The Dutch 4G Auction and the Law of Unintended Consequences

By Francesco Radicati

It took a while, but the spectrum auction in the Netherlands is finally over. The mobile operators are essentially in a position to fully roll out 4G services, and as the regulator had desired, a fourth entrant is poised to come in and shake things up. But it’s worth remembering the old saying that the more things change, the more they stay the same: increasing competition by adding a fourth operator may well result in one of the existing players exiting the market.

On the face of it, everyone got what they wanted. KPN and Vodafone came away with the biggest haul, picking up blocks in each band on offer, while third-placed T-Mobile picked up some spectrum in the 900 and 1800MHz bands. Tele2, meanwhile, added 2x10MHz of 800MHz spectrum to the 2.6GHz it already holds, which had been reserved especially for a new entrant and turned out to be the only purchase Tele2 was interested in. It beat fellow challenger ZUM, a joint-venture between cable players Ziggo and UPC, for the spectrum and will now be looking at further building out its 4G network.

Of course, this follows on from the launch in May of LTE services by all five existing operators, including Ziggo, using the 2.6GHz spectrum they all acquired two years ago. As we reported at the time, the launches were intended to fulfil the coverage obligations attached to the 2.6GHz spectrum, rather than offering a truly commercial proposition. A full launch will be possible now for the four operators that won spectrum, while Ziggo and UPC will be limited to offering broadband over 2.6GHz to their fixed customers. But it’s unlikely they would have become a true fourth operator anyway, given that while both currently operate MVNOs, their MVNOs offer mobile broadband only.

The question, however, is whether the Netherlands can support four mobile operators. Although it’s a relatively small market, the regulatory authorities believe that the existing three-operator market has led to the Netherlands having some of the highest prices in Europe for mobile services. True or not, Tele2’s stated aim will be to heavily disrupt the market; for any operators on the brink of packing up and leaving, this will be the time to do it.

If I had to guess which player will leave, my money is on T-Mobile – it’s currently languishing in third place, and has effectively already pulled itself out of the fixed-line market, by no longer promoting its fixed voice, broadband and TV propositions. Not only that, but parent company Deutsche Telekom has suggested in the past year that it might sell off certain operations, following on from the failure of its planned merger with AT&T in the US; the Dutch operation was one of those mentioned at the time.

If T-Mobile does sell up, it’s difficult to imagine regulators allowing KPN, or even Vodafone, to buy it. This opens the intriguing possibility of it selling to Tele2, which runs its MVNO on T-Mobile’s network; and since Tele2 is already effectively a fixed player with an MVNO, it would be ironic to see the two switch places, with Tele2 hosting T-Mobile as an MVNO on what was previously its own network.

While this may all be blue-sky thinking, it’s clear that the Dutch mobile market is in for some upheaval over the next year. Regulators may have intended to increase competition – which the arrival of Tele2 is certain to do – but the decision to allow a fourth operator is unlikely to be the panacea they hoped for.