1&1 goes on the offensive over spectrum imbalance

After becoming the country's fourth player in mid-December upon the inauguration of its 5G network, 1&1 has wasted no time in publishing a study asserting that its bigger rivals – Deutsche Telekom, Telefónica Germany, and Vodafone Germany – are hoarding frequencies.

Telecoms regulator Bundesnetzagentur (BNetzA) also comes in for some sharp criticism. This is due to a consultation it is carrying out regarding a proposal to extend the incumbents' current spectrum licences after they expire at the end of 2025.

The study, carried out by UK-based Aetha Consulting, compared DT, Telefónica and Voda's spectrum holdings to the top three operators in four-player markets across Europe and found on average the Germans hold 38 MHz more low-band frequencies, and their combined overall spectrum portfolio is almost 120 MHz larger.

Aetha also found that the big three are under-utilising their spectrum. Based on figures from test and measurement companies, the study claims that only five percent of cell sites use more than 40 MHz of the 60-70 MHz available to the big three. 1&1 argues that each rival could return up to 20 MHz in either the 700 MHz or 900 MHz band without it affecting the quality of their networks.

Interestingly, the study also found that data rates are actually higher in mobile markets where players have smaller spectrum portfolios, undermining the argument that more spectrum per operator results in overall better network quality.

Ergo, 1&1 argues that any extension by BNetzA of the existing licences would entrench the current spectrum imbalance, not only to the detriment of 1&1, but end users too.

It has been less than a decade since Telefónica Germany completed its acquisition of E-Plus, reducing the number of operators to three from four. In 2019, BNetzA paved the way for a new fourth player by including incentives in its first 5G auction, incentives that encouraged 1&1 to bid.

"In order to pave the way for Germany to have four mobile networks again, the Federal Network Agency issued special rules for new entrants at the 2019 5G auction. 1&1 has invested over a billion euros for the first high-frequency spectrum and is confident that further frequencies will become available at the end of 2025. The auction conditions expressly stipulated this," said 1&1 CEO Ralph Dommermuth.

"All low-band frequencies are in the hands of the established network operators," he continued. "With the 800-MHz frequencies, only a third of the low-band frequencies will be free at the end of 2025. This means that Deutsche Telekom, Vodafone and Telefónica will have unrestricted access to the other two thirds at 700 and 900 MHz until at least 2034. If 1&1 were excluded from the spectrum allocation process, we would be blocked for many years and would not be able to operate our network competitively."

1&1 said it isn't opposed to the idea of a licence extension, it just wants any extension to address the current spectrum imbalance by allocating it more evenly between the four MNOs.

"Other countries are leading the way: In order to ensure fair competition, for example, in the low-band frequency extension in France, all four network operators – including the newcomer Free Mobile – received the same share of the frequencies to be awarded. In Germany too, there is no reason why a fair distribution of frequencies should not succeed," said Dommermuth.

It does seem counterintuitive for BNetzA to go to all the effort of attracting a new fourth player only to hamstring them by favouring the incumbents when it comes to spectrum allocation.

If it's not careful, it might inadvertently wind the clock back 10 years and be left once again with a three-player market.