On 8 November 2022 the National Media and Infocommunications Authority (hereinafter as: the NMHH or the Auctioneer) published the draft documentation of the planned auction procedure to be announced for the entitlements to the radio spectrum use of the 32 GHz frequency band (hereinafter as: the Draft Documentation) and a call for consultation.
By awarding entitlements to the radio spectrum use of the 32 GHz frequency band, the NMHH will create the opportunity to operate microwave systems in the 32 GHz frequency band within the framework of block management, offering an alternative to the operators of systems currently operating in the 26 GHz frequency band to switch frequency band. As the 26 GHz frequency band is one of the 5G pioneer bands and is currently not yet in use for 5G, the authority will also use the auction to indirectly facilitate the use of the 26 GHz frequency band for 5G as soon as possible.
The Auctioneer, in accordance with paragraph (4) of Section 40/A of Act C of 2003 on Electronic Communications, held a consultation on 22 November 2022 from 10.00 a.m. for the interested parties. The consultation was organised by the NMHH in a hybrid format, allowing full online participation in addition to on-site attendance. The event was attended by 60 participants in person on the site and 16 more online.
The participants were welcomed by Dr. Janka Aranyos-Börcs, Director General of the NMHH, followed by Dr. Emilia Ulelay, Deputy Director of the NMHH, the chairperson of the consultation, who summarised the steps made so far in the entitlement awarding procedure and the main elements of the legal environment of the Consultation. Following the presentation of the agenda and the necessary information, in the first part of the event, the staff of the Auctioneer provided information on the characteristics of the frequency set offered, the conditions of use and the auction procedure, which procedure will be conducted electronically – for the first time in the history of the NMHH.
The series of presentations was opened by Dr. Péter Vári, Deputy Director General of the NMHH, who, after describing the background of the procedure and the current use of the 26 GHz frequency band, presented the main characteristics of the 32 GHz frequency band and the spectrum management issues related to its use. He described in detail the available radio spectrum set and the minimum and maximum rules relating to the offered entitlement to radio spectrum use. He concluded his presentation with a description of the general and special rules of user block formation, including illustrative examples to help interpret the rules of user block formation.
This was followed by an overview presentation by Dr. Károly Karl, Deputy Director General of the NMHH, on the legal environment of the auction procedure, the official procedure, its details and timing. He explained that the auction procedure qualifies as an official matter, which will be launched ex officio on the date of publication of the final documentation and the notice, i.e. – according to the NMHH's plans – on 12 January 2023. Registration will be open from this date until the application is submitted.
Registration is not a prerequisite for application, but the opportunity to ask questions in writing, to see the answers to the questions collected and to be informed of any changes to the documentation are only available to those who have registered.
Applications may be submitted electronically on 3 February 2023, between 9:00 and 12:00 based on the Draft Documentation.
This will be followed in February-March by the opening of the applications and the formal validity check of the applications, including the remedy of deficiencies (if any). Applicants may be entered into the auction register in March-April, depending on the procedural steps mentioned above.
The participants entered into the auction register then make a declaration as to whether they belong to a group of undertakings, and only then can the offers be opened, the bids evaluated, the quantitative results established and the user blocks formed.
According to the plans, the procedure will end with a consolidated resolution, sometime in May 2023.
In his presentation, Dr. Károly Karl made a special mention of the detailed rules of electronic Application, which is a novelty of the awarding procedure, as well as the importance and the way of electronic communication.
The Application and within it the submission of offers can only be executed on the Application form designed for this purpose, whereas the submission of Counter-offers can only be executed on the Counter-Offer Form designed for this purpose, with authentic identification through the Client Gate. The procedural actions are generally carried out electronically, except for the opening of the Offers and Counter-Offers, which requires the personal involvement of the contact person representative of the participant.
The Auctioneer will send the information to the applicant/participant via the Company Gate.
In the remaining part of the presentation, the Deputy Director General explained some important procedural details: the content and method of the application for participation, the institution and importance of guarantees, the correct way to make bids through the Offer Form, or the evaluation of offers. He also mentioned that the procedure will end with a consolidated resolution based on the quantitative result of the procedure and will include the location of the awarded user blocks within the frequency band.
In the second phase of the consultation, participants were given the opportunity to ask questions and make suggestions and comments.
The market participants making a comment at the consultation thanked the Auctioneer for its preparatory work, which resulted in a complex and well thought-out auction procedure. The presentations, which gave a comprehensive picture of the procedure and explained it in a logical and sometimes humorous way, enhanced the understanding of the Auctioneer’s ideas, therefore only a few questions were asked.
Dr. Győző Drozdy, on behalf of YETTEL Hungary, thanked the NMHH staff for preparing such a well thought-out and consistent Draft Documentation. According to him, the new procedural form is justified in view of the changed circumstances and the frequency band to be awarded.
There are two types of participants. Either they already hold entitlements in the 26 GHz frequency band or they are new entrants. For those who are about to switch over from the 26 GHz frequency band, paying the annual band fees for both the 26 GHz and 32 GHz frequency bands at the same time is an excessive burden, even though the Authority grants a 50% discount on the payment of the 32 GHz band fee for the first four years. Since operators will be required to simultaneously bear the burden of moving out of the 26 GHz frequency band and moving into the 32 GHz frequency band – if we calculate with the reconfiguration of more than 1000 links – this will require so much time and effort that it will not allow the 26 GHz band to be cleared quickly, and as a result, the operators will not be able to avoid parallel fee payment in the foreseeable future. In order to reduce their costs, they request that the above reasons be taken into account and that – if an operator acquires the 26 GHz and 32 GHz bands in parallel and has to bear the burden of migration – the relevant discount be increased to 100%.
No questions were asked by YETTEL Hungary. The Auctioneer will consider this suggestion during the finalisation of the Documentation.
Róbert Ruzsa made a comment on behalf of Vodafone Hungary. He basically agreed with the previous speaker and thanked the representatives of the NMHH for their professional preparatory work, both in terms of the Draft Documentation and the presentations. In lieu of a question, he joined the previous speaker in commenting on the rate of the band fees.
The payment of parallel band fees should be avoided at all costs. They would like to pay only a one-off band fee, which would be the 26 GHz band fee, and request a 100% discount on the annual band fee for the 32 GHz band until the 26 GHz band license expires.
The next speaker was Dr. Gabriella Kövesi on behalf of Magyar Telekom. Similarly to the previous speakers, she had no questions regarding the Draft Documentation either, but made two comments. On the one hand, she thanked for the simplification of the process of presenting the ownership structure, which saves them a considerable amount of time, on the other hand, with regard to cost reduction, she joined the two other companies that had spoken before her in proposing that the payment of parallel band fees for the 32 GHz band for the same use during the period of parallel use should be avoided.
Zsolt Kozma spoke on behalf of CETIN Hungary. He also thanked for the Draft Documentation and the presentations and asked the following question.
What happens if the 24 blocks currently offered are not awarded in full? Will the remaining blocks be available later in case of a later demand and under what conditions will they be made available?
Dr. Péter Vári replied orally.
It has also happened before that not all blocks offered in a frequency band have been awarded. Blocks that have not been awarded are returned to the NMHH's “warehouse”. If a demand for the frequency band arises at a later date, the Authority will examine that demand and the remaining part of the frequency band may be offered under the conditions prevailing at that time, with a view to ensuring the continued use of user blocks by the operators.
Tamás Vári, on behalf of ANTENNA Hungária, asked a question about the formation of user blocks. He started from the assumption that if the NMHH does not plan to create a guard band between the users of the 32 GHz frequency band, they are likely to find the blocks less usable from a technical point of view.
If not all blocks are awarded, what will be the NMHH's policy? Should as many frequencies as possible be left for later awarding or will guard blocks be created between the users in this case?
Péter Vári replied orally:
The fundamental objective is to make as much frequency bandwidth available to users as possible. Looking at the 26 GHz frequency band, there were point-to-point and point-to-multipoint systems and therefore the guard band was more important there, because these systems operate on a different principle. Examining the technical rules in the 32 GHz frequency band, point-to-point micro-links can be operated even without guard bands, since the links are not only adjacent to each other within the frequency, but are also largely separated from each other geographically, therefore by careful planning and coordination we can avoid cases where these links cause interference to each other. Therefore, we do not want to use guard bands in the 32 GHz frequency band, but want users to use that frequency band and establish links within it.
There were no further questions or comments from online participants.
In accordance with its statutory obligation, the NMHH will respond to written questions received for the consultation, or questions raised orally or in writing during the consultation on the Draft Documentation, by 2 December 2022 and will publish them on its official website.
After the evaluation of the questions and suggestions, the final documentation of the procedure is scheduled to be published on the NMHH website on 12 January 2023. The Application and the Submission of Offers will take place on 3 February 2023.