural customers
and urban customers, which partially reflects the difference in the
capabilities of the network between those two areas (that is,
operators will roll-out new technologies in urban areas before rural
areas). In urban areas we have assumed an average peak data rate of
0.01Mbit/s in 2010 increasing to 0.5Mbit/s in 2031. In rural areas
the rate increases from 0.001Mbit/s to 0.1Mbit/s. (This peak rate is
the average over all users, taking into account the users’ duty
cycles8 and activity rates9).
Modem data: We have assumed the same data rate as for handheld
data.
7
0.01 Erlangs in 2006 (597 million minutes in quarter/2.1 million customers = 284 minutes/customer/quarter = 3.1
minutes/customer/day = 0.01Erl assuming 20% of traffic occurs in the busy hour. This corresponds to 0.04Erl in 2010 assuming
linear growth to 0.2Erl. Source of figures: Vodafone Media release, Vodafone New Zealand releases first quarter KPIs. 25 July
2006, available at http://www.vodafone.co.nz/aboutus/media_releases/20060725.jsp
8
9
The proportion of the time a user is active.
The proportion of the time an active user is actually transmitting.
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11
12
Site maximum
We have used an illustration of the trend in growth of capacity
capacity
provided by Telecom in its submission10 to estimate the maximum
capacity of a site. From this we can estimate that the maximum
capacity will be about 5bit/s/Hz in 2010 and if we extrapolate
linearly, about 10bit/s/Hz in 2031. We assume that this can be
applied to all technologies.
We have assumed that because technology deployment in rural sites
lags that of urban sites, the capacity is less: 0.5bit/s/Hz in 2010,
increasing to 2bit/s/Hz in 2031.
Capacity versus
As discussed in the previous section, it is expected that future
range
mobile technologies will all use OFDM, which allows adaptive data
rates. (It is expected that adaptive data rates will be introduced in
EVDO revision C and LTE). WiMAX has already been introduced
using adaptive data rates.
With the adaptive data rate, as the radius of the cell increases, the
capacity drops off. We have assumed that all mobile technologies
will have a similar capacity versus range trend as WiMAX. This
assumption is reasonable because OFDM will have similar
characteristics in all technologies.
Using data provided by the WiMAX forum11, we estimate that full
capacity is only possible when the cell’s radius is at 40% or less of
its maximum radius, and at full radius the capacity has decreased to
40% of its maximum capacity.
Maximum cell
10
In theory, maximum cell radii can be as large as 30km for GSM and
Telecom New Zealand, Renewal of Management Rights for Cellular Services, 4 September 2006 (“Telecom submission”), graph
1. Available at http://www.med.govt.nz/upload/39925/03.pdf.
11
WiMAX Forum, WiMAX Deployment Consideration s for Fixed Wireless Access in the 2.5 GHz and 3.5 GHz Licensed Bands, Jun
2005, Figures 2–3. Available at
http://www.wimaxforum.org/news/downloads/DeploymentConsiderations_White_PaperRev_1_4.pdf
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radii
40km for CDMA in rural areas. However in reality these maximum
cell radii will not always be achieved due to terrain, non-ideal site
locations etc. We have therefore de-rated12 maximum cell radii to
those given in the following table (Exhibit 2.3). We have assumed
no difference between the CDMA and GSM families of
technologies. We have also assumed the maximum radii do not vary
over time as new technologies are introduced.
Maximum cell radius (km)
Exhibit 2.3:
800/900MHz
1.8/2.1GHz
Urban sites
2.5
1.5
Rural sites
15
12
Maximum cell radii
[Source: Network
Strategies]
Please see the accompanying spreadsheet model for a full list of assumptions including
sources and references.
2.5 Results
The model results are listed below with the four operators all having an equal market share
of 25% (after the initial introductory period for the new entrants of 10 years). We also
tested the results with varying market shares (see below).
Equal market share
The results of the model are shown in the following tables. Each table shows the relative
cost of the access network to each operator against the amount of spectrum the incumbent
operator has in the 800/900MHz band (with the new entrant having the remainder). Each
operator has an market ultimate market share of 25%
12
Reduce the rated capacity or size.
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13
14
For the 900MHz spectrum and option A of 800MHz (where Telecom uses all its spectrum),
the lowest overall cost is about the same for all scenarios from a 5MHz:15MHz split
(incumbent: new operator) to a 15MHz:5MHz split. For option B of 800MHz, the cost to
Telecom is much greater, and so the lowest cost scenario is 15MHz for Telecom and 5MHz
for the new operator
The information is also shown in the graphs in Exhibit 2.7 Exhibit 2.8 and Exhibit 2.9 .
Telecom
Spectrum (MHz)
New operator
Relative cost of
Spectrum (MHz)
access network
Total cost
Relative cost of
access network
0
2721
20
1234
3956
5
671
15
1248
1919
10
642
10
1265
1907
15
619
5
1286
1905
20
601
0
3328
3929
Exhibit 2.4:
Relative costs of 800 MHz operators (option A: with Telecom using spectrum in
higher bands) [Source: Network Strategies]
Telecom
Spectrum (MHz)
New operator
Relative cost of
Spectrum (MHz)
access network
Exhibit 2.5:
Total cost
Relative cost of
access network
0
n/a
20
1234
n/a
5
6777
15
1248
8026
10
3411
10
1265
4676
15
2322
5
1286
3608
20
1781
0
3328
5108
Relative costs of 800 MHz operators (option B: with Telecom using 800MHz
spectrum only) [Source: Network Strategies]
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Vodafone
Spectrum (MHz)
New operator
Relative cost of
Spectrum (MHz)
access network
Exhibit 2.6:
Total cost
Relative cost of
access network
0
3081
20
1391
4472
5
950
15
1438
2238
10
858
10
1500
2358
15
791
5
1583
2374
20
740
0
3710
4450
Relative costs of 900 MHz operators [Source: Network Strategies]
4,500
4,000
Relative cost
3,500
3,000
2,500
New operator
Telecom
2,000
1,500
1,000
500
0
0
5
10
15
20
Incumbent's spectrum (MHz)
Exhibit 2.7:
Relative costs of access networks of 800MHz operators (Telecom using higher
band spectrum) [Source: Network Strategies]
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15
9,000
8,000
7,000
Relative cost
16
6,000
5,000
New operator
Telecom
4,000
3,000
2,000
1,000
0
5
10
15
20
Exhibit 2.8:
Relative costs of access networks of 800MHz operators (Telecom not using
higher band spectrum) [Source: Network Strategies]
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5,000
4,500
4,000
Relative cost
3,500
3,000
New operator
Vodafone
2,500
2,000
1,500
1,000
500
0
0
5
10
15
20
Exhibit 2.9:
Relative costs of access networks of 900MHz operators [Source: Network
Strategies]
Varying market share
In the results above, it was assumed that each operator ultimately had an equal market
share (that is, 25%). The graphs below show the results if the market share obtained by the
new operators is varied, first increased to 35% and then decreased to 15%. The remaining
market share is split equally between the incumbents (15% and 35%, respectively). The
graphs show that having more spectrum is more valuable to the operators with higher
market share.
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17
4,500
4,000
Relative cost
3,500
3,000
2,500
New operator
Telecom
2,000
1,500
1,000
500
0
0
5
10
15
20
Exhibit 2.10:
New entrant with 15% market share (800MHz network) [Source: Network
Strategies]
5,000
4,500
4,000
3,500
Relative cost
18
3,000
New operator
Vodafone
2,500
2,000
1,500
1,000
500
0
0
5
10
15
20
Exhibit 2.11:
Strategies]
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4,500
4,000
Relative cost
3,500
3,000
2,500
New operator
Telecom
2,000
1,500
1,000
500
0
0
5
10
15
20
Exhibit 2.12:
Strategies]
5,000
4,500
4,000
Relative cost
3,500
3,000
New operator
Vodafone
2,500
2,000
1,500
1,000
500
0
0
5
10
15
20
Exhibit 2.13:
Strategies]
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19
20
2.6 Analysis and conclusion
From the model results we conclude that:
• It is very expensive for an operator to provide nation-wide coverage without 800 or
900MHz spectrum.
• As an operator’s spectrum in the 800 or 900MHz band increases from 5MHz to
20MHz, the cost to that operator continues to decrease slightly. In other words, if the
incumbents lose spectrum in the 800 and 900MHz bands, their costs will increase
slightly, assuming they can use their spectrum in higher bands. In particular, if
Telecom is unable to use its spectrum in its higher band (that is, if it stays with its
CDMA technology and CDMA does not evolve to use 1.8GHz and/or 2.1GHz
spectrum), the cost of having lower spectrum is significant.
• The lowest overall cost (for both operators in a spectrum band together) is obtained
when both operators have equal amounts of that spectrum, although there is not much
difference overall between splitting the spectrum evenly (10MHz:10MHz) and
providing 5MHz to one operator and 15MHz to the other (5MHz:15MHz).
• The actual costs of the individual operators varies between the operators for two
reasons:
– it is assumed that the incumbents already have a number of sites at the start of the
licence period. These sites are not included (they are treated as sunk costs). It is
assumed all new operators’ sites are included.
– The amount of spectrum in the higher 1.8GHz and 2.1GHz bands has an effect on
the total cost, especially in later years when the traffic levels increase.
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3 Current utilisation of spectrum
3.1 Introduction
In general, an operator is likely to use all the spectrum that it has available because using
more spectrum than would otherwise be necessary means that the operator can plan and
design a lower cost network. Vodafone mentions this point when it discusses spectrum
requirements in its cross submission13:
… there is only an increase or reduction in costs associated with having access to less or
more cellular spectrum rather than some “required” or “optimal” amount of spectrum.
However both Telecom and Vodafone have seen changes to their operations that may
affect how much spectrum they substantially use. For example, Telecom has changed the
technology it uses in the 800MHz band from AMPS/D-AMPS to the significantly more
efficient CDMA, and Vodafone has purchased more spectrum in the 900MHz band, and
has rolled out a WCDMA network in its 2.1GHz spectrum.
Below we determine how much spectrum is substantially used by the operators. Our
analysis is based entirely on publicly available information, and the submissions and cross
submissions to the spectrum renewal process.
13
Vodafone New Zealand Ltd, Submission to the Ministry of Economic Development: Renewal of Management Rights for Cellular
Services,
13
October
2006
(“Vodafone
cross
submission”),
http://www.med.govt.nz/upload/41335/04.pdf.
PUBLIC
paragraph
19.
Available
at
22
3.2 Telecom
Telecom’s 800MHz spectrum consists of two 10MHz bands, traditionally referred to as the
AMPS-A and AMPS-B bands.
Currently the AMPS-A band is used for Telecom’s CDMA network and the AMPS-B band
is used for its AMPS/D-AMPS14 network15.
AMPS-A (CDMA)
The 10 MHz band supports seven CDMA carriers of 1.25MHz each (a small intertechnology guard band is required at the boundary of the spectrum).
Telecom states that it currently uses three carriers for voice and data based on its 1X
technology, and one further carrier for EV-DO16.
It also temporarily expands some base stations to six carriers17 during periods of higher
traffic (such as during holiday season or for special events). This is a cheaper solution for
expanding capacity than deploying extra sites.
We assume that these temporary capacity expansions do not count as substantial use of the
spectrum by Telecom.
AMPS-B (AMPS/D-AMPS)
The 10MHz band supports 333 30kHz carriers.
14
15
16
17
Sometimes referred to as TDMA.
Telecom submission, paragraph 19.
Ibid.
Presumably this excludes the EVDO carrier.
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Telecom currently has less than 65 000 customers on its AMPS/D-AMPS network18. We
can roughly determine the amount of spectrum Telecom requires for those customers based
on the network when it was at its peak:
• The maximum number of customers on the AMPS/D-AMPS network was nearly 1.3
million customers, at the time the migration to the CDMA network commenced in mid
2001. The spectrum used by the AMPS/D-AMPS network would have been the entire
20MHz less the spectrum required for one CDMA carrier (1.25MHz) plus an intertechnology guard band (0.625MHz19) – a total of 18.125MHz. At 30kHz per channel,
this provides a total of 604 channels.
• Assuming no (or few) sites have been decommissioned, and assuming the AMPS/DAMPS customers today generate a similar level of traffic to customers in 2001, the
traffic per site will have decreased by a similar proportion as the number of customers:
there are now 5% of the 2001 number of customers; the corresponding number of
carriers is 5% of 604, or 30. This number of channels uses about 1MHz of spectrum.
• In 2001, there would have been significantly more analogue customers than today.
There is only one circuit on an analogue channel, whereas there are three circuits on a
digital channel. Therefore as few as one-third the number of channels is required to
deploy the network today (for a given level of traffic per site); consequently the
spectrum requirement today (per customer) is less than in 2001.
• The average traffic generated per customer (Erlangs) is likely to be far lower in 2006
than in 2001, because the remaining AMPS/D-AMPS customers today are prepaid
customers who use their phones infrequently20.
18
Telecom media release, Telecom Delivers Strong First Quarter Result, 3 November 2006, available at http://www.telecommedia.co.nz/releases_detail.asp?id=3375.
19
Telecom New Zealand, Telecom Cross Submission on Renewal of 850MHz Spectrum, 12 October 2006 (“Telecom cross
submission”), page 15. Available at http://www.med.govt.nz/upload/41336/01.pdf.
20
Telecom media release, 025 Network Shutdown – 31 March 2007, 11 October 2006, available at
http://www.telecom-media.co.nz/releases_detail.asp?id=3366.
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23
24
• On the other hand, the non-linearity of the Erlang formula at low levels of traffic
means that the number of channels for a certain level of carriers is likely to be
underestimated.
These last three points work to cancel each other out, so if Telecom were to design an
efficient frequency plan for today’s traffic levels, 1MHz may be a reasonable estimate of
the level of spectrum required by Telecom in its AMPS-B band.
In addition, we note that the last time Telecom had 65 000 customers on its AMPS/DAMPS network was likely to be in the early 1990s (our records show it had 132 000 AMPS
customers on 31 December 1993). We assume that Telecom was using its full quota of
spectrum in 1993 where needed. However, there are a number of differences between the
network of today and of 1993:
• In 1993, the network was only analogue (AMPS), whereas most (if not all) customers
today will be digital (D-AMPS). Therefore the spectrum requirement today is less than
in 1993.
• In 1993, the network was still being rolled out, and many sites were deployed to meet
coverage requirements. However today’s network was designed to meet the network’s
peak capacity – nearly 1.3 million customers in mid 2001, prior to the start of
migration to the new CDMA network. Therefore, assuming no (or few) sites have been
removed from service, sites are on average smaller and therefore carry fewer customers
per site. Therefore the spectrum requirement today is less than in 1993.
• In 1993, most mobile users were early adopters and were likely to be frequent users.
Today, the remaining AMPS/D-AMPS customers have old phones (Telecom has not
sold AMPS/D-AMPS phones for many years); which are used infrequently. Therefore
the traffic carried is much less and consequently the spectrum requirement today is
considerably less than in 1993.
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Summary
Telecom is using three 1X carriers and one EVDO carrier in its CDMA network utilizing
the AMPS-A band. It occasionally expands some sites to six 1X carriers due to short term
demand. We conclude that the spectrum substantially used is between 5MHz (four carriers)
and 8MHz (seven carriers) (excluding guard bands).
Telecom’s D-AMPS network, using the AMPS-B band, has decreased to about 5% of the
customers it had at its peak. Assuming Telecom has not decommissioned any (or many)
sites and the current frequency plan is efficient, the spectrum substantially used would have
correspondingly dropped from about 18MHz to about 1MHz. We therefore conclude that
the spectrum substantially used is at least 1MHz.
3.3 Vodafone
Vodafone declares that it uses all its spectrum in the 900MHz band21 22. While we have
found no evidence suggesting otherwise, we wish to highlight a number of factors that
could influence the amount of spectrum substantially being used:
• Prior to the spectrum auction in July/August 2002, Vodafone had 14MHz of spectrum
in the 900MHz band (it is this spectrum that is the subject of this spectrum renewal
study). Potentially the additional spectrum purchased in this auction allowed it to free
up some spectrum, but we note that the number of customers has just about doubled in
this time (from 1.1 million on 30 September 200223 to 2.1 on 30 June 200624), meaning
that any gains from the additional spectrum are likely to be exhausted. (This is
21
22
23
Vodafone cross submission, paragraph 39.
Ibid, paragraph 53.
Vodafone media release, Vodafone NZ Revenue and Customer Numbers Jump Again, 12 November 2002, available at
http://www.vodafone.co.nz/aboutus/media_releases/12.4_20021112.jsp.
24
Vodafone
media
release,
Vodafone
New
Zealand
reports
First
http://www.vodafone.co.nz/aboutus/media_releases/20060725.jsp.
PUBLIC
Quarter
KPIs,
25
July
2006,
available
at
25
26
compounded because it appears network traffic – the real driver for network rollout – is
rising faster than the number of customers25).
• We are not aware of any traffic (in particular voice) being carried using Vodafone’s
1800MHz spectrum. Vodafone states that the 1800MHz spectrum auction occurred too
late for it to be as useful as it might have otherwise been26.
• Vodafone introduced its UMTS 3G network, operating in the 2100MHz band, in mid
200527. While 3G phones use the 3G network by default28 – which will free up capacity
in GSM base stations and hence spectrum – 3G coverage is still restricted to the hightraffic urban areas of the main centres29 and hence the effect is not likely to be great at
this stage.
• Vodafone has been reported as having offered a block of spectrum in the 900MHz
band to Econet for ‘a cost-based price’30. While this could be interpreted as meaning
Vodafone has spectrum to spare, it is more likely that the network would need a
redesign with additional sites to compensate for lower spectrum, and that the price is
set by Vodafone based on the cost of such a network redesign.
•
25
Of most interest is [313233]
Vodafone
media
release,
Vodafone
New
Zealand
reports
First
Quarter
KPIs,
25
July
2006,
available
at
http://www.vodafone.co.nz/aboutus/media_releases/20060725.jsp.
26
27
Vodafone cross submission, paragraph 39.
Vodafone media release, Vodafone unleashes mobile revolution on New Zealand, 10 August 2005, available at
http://www.vodafone.co.nz/aboutus/media_releases/20050810.jsp
28
29
30
That is, only using the GSM network when 3G coverage is not available.
Vodafone New Zealand website, http://www.vodafone.co.nz/coverage/3g/maps.jsp?item=3g.
Econet Wireless New Zealand, Response to Ministry of Economic Development: Renewal of Management Rights for Cellular
Services Discussion Paper, 27 August 2006, page 3, available at http://www.med.govt.nz/upload/39924/02.pdf.
31
32
33
Vodafone Cross Submission, paragraphs 43, 45.
For example, Telecom cross submission, Appendix E
Telecom cross submission, paragraph 20.
PUBLIC
• Finally we compare the spectral efficiency of Vodafone’s and Telecom’s networks
(GSM and CDMA respectively). An efficient reuse number for GSM is 9 (3 sites×3
sectors per site); one GSM transceiver (TRX) in each sector in a reuse pattern requires
a total of 1.8MHz (0.2MHz per TRX×9). At an average of 7.5 traffic channels per
TRX34 this corresponds to 240kHz required for one traffic channel in each sector in the
whole reuse pattern. On the other hand, CDMA has a reuse pattern of 1; 1.25MHz is
required to cover the same 9 sectors covered by 1.8MHz in GSM. At a capacity of 34.5
Erlangs per site (11.5 per sector)35, the number of traffic channels per sector is 19 (at
2% blocking probability). This corresponds to 66kHz required to provide one traffic
channel per sector – about 27.5% of the bandwidth required for GSM, or (using
Telecom’s words), three to four times more capacity36. Extending this calculation to
Telecom’s reported requirement of 5MHz of spectrum (4 carriers), Vodafone would
need around 18MHz to support the same traffic demand in a site.
Summary
We conclude that while Vodafone may be currently using its entire allocation of 21MHz, it
is possible it may not actually all be needed, because:
• Vodafone has offered Econet a portion of its spectrum
• [ ]
• comparing spectral efficiency with CDMA indicates about 18MHz would be needed to
support the same traffic that Telecom supports on 4 carriers.
Thus, the amount of spectrum substantially used could be as low as 14 to 16MHz (5 to
7MHz less than its full allocation of 21MHz).
34
35
36
Assuming eight channels per TRX, less one control channel for every second TRX, leaving 15 traffic channels per two TRXs.
Network Strategies estimate
Telecom media release, Customers Flock To Telecom’s CDMA, 8 August 2001, available at
http://www.telecom-media.co.nz/releases_detail.asp?id=2669
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27
28
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4 Frequency allocation: a comparison with other
countries
4.1 Introduction
The amount of spectrum held by overseas operators may provide a useful comparison with
the situation in New Zealand. We have undertaken some comparative analysis of a sample
of operators, firstly collecting information on the quantity of spectrum held by the
operators, and secondly undertaking a statistical analysis to identify if there are any factors
which may have a relationship with the amount of spectrum held by the operators.
While we have selected a sample, the members of which have various points of similarity
with Telecom and Vodafone New Zealand (described in Section 4.2), key differences still
exist. There may be certain characteristics which explain why one operator may appear to
have only a small amount of spectrum, or another operator a particularly generous
allocation. The purpose of the statistical analysis is to adjust the sample data for these
significant factors. This then allows us to compare the allocation of spectrum for Telecom
and Vodafone New Zealand with that of the other operators within our sample.
4.2 Selecting a sample of operators
Mobile networks reflect the characteristics of the local environment. These characteristics
include:
•
population distribution and density
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30
•
mix of urban, suburban and rural areas
•
coverage area
•
terrain
•
traffic levels
•
the amount of spectrum available.
Every country is unique, which makes direct comparisons difficult, nevertheless it is still
possible to use information from other countries to draw conclusions about the use of
spectrum in New Zealand.
We have collected information across several countries which have operators of similar
size in terms of subscriber numbers to Telecom and Vodafone New Zealand:
•
Denmark
•
Finland
•
Hong Kong
•
Ireland
•
the Netherlands
•
Norway.
While most of these countries have a number of points of similarity with New Zealand, in
terms of demographic or geographic characteristics, Hong Kong represents a very different
environment. It is one of the most competitive mobile markets in the world. With five
operators (and 14 different networks) serving a population of just under 7 million within a
small area characterised as an extremely high density urban environment, it offers great
challenges in radiofrequency planning. Hong Kong thus provides an interesting illustration
of an extreme case: namely, what can be achieved with a given amount of spectrum across
multiple operators with high traffic densities.
In addition to all the mobile operators within the above countries, we have supplemented
our sample with a small selection of operators from Canada, United States, Japan, United
Kingdom, Germany, Spain and Hungary. This enabled the inclusion of several CDMA
operators, as well as introducing more variation within the sample in terms of operator and
country characteristics.
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As Exhibit 4.1 shows, in terms of subscriber base both Telecom and Vodafone New
Zealand are positioned at around the midpoint of our sample of operators.
Exhibit 4.1:
Vodafone Germany
KDDI Japan
Vodafone UK
Vodafone Spain
ALLTEL United States
KPN Mobiel Netherlands
TELUS Mobility
Vodafone Netherlands
Telenor Norway
Sonera Finland
Pelephone Israel
Telfort Netherlands
T-Mobile Netherlands
TDC Denmark
Vodafone Ireland
Vodafone Hungary
Vodafone New Zealand
Hutchison HK
Elisa Finland
Orange Nederland
Telecom New Zealand
Netcom Norway
O2 Ireland
HK CSL
New World PCS HK
China Mobile Peoples HK
Sonofon Denmark
Telia Denmark
SmarTone HK
Finnet Finland
SUNDAY HK
Aliant Canada
Meteor Ireland
Mobile subscribers
by operator, 2005
[Source: regulators,
operators]
0
5
10
15
20
25
30
Subscribers (millions)
All of the countries within our sample have extensive mobile networks, with coverage in
excess of 94% of the population, although there are individual operators in some countries
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31
32
which do not offer national coverage, or extend their coverage via roaming agreements
with other operators.
Most of the New Zealand population live in non-rural areas, with the United Kingdom,
Denmark, the Netherlands and Norway also displaying similar urbanisation levels
(Exhibit 4.2). The urbanisation levels in the various spectrum licence areas for the United
States and Canada can vary from national data. For example in Aliant’s licence area –
encompassing the Canadian provinces of Newfoundland and Labrador, Prince Edward
Island, Nova Scotia and New Brunswick – only 54% of the population live in non-rural
areas.
Exhibit 4.2:
Hong Kong
Proportion of the
United Kingdom
population living in
Denmark
New Zealand
non-rural areas for
United States
selected countries
Canada
[Source: World
Netherlands
Bank]
Norway
Spain
Germany
Hungary
Japan
Ireland
Finland
0%
20%
40%
60%
80%
100%
% population in non-rural areas
In terms of land area, New Zealand is just below the midpoint of the countries within our
sample (Exhibit 4.3 – this graph excludes the United States and Canada as the resultant
scale would mask variation in the smaller countries). Note that our analysis uses land area
as a proxy for coverage area, and in the cases of the regional US and Canadian operators
we have used the spectrum licence areas rather than the national land area. There is little
information available on the geographic coverage area for mobile operators – most report
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coverage only in terms of percentage of population covered. Coverage is either low or
nonexistent in unpopulated areas.
Exhibit 4.3:
Spain
Land area of
Japan
selected countries
Germany
[Source: World
Finland
Bank, Hong Kong
Norway
New Zealand
C&SD]
United Kingdom
Hungary
Ireland
Denmark
Netherlands
Hong Kong
0
100
200
300
400
500
600
Area (sq km, '000s)
New Zealand has a similar population density to both Finland and Norway (Exhibit 4.4 –
note that Hong Kong was omitted due to its effect on the scaling for this graph). However,
caution should be used if inferring characteristics of mobile traffic density (for the purposes
of network dimensioning) from a national figure. All countries will have areas of high
density population (typically in the central business districts of major urban centres), areas
of medium population density (such as in suburbs) and low density areas (rural regions),
which means that subscribers, and the traffic, will be spread unevenly over the entire
coverage area. Furthermore, for regional operators population density may also differ from
the national figure.
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33
34
Exhibit 4.4:
Netherlands
Population density
Japan
for selected
United Kingdom
Germany
countries [Source:
Denmark
Network Strategies]
Hungary
Spain
Ireland
United States
Finland
New Zealand
Norway
Canada
0
100
200
300
400
Population density (persons per sq km)
Most of the countries in our sample have mature mobile markets, with more than
90 subscriptions per 100 persons, with the exception of Canada, the United States and
Japan (Exhibit 4.5). In such markets, the opportunity for subscriber growth becomes more
limited, as this translates into a proportion of the population taking up more than one
service. Indeed, penetration has already exceeded 100% in Denmark, the United Kingdom,
Ireland, Norway and Hong Kong.
PUBLIC
Exhibit 4.5:
Hong Kong
Mobile penetration
Norway
in selected
Ireland
countries, 2005
United Kingdom
[Source: Network
Denmark
Netherlands
Strategies]
Finland
Spain
Germany
New Zealand
Hungary
United States
Japan
Canada
40%
60%
80%
100%
120%
140%
Mobile penetration (%)
The traffic levels experienced in New Zealand are substantially lower than for many of the
other operators in our sample. There is a relationship between the number of subscribers
and the traffic volumes (Exhibit 4.6), nevertheless there is some variability of average
minutes of use per subscriber between operators.
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35
50,000
ALLTEL
45,000
40,000
Traffic minutes (millions)
36
35,000
30,000
KDDI
25,000
20,000
Vodafone Spain
15,000
TELUS
10,000
5,000
Vodafone UK
Vodafone
Germany
KPN Mobiel
Sonera
Vodafone NZ
Telecom NZ
0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Exhibit 4.6:
The relationship between subscribers and annual outgoing traffic volumes
[Source: operators, Network Strategies]
If we exclude the larger operators from the above graph (Exhibit 4.7), we see that both
Telecom and Vodafone New Zealand have a relatively low level of traffic given the
number of subscribers. Only the Dutch operator Telfort has less traffic, but this is due to
the subscriber base being predominantly low-usage prepaid customers. A discussion of the
reasons behind low traffic levels in New Zealand is beyond the scope of this project – it is
a complex topic and would be an avenue for further research.
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15,000
TELUS
Traffic minutes (millions)
12,000
9,000
KPN Mobiel
Sonera
6,000
Vodafone Ireland
3,000
Telenor
Vodafone
Netherlands
TDC Denmark
Elisa
Vodafone Hungary
Sonofon
Vodafone NZ
Telecom NZ
Telfort
O2 Ireland
Aliant
0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Exhibit 4.7:
The relationship between subscribers and annual outgoing traffic volumes for
smaller operators [Source: operators, Network Strategies]
4.3 How much spectrum do the operators in our sample hold?
The amount of 800/900MHz spectrum held by both Telecom and Vodafone New Zealand
falls at the upper end of the allocations of the other operators within our sample
(Exhibit 4.8). In the table below, row shading is used to denote those operators that use
CDMA technology.
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37
38
Licensee
Subscribers
800/900MHz
GSM1800
IMT2000
bands
band
band
n.a.
2 × 4.6MHz
–
–
Orange Nederland
1 914 000
2 × 5.0MHz
2 × 15.0MHz 2 × 10.0MHz
Telfort Netherlands
2 332 000
2 × 5.0MHz
2 × 17.4MHz 2 × 10.0MHz
Telia Denmark
1 146 667
2 × 7.2MHz
2 × 14.2MHz 2 × 15.0MHz
Meteor Ireland
565 000
2 × 7.5MHz
2 × 14.4MHz
O2 Ireland
1 602 000
2 × 7.5MHz
2 × 14.4MHz 2 × 15.0MHz
Vodafone Ireland
2 047 000
2 × 7.5MHz
2 × 14.4MHz 2 × 15.0MHz
Vodafone Hungary
2 038 000
2 × 8.6MHz
2 × 15.0MHz 2 × 15.0MHz
SmarTone Hong Kong
1 054 000
2 × 8.7MHz
2 × 11.6MHz 2 × 14.8MHz
Sonofon Denmark
1 284 443
2 × 8.8MHz
2 × 19.2MHz 2 × 15.0MHz
TDC Denmark
2 253 263
2 × 8.8MHz
2 × 26.2MHz 2 × 15.0MHz
Hong Kong CSL
1 300 000
2 × 9.3MHz 2 × 12.4MHz
Hutchison Hong Kong
1 971 000
2 × 11.4MHz
2 × 11.6MHz 2 × 14.8MHz
Vodafone Netherlands
3 976 000
2 × 11.4MHz
2 × 5.2MHz 2 × 14.6MHz
12 923 000
2 × 12.0MHz
2 × 24.8MHz 2 × 14.8MHz
5 740 000
2 × 12.4MHz
2 × 17.6MHz 2 × 14.8MHz
29 165 000
2 × 12.4MHz
2 × 5.4MHz
715 493
2 × 12.5MHz
2 × 5.0MHz
n.a.
5
2 × 12.5MHz 2 × 20.0MHz
n.a.
10 622 324
2 × 12.5MHz
n.a.
n.a.
830 000
2 × 13.2MHz
2 × 14.6MHz 2 × 14.8MHz
Netcom Norway
1 651 000
2 × 14.2MHz
2 × 16.4MHz 2 × 15.0MHz
Telenor Norway
2 731 000
2 × 14.2MHz
2 × 10.0MHz 2 × 15.0MHz
KDDI Japan
22 699 000
2 × 15.0MHz
–
2 × 15.0MHz
Vodafone UK
16 325 000
2 × 17.4MHz
2 × 5.8MHz
2 × 14.8MHz
Network Norway
Vodafone Spain
KPN Mobiel Nederland
Vodafone Germany
Aliant Canada
TELUS Canada
4 520 700
ALLTEL United States
Finnet Finland
1
1
1
1
1
1
1
1
1
4
5
–
1
2 × 14.8MHz
1
3
1
1
1
2 × 9.9MHz
2
1
1
2
Elisa Finland
1 962 101 2 × 18.8MHz
2 × 15.6MHz 2 × 14.8MHz
Telecom New Zealand
1 808 000
2 × 25.0MHz
2 × 20.0MHz
5
2 × 22.5MHz
2 × 15.0MHz
2
Sonera Finland
2 507 000 2 × 22.0MHz
2 × 18.6MHz 2 × 14.8MHz
2 024 000
2 × 15.0MHz 2 × 10.0MHz
1
Plus 5.0MHz of unpaired spectrum
2
3
4
Plus 2 × 12.0MHz from the merger with New World PCS in April 2006
5
Some regional variation
Exhibit 4.8:
1
Summary of spectrum holdings of licensees with 800/900MHz spectrum, ranked
by spectrum amount [Source: regulators, operators]
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4.4 Comparative analysis of the sample data
We have seen that both Telecom and Vodafone New Zealand have a relatively generous
quantity of spectrum in the 800/900MHz bands (Exhibit 4.8), in comparison with the other
operators within our sample, however such a simple comparison does not take into account
any factors that may vary from operator to operator, and which may justify the amount of
spectrum held.
So, the next step in the comparative analysis is to try to identify if there are any factors
which have a significant relationship with the amount of spectrum, and then develop a
model which may adjust the sample data for these factors. Such a model can then be used
to estimate, based on the sample data, how much spectrum Telecom and Vodafone New
Zealand would be expected to hold.
A statistical analysis of our sample data, using multiple regression, shows that there are
four significant factors which have a relationship with the amount of spectrum held by the
operator37:
Spectrum = 7.760 ( 7.28) + 1.806 × 10 −4 × Traffic(1.97) + 6.987 ×10 −4 × PopDensity (1.14)
+ 9.628 × 10 −6 × Area(1.99) − 1.182 × CDMA(−0.50)
Adjusted R2 = 0.419
F4,12 = 3.890
Durbin-Watson statistic = 1.78
where:
• Spectrum is the amount of paired spectrum in the 800/900MHz bands, expressed in
MHz
• Traffic is the outgoing traffic, in millions of minutes
• PopDensity is the population density, in persons per square kilometre
• Area is the land area, in square kilometres
37
The numbers within parentheses associated with the variables in the model are the t-statistics, and are a measure of the statistical
significance of each variable. All the variables within our regression model are statistically significant.
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39
40
• CDMA is a dummy variable which has the value of one if the operator uses CDMA or
zero otherwise.
Clearly, our model only goes part way towards explaining the variability within the sample
data. This is indicated by the relatively low adjusted R2 value, and the lack of statistical
significance of the predictor variables (indicated by the t statistics). It is not surprising that
we have not captured all the sources of variability within the data – the frequency
allocation process varies from country to country, and certainly in some jurisdictions, such
as Japan, there has been criticism that the process lacks transparency38. Thus it would be
difficult to capture in such a model all the key drivers influencing the various spectrum
management agencies.
Nevertheless, the model can still be used as an indication of how the spectrum amounts in
New Zealand compare with those in other countries.
It should be noted that this model is based on a reduced data sample of 17 operators:
• In order to estimate the spectrum amount for Telecom and Vodafone New Zealand
based on the characteristics of the overseas operators, data for the New Zealand
operators needed to be excluded from the multiple regression – inclusion of the New
Zealand data would bias the result.
• Outgoing traffic data was not available for all the operators within our sample, and for
a number of operators outgoing traffic was estimated from the traffic data that was
reported (either total incoming and outgoing traffic, or average minutes per subscriber).
A number of operators were excluded from the analysis, as we were unable to obtain
reliable current traffic information within the timeframe for this project.
• A small number of operators were removed from the sample due to being outliers, or
extreme observations. The licence areas for TELUS and ALLTEL are extremely large
in comparison with all other operators (1.6 and 2.6 million square kilometres
respectively); the statistical analysis found that Sonera and Elisa were also outliers. It is
38
See for example TeleGeography CommsUpdate, ‘Spectrum allocation decision angers Softbank’, 7 September 2004.
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standard practice to remove extreme observations in order to improve the fit of the
statistical model.
One factor we did not examine – due to limited time – was the presence of any relationship
between the spectrum allocation in the 800/900MHz bands and the amount of spectrum
held in higher frequency bands.
It should be emphasised that this regression model does not estimate ‘optimal’ spectrum –
it is unable to provide any information on whether the operators in our sample have an
optimal allocation. It cannot be used to estimate the appropriate amount of spectrum for
New Zealand operators – a far more complex task than can be captured in such a simple
model, as described in Section 2 – nor can it be used to derive any conclusions regarding
causality – for example are the traffic levels driving the amount of spectrum, or are
operators seeking to maximise spectrum utilisation and are thus encouraging high traffic
volumes?
The model does however suggest that in comparison to the operators within our sample,
both Telecom and Vodafone New Zealand have a relatively generous spectrum allocation
within the 800/900MHz bands, given adjustments for various factors that differ between
New Zealand and the other countries. Applying New Zealand data to the regression model
results in a estimated allocation of 2 × 9.4MHz for Telecom and 2 × 10.7MHz for
Vodafone, which is less than the actual holdings of the operators. This confirms our finding
based on the simple comparison of Exhibit 4.8.
PUBLIC
41
5 Summary
Modelling optimal spectrum quantities
• It is very expensive for an operator to provide nation-wide coverage without 800 or
900MHz spectrum.
• As an operator’s spectrum in the 800 or 900MHz band increases from 5MHz to
20MHz, the cost to that operator continues to decrease slightly. In other words, if the
incumbents lose spectrum in the 800 and 900MHz bands, their costs will increase
slightly, assuming they can use their spectrum in higher bands. In particular, if
Telecom is unable to use its spectrum in its higher band the cost of having lower
spectrum is significant.
• The lowest overall cost (for both operators in a spectrum band together) is obtained
when both operators have equal amounts of that spectrum, although there is not much
difference overall between splitting the spectrum evenly (10MHz:10MHz) and
providing 5MHz to one operator and 15MHz to the other (5MHz:15MHz).
• The actual costs of the individual operators varies between the operators for two
reasons:
– it is assumed that the incumbents already have a number of sites at the start of the
licence period. These sites are not included (they are treated as sunk costs). It is
assumed all new operators’ sites are included
– the amount of spectrum in the higher 1.8GHz and 2.1GHz bands has an effect on
the total cost, especially in later years when the traffic levels increase.
PUBLIC
44
Current utilisation
Telecom is using three 1X carriers and one EVDO carrier in its CDMA network utilizing
the AMPS-A band. It occasionally expands some sites to six 1X carriers due to short term
demand. We conclude that the spectrum substantially used is between 5MHz (four carriers)
and 8MHz (seven carriers) (excluding guard bands).
Telecom’s D-AMPS network, using the AMPS-B band, has decreased to about 5% of the
customers it had at its peak. Assuming Telecom has not decommissioned any (or many)
sites and the current frequency plan is efficient, the spectrum substantially used would have
correspondingly dropped from about 18MHz to about 1MHz. We therefore conclude that
the spectrum substantially used is at least 1MHz.
While Vodafone may be currently using its entire allocation of 21MHz, it is possible it may
not actually all be needed, because:
• Vodafone has offered Econet a portion of its spectrum
• [ ]
• comparing spectral efficiency with CDMA indicates about 18MHz would be needed to
support the same traffic that Telecom supports on 4 carriers.
Thus, the amount of spectrum substantially used could be as low as 14 to 16MHz (5 to
7MHz less than its full allocation of 21MHz).
Comparisons with other countries
Both Telecom and Vodafone New Zealand have a relatively generous quantity of spectrum
in the 800/900MHz bands (Exhibit 4.8), in comparison with the other operators within our
benchmark sample. At the same time a simple comparison does not take into account any
factors that may vary from operator to operator, and which may justify the amount of
spectrum held.
To normalise for these factors we undertook regression modelling. The model suggests that
in comparison to the operators within our sample, both Telecom and Vodafone New
PUBLIC
Zealand have a relatively generous spectrum allocation within the 800/900MHz bands,
given adjustments for various factors that differ between New Zealand and the other
countries. Applying New Zealand data to the regression model results in a estimated
allocation of 2 × 9.4MHz for Telecom and 2 × 10.7MHz for Vodafone, which is less than
the actual holdings of the operators.
PUBLIC
45
Annex A: Detailed data for selected countries
A.1 New Zealand
Population, 2005
4 120 900
Population density (persons per square km)
15.2
Area (square km)
270 500
Urbanisation (% population living in non-rural
areas)
86%
Mobile subscribers
3 832 000
Mobile penetration
93%
Outgoing mobile traffic (millions of minutes)
2 944
Mobile operators
Licensee
2
Exhibit A.1: New
Zealand –
summary
characteristics
[Source: Statistics
New Zealand,
operators, World
Bank]
Subscribers
Annual
800/900MHz
GSM1800
IMT2000
2005
outgoing call
bands
band
band
2 × 20.0MHz
2 × 20.0MHz
2 × 10.0MHz
2 × 5.0MHz
2 × 5.0MHz
2 × 5.0MHz
2 × 10.0MHz
2 × 10.0MHz
1 × 5.0MHz
minutes
(millions)
2005
Telecom
New Zealand
1 808 000
Vodafone
New Zealand
2 024 000
Exhibit A.2:
1 306
1 638
2 × 22.5MHz
Mobile spectrum licences, New Zealand [Source: Radio Spectrum Management
New Zealand, operators]
PUBLIC
A2
Telecom New Zealand
Exhibit A.3:
Base stations
540
CDMA coverage (as % of population)
97%
Base station sites
over 1100
GSM coverage (as % of population)
97%
Network investment (since commencing
operations in 1998)
Selected network
characteristics ,
New Zealand
[Source: operators]
NZD2 billion
A.2 Denmark
Population, 2005
5 427 459
126.0
Area (square km)
43 090
areas)
86%
Mobile subscribers
5 478 246
Mobile penetration
100.9%
Outgoing mobile traffic (millions of minutes)
6 485
Mobile operators (excludes MVNOs)
Exhibit A.4:
Denmark –
summary
characteristics
[Source: NITA,
Statistics Denmark,
World Bank]
4
Just over 26% of mobile subscriptions in Denmark are with a mobile virtual network
operator (MVNO) or reseller. This means that the networks of the mobile operators also
carry a significant amount of wholesale traffic in addition to traffic to and from the
operators’ retail services.
TeliaSonera acquired Orange Denmark in 2004 and was required to return one of the two
2G and two 3G spectrum licences by the end of 2005. TeliaSonera requested that it retain
the 2G spectrum (the 3G spectrum was re-auctioned and awarded to Sonofon), but we have
been unable to confirm if the Orange 2G spectrum was retained.
PUBLIC
Licensee
Subscribers
Outgoing
800/900MHz
GSM1800
IMT2000
2005
minutes
band
band
band
–
–
1 × 5.0MHz
(millions)
2005
Hi3G Denmark ApS
117 206
199
2 × 15.0MHz
Sonofon
(including CBB)
1 284 443
TDC
(including Telmore)
2 253 263
Telia Denmark
1 146 667
1 637
2 × 8.8MHz
2 × 19.2MHz
1 × 5.0MHz
2 × 15.0MHz
2 586
2 × 8.8MHz
1 564
2 × 16.4MHz
1 × 5.0MHz
2 × 9.8MHz
2 × 15.0MHz
2 × 14.2MHz
1 × 5.0MHz
2 × 7.2MHz
2 × 15.0MHz
Other providers
1
1
676 667
588
–
–
–
Some providers use the networks of more than one mobile operator
Exhibit A.5:
Mobile
spectrum
licences,
Denmark
[Source:
NITA,
European
Radiocommunications Office]
National
Exhibit A.6:
Base stations, 1999
6654
Sonofon
Base stations
540
GSM coverage (geographical)
98.7%
Selected network
characteristics ,
Denmark [Source:
operators, NITA]
TDC
GSM900 coverage (geographical)
>95%
Telia Denmark
GSM1800 coverage (geographical)
>95%
PUBLIC
A3
A4
A.3 Finland
Population, 2005
5 255 580
15.5
Area (square km)
338 200
areas)
Mobile subscribers, June 2006
61%
5 360 000
Mobile penetration
98%
Mobile traffic
n.a.
Mobile operators
4
PUBLIC
Exhibit A.7: The
Finland – summary
characteristics
[Source: FICORA,
Statistics Finland,
World Bank]
Licensee
Subscribers
Annual
800/900MHz
GSM1800
IMT2000
2005
incoming &
bands
band
band
1
–
outgoing call
minutes
(millions)
2005
Ålands Mobiltelefon
AB
Elisa
Matkapuhelinpalvelut
13 000
n.a.
2 × 3.8MHz
1
1
2 × 11.6MHz
1 962 101
3 509
2
2 × 0.2MHz
1
1 × 4.8MHz
2 × 15.0MHz
2
2 × 15.6MHz
2
2
1 × 4.8MHz
2
2 × 0.6MHz
2 × 14.8MHz
3
2 × 9.8MHz
4
2 × 8.4MHz
2
2 × 9.6MHz
Finnet Verkot Oy
830 000
n.a.
2
2 × 5.2MHz
2
2 × 14.6MHz
2
2
1 × 4.8MHz
2
2 × 1.4MHz
2 × 14.8MHz
2
2 × 3.0MHz
2
2 × 3.6MHz
Nokia Networks Oy
Sonera Mobile
Networks Oy
n.a.
n.a.
2 507 000
8 047
5
–
–
2 × 1.0MHz
2 × 18.6MHz
1 × 4.8MHz
2 × 5.2MHz
3
2 × 13.4MHz
4
2 × 11.4MHz
2 × 9.6MHz
1
2 × 1.6MHz
1
Province of Åland only
2
Finland excluding the province of Åland
3
Metropolitan area, Turku, Tampere and Oulu
4
Finland, excluding the metropolitan area, Turku, Tampere, Oulu and the province of Åland
5
Test locations only
Exhibit A.8:
Mobile spectrum licences, Finland [Source: FICORA, operators]
PUBLIC
2 × 14.8MHz
A5
A6
Elisa
Exhibit A.9:
3G base stations (by end 2006)
>1000
3G coverage (as % of population by end 2006)
40%
Finnet (DNA)
99%
Selected network
characteristics ,
Finland [Source:
operators]
Sonera
GSM coverage (geographical)
97%
99%
A.4 Hong Kong
Population, 2005
6 965 900
6309.7
Area (square km)
1 104
areas)
100%
Mobile subscribers, 2005
8 544 255
Mobile penetration
122.7%
Mobile traffic
n.a.
Mobile operators
5
PUBLIC
Exhibit A.10:
Hong Kong –
summary
characteristics
[Source: OFTA,
C&SD Hong Kong,
World Bank]
Licensee
Subscribers
Annual
800/900MHz
GSM1800
IMT2000
2005
incoming &
band
band
band
–
2 × 10.0MHz
–
outgoing call
minutes
(millions)
2005
China Mobile
Peoples Telephone
Company
1 287 000
Hong Kong CSL
1 300 000
n.a.
(Q3)
2 × 1.6MHz
n.a.
2 × 7.5MHz
2 × 10.0MHz
2 × 14.8MHz
2 × 0.8MHz
2 × 1.6MHz
1 × 5.0MHz
2 × 1.0MHz
2 × 0.8MHz
3 317
2 × 4.8MHz
2 × 10.0MHz
2 × 14.8MHz
(estimate)
2 × 0.7MHz
2 × 1.6MHz
1 × 5.0MHz
2 × 10.0MHz
–
(Q2)
1 971 000
Hutchison
2 × 0.2MHz
2 × 0.2MHz
2 × 1.8MHz
2 × 0.6MHz
2 × 0.6MHz
2 × 2.5MHz
New World PCS
(merged with
Hong Kong CSL in
April 2006)
1 290 000
SmarTone
1 054 000
n.a.
–
2 × 1.6MHz
2 × 0.4MHz
n.a.
2 × 7.5MHz
2 × 10.0MHz
2 × 14.8MHz
2 × 0.8MHz
2 × 1.6MHz
1 × 5.0MHz
2 × 10.0MHz
2 × 14.8MHz
2 × 1.6MHz
1 × 5.0MHz
2 × 0.4MHz
SUNDAY / Mandarin
Communications
Exhibit A.11:
738 000
n.a.
–
Mobile spectrum licences, Hong Kong [Source: OFTA, operators, Network
Strategies]
Hutchison
Exhibit A.12:
Base stations (by end 2006)
3 000
99%
Selected network
characteristics ,
Hong Kong [Source:
operators]
PUBLIC
A7
A8
A.5 Ireland
Population, 2005
4 130 700
58.8
Area (square km)
70 270
areas)
61%
Mobile subscribers, 2005 (2G)
4 213 000
Mobile penetration
Ireland – summary
characteristics
[Source: ComReg,
World Bank]
102%
Mobile traffic
n.a.
Mobile operators
Licensee
Exhibit A.13:
4
Subscribers
Annual
800/900MHz
GSM1800
IMT2000
2005
incoming &
band
band
band
–
–
2 × 15.0MHz
outgoing call
minutes
(millions)
2005
Hutchison
(operating as 3
Ireland)
Meteor
O2
n.a.
n.a.
1 × 5.0MHz
565 000
n.a.
2 × 7.5MHz
2 × 14.4MHz
–
1 602 000
n.a.
2 × 7.5MHz
2 × 14.4MHz
2 × 15.0MHz
1 × 5.0MHz
Vodafone
2 047 000
5 020
2 × 7.5MHz
2 × 14.4MHz
2 × 15.0MHz
1 × 5.0MHz
Exhibit A.14:
Mobile spectrum licences, Ireland [Source: European Radiocommunications
Office, operators]
PUBLIC
3 Network
Exhibit A.15:
Base stations
540
3G network coverage (as % of population)
September 2006 (actual)
80%
Target end 2007
85%
Selected network
characteristics ,
Ireland [Source:
operators]
Meteor
GSM coverage (as % of population) – this
includes areas where Meteor has no network,
which are covered via a roaming agreement
with O2
98%
O2 Ireland
Annual network investment
⁄200million
Vodafone Ireland
99.5%
Network investment (cumulative)
⁄1billion
Weekly network investment
⁄3million
A.6 The Netherlands
Population, 2005
16 305 526
392.6
Area (square km)
41 530
areas)
80%
16 000 000
Mobile penetration
98%
Mobile operators
Exhibit A.16: The
Netherlands –
summary
characteristics
[Source: OPTA,
CBS, World Bank]
5
There are five mobile operators in the Netherlands: KPN, Orange Nederland, T-Mobile,
Telfort (now owned by KPN) and Vodafone. All operators, with the exception of
T-Mobile, hold licences for spectrum in the 800/900 MHz bands (Exhibit A.17).
PUBLIC
A9
A10
Licensee
Subscribers
Annual
800/900MHz
GSM1800
IMT2000
2005
outgoing call
band
band
band
minutes
(millions)
2005
KPN Mobiel
Nederland
5 740 000
9 059
2 × 4.0MHz
2 × 2.4MHz
1 × 5.0MHz
2 × 8.4MHz
2 × 2.6MHz
2 × 14.8MHz
2 × 2.6MHz
2 × 5.0MHz
2 × 5.0MHz
Orange Nederland
NV
1 914 000
T-Mobile
Netherlands B.V.
2 300 000
n.a.
2 × 0.8MHz
2 × 15.0MHz
2 × 4.2MHz
n.a.
–
1 × 5.0MHz
2 × 10.0 MHz
2 × 2.4MHz
1 × 5.0MHz
2 × 2.4MHz 2 × 10.0 MHz
2 × 2.6MHz
2 × 4.4MHz
2 × 5.0MHz
Telfort B.V.
2 332 000
760
1
6 609
2
2 × 1.4MHz
2 × 3.6MHz
Vodafone
1
3 976 000
2 × 2.4MHz
1 × 5.0MHz
2 × 15.0MHz 2 × 10.0 MHz
2 × 9.0MHz
2 × 2.6MHz
1 × 5.4MHz
2 × 2.4MHz
2 × 2.6MHz
2 × 14.6MHz
The low traffic volume is a result of the modest usage levels of Telfort’s predominantly prepaid subscriber base: 73% of the
Telfort subscriber base is prepaid
2
Incoming and outgoing traffic
Exhibit A.17:
Mobile spectrum licences, the Netherlands [Source: Agentschap Telecom]
KPN
KPN operates two 2.5G GSM networks (one being the Telfort network acquired in October
2005) and a 3G UMTS network. A combined upgrade and integration of the 3G network
and the Telfort network with HSDPA was announced in February 2006, with the upgrade
of the KPN UMTS coverage area expected to be completed by the end of the year39.
39
Total Telecom (2006) KPN to save up to E300m from network rollout, 28 February 2006.
PUBLIC
Base stations
Exhibit A.18:
2.5G sites
3918
3G sites
1735
2.5G network coverage
Outdoor (as % of population)
>99%
Outdoor (as % of area)
99%
Indoor (as % of population)
98%
Outdoor (as % of population)
characteristics,
excluding Telfort
network, 2005
72%
Subscribers
Exhibit A.19:
Traffic
7,000
KPN subscriber
10,000
and traffic growth,
9,000
6,000
2001–2005
8,000
5,000
7,000
6,000
4,000
5,000
3,000
4,000
3,000
2,000
2,000
1,000
1,000
0
0
2002
2003
2004
2005
PUBLIC
(excludes Telfort)
Minutes (millions)
Subscribers ('000s)
network
[Source: KPN]
3G network coverage
2001
Selected KPN
[Source: KPN]
A11
A12
A.7 Norway
Population, 2005
4 640 200
14.3
Area (square km)
323 800
areas)
77%
4 754 453
Mobile penetration
Exhibit A.20:
Norway – summary
characteristics
[Source: NPT,
World Bank]
102.5%
Mobile traffic
n.a.
Mobile operators
5
There are two nationwide GSM networks in Norway: Telenor and Netcom. Teletopia has
limited coverage, concentrating on the Oslo area. Automobil Invest (operating as Network
Norway) launched its network in May 2006.
Licensee
Subscribers
Annual
800/900MHz
GSM1800
IMT2000
2005
outgoing call
band
band
band
–
–
1 × 5.0MHz
minutes
(millions)
2005
Hi3G Access Norway
AS
Netcom
Network Norway
Telenor ASA
n.a.
n.a.
2 × 14.8MHz
1 651 000
1 757
2 × 4.6MHz
2 × 6.4MHz
1 × 5.0MHz
2 × 9.6MHz
2 × 10.0MHz
2 × 15.0MHz
n.a.
n.a.
2 × 4.6MHz
–
–
2 731 000
3 799
2 × 4.6MHz
2 × 10.0MHz
1 × 5.0MHz
2 × 9.6MHz
Teletopia
Exhibit A.21:
n.a.
n.a.
–
2 × 14.8MHz
2 × 6.4MHz
Mobile spectrum licences, Norway [Source: NPT, Network Strategies]
PUBLIC
–
Netcom
Exhibit A.22:
>98%
Telenor
characteristics,
GSM network coverage
- Outdoor (as % of population)
99.8%
- as at March 2006 (as % of population)
70.6%
- March 2007 target (as % of population)
80.9%
Subscribers
Exhibit A.23:
Traffic (estimated)
3,000
7,000
2,500
6,000
5,000
2,000
4,000
1,500
3,000
1,000
2,000
500
1,000
0
0
2002
2003
2004
2005
PUBLIC
Telenor subscriber
and traffic growth,
2001–2005
[Source: Telenor,
Minutes (millions)
Subscribers ('000s)
Norway [Source:
operators]
UMTS network coverage
2001
Selected network
Network Strategies]
A13

Document 6516692

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