Autoridade Nacional de Comunicações
(This is not an official translation of the law)
Draft Regulation amending Regulation no. 987-A/2020 of 5 November
Statement of reasons
By determination of 30 October 2020, the Board of Directors of Autoridade Nacional de Comunicações (ANACOM) approved the Regulation which defines the procedures applicable to the auction and the conditions to which the rights of use of frequencies allocated under this auction are subject, in the following bands: 700 MHz, 900 MHz, 1800 MHz, 2.1 GHz, 2.6 GHz and 3.6 GHz. This Regulation was published as Regulation no. 987-A/2020 in Diário da República (Official Journal), 2nd series, no. 216, on 5 November (Auction Regulation or Regulation no. 987-A/2020).
As established in article 4 of this Regulation, the auction is to be held by ANACOM, and ANACOM's Board of Directors is responsible for conducting the respective procedure.
By means of this auction, ANACOM intends to allocate new rights of use of frequencies in these bands. This allocation is considered essential to enable the installation of networks and the provision of electronic communications services compatible with 5G technology, as well as the installation or enhancement of networks using other technologies.
The auction was begun in November 2020, with completion of the bidding phase for new entrants, while the main bidding phase remains ongoing. This phase began on 14 January 2021 and, to date, has involved more than 580 rounds, with a maximum number of 6 rounds per day up to the 81st day of the main bidding phase and a maximum of 7 daily rounds thereafter.
Although the auction is taking place on a regular basis, the main bidding phase has still not concluded, despite the fact that the rules of the auction allow bidders to proceed more quickly if they so wish. However, as is clear from the daily information published on ANACOM's institutional website, there has been successive and repeated use of the lowest price increments in bidding (often 1%). For this reason, the auction's progress has been particularly slow. In fact, if the bidding pattern observed to date is maintained, there is a serious risk that the auction will carry on far longer than initially envisaged (taking far longer than is normal for such procedures in the vast majority of EU Member States).
This could result in a delay with a severely negative impact on the development and entry into operation of 5G networks to the detriment of citizens and companies. A delay would deny citizens and companies the economic and social benefits resulting from 5G-driven digital transition, in terms of the development and competitiveness of the Portuguese economy, social and territorial cohesion, social innovation and improving the quality of services of public interest. A delay would also impact the benefits that could be derived from the strengthening of existing 3G or 4G networks or the development of new networks, regardless of the associated technology. In a situation where the pandemic persists over time, the impact could be even more significant.
In particular, it should be noted that, as a result of this delay, the benefits arising from the fulfilment of coverage obligations, the development of networks and the strengthening of the voice signal will not reach populations and businesses as quickly as the collective interest requires. This is because rights of use of frequencies need to be allocated first, under the terms of the Regulation, which, in turn, depends on timely conclusion of the auction procedure.
Notably, in this regard, there will be an impact on the obligations to install base stations supported by the 3.6 GHz band, on the one hand, with a view to providing services compatible with 5G, especially in municipalities with low population density and in the Autonomous Regions, but also, when requested, in hospitals and health centres, educational establishments, ports and airports and entities managing business parks and industrial estates (accomplishing this is essential to enable urgent use of the ample opportunities offered by 5G).
Also at stake are the benefits which are due from the implementation of obligations to provide coverage in each of the low density parishes and in each of the parishes in the Autonomous Regions of the Azores and Madeira, as well as parishes which are not considered low-density but which are located within municipalities with other parishes which are considered low-density. Although these obligations, which seek to remedy the current lack of coverage and capacity in these areas, are established by reference to specific dates, in the short term, operators will need to initiate network investments long before they come into force, since installing the network infrastructure required to provide coverage of the populations and areas concerned with the required speed of service is a lengthy task.
In this context, an excessive delay to the completion of the auction makes execution of these investments in the short term less likely (since they make use of the spectrum made available under this procedure), denying the population and the companies in these areas access to the benefits inherent to this progressive investment. This means that the opportunities provided by digital connectivity will not reach a larger percentage of the population and national territory in the shortest possible time.
Furthermore, the delay would also have a significant impact on the conditions of competition existing in the market, given the measures in the Auction Regulation that are designed to create a level playing field for all market participants.
As such, while much of Europe converges quickly to make use of 5G as a key instrument of digital transition and economic competitiveness, in Portugal, an excessive delay to the auction’s conclusion would be extremely harmful to national interests, affecting the population and Portuguese companies, the country in general and jeopardizing rapid pursuit of the public interest objectives in question, particularly in more remote and less densely populated areas.
In these exceptional circumstances, it is urgent to promote the adoption of measures that, with due consideration of all the interests in question, minimise any excessive delay by enabling a streamlining of procedure. It should be noted that following publication of the notice to commence the regulatory amendment procedure, ANACOM decided to reduce the duration between rounds in order to accommodate an additional daily round - this took place from 10 May. However, assessment of this measure's impact proved that it was insufficient to provide the streamlining that was desired.
In this context, and considering the contributions to the drafting of the draft amendment to the Auction Regulation, presented following the notice to commence this regulatory procedure, on 31 May 2021, the Board of Directors of ANACOM approved the present draft amendment to Regulation no. 987-A/2020. This approval was granted pursuant to the provisions of paragraph 5 of article 15 and paragraph 8 of article 30 of Lei das Comunicações Eletrónicas (Electronic Communications Law), and under the provisions of point b) of paragraph 1 of article 9, point a) of paragraph 2 of article 9, article 10, and point b) of paragraph 1 of article 26, all of ANACOM's Statutes (approved by Decree-Law no. 39/2015 of 16 March).
The draft Regulation aims to increase the daily number of rounds in the main bidding phase, as set out in the notice to commence the regulatory procedure.
With a large number of lots available and with frequent use of bidding with very small price increments, the auction's progression has been slow, and it is anticipated that it may carry on far longer than was initially expected and considered reasonable. This has a negative impact on the public interest, which also includes the interests of companies and users in this sector.
Increasing the daily number of rounds and barring use of minimum increments (another option considered in the notice of this regulatory procedure) are parameters that control progress of the auction, impacting the static efficiency and dynamic efficiency of the auction result.
Indeed, the efficiency of the allocation has two different but equally important aspects. Static efficiency is based on the goal of allocating the spectrum to the operators that value it most highly, while dynamic efficiency is based on the goal of improving the functioning of the product market, contributing to greater competition, investment and quality of service. In order to achieve this objective of dynamic efficiency, it is essential that the process of attributing the rights of use of frequencies and of network deployment does not take an excessive amount of time.
In this context, and in light of what is currently known about the auction, having considered measures that may have an impact on its duration without introducing changes to the Regulation that might distort the procedure or undermine the bidding strategies of the companies involved, ANACOM took the view that, in the present circumstances in which the auction is taking place, it is important to advance with measures which reduce the duration of the rounds and increase the period over which they take place each day, enabling a greater number of rounds per day.
In the particular case of a simultaneous multiple-round ascending auction (SMRA auction), as is the case of the ongoing auction, bidder strategies are based on the lots available and on the rules governing the auction’s structure. A bidder's competitive strategy typically consists of giving values to alternative sets of frequency bands (i.e. quantities and types of lots in different combinations) over successive bidding until there are no other offers for the chosen lots (so that the lots are won by the bidder) or until the best competing offers exceed the bidder's own valuation (leading the bidder to withdraw). A strategy of this type is defined according to the lots available at the beginning of the auction, the type of information revealed by the auctioneer at the end of each round and the level of activity necessary to maintain the desired bidding rights, with the knowledge that the rules of conclusion and allocation determine how the bidding ends and who receives each lot and at what price.
As such, the information required by bidders to prepare their strategies does not depend on the length of time that each round lasts, nor on the daily number of rounds, so that even if these aspects are adjusted to hasten progress of the auction, there is no impact on the strategies, constituting a parameter that has no effect on the valuation of the lots or on offers.
It should be noted that the Auction Regulation establishes that the rounds take place on weekdays, between 9:00 am and 6:00 pm, and that each round has a duration of 60 minutes (article 27), with 6 daily rounds being carried out on most days of this main bidding phase and 7 daily rounds since the 82nd day, as mentioned above. Strictly speaking, the Auction Regulation already allows the duration of rounds to be shortened in situations where all bidders have already submitted their bids. This demonstrates that the bidders were already aware and could have expected that the duration of rounds might vary. However, in practice, the fact that a bidder can only make improved offers in a given round and is not obliged to bid to maintain these improved offers (but can do so by increasing them) means that this mechanism cannot be used systematically.
As such, scheduling rounds lasting less than 60 minutes makes it possible to increase the number of daily rounds without compromising the bidder decision and bidding processes.
As already mentioned, an adjustment to the duration of the rounds and the daily number of rounds does not change the information already revealed and does not undermine the feasibility of the bidding strategies used on an ex post basis, either in the case of bidders who have not yet reached the valuation they will have attributed to the lots and that continue to undergo price discovery, nor for bidders who have already withdrawn from bidding because the price has already exceeded the value they attribute to the spectrum, that is, they have already reached discovery of the final price. Accordingly, altering the duration of the rounds and the number of rounds held each day does not affect or impact the review of the price discovery process.
On the other hand, in the initial bidding rounds, the bidders usually require more preparation time, given the variations in the prices of lots and in demand between lots and categories. As the rounds progress, excess demand starts to diminish and the bidders form firmer and more refined expectations about the spectrum they are most likely to win and about the maximum amounts they are willing to bid for it; as such, the information acquired between rounds leads to a reduction in the time required by the bidders to prepare and complete their bidding. Likewise, there is also an increase in situations where bidders have achieved all (or most) of their eligibility points in best offers, without needing to place any bid, or without needing to bid for all they intend to acquire, while retaining this condition.
In this context and in order to speed up the auction, there is justification for reducing the duration of the rounds and increasing the number of rounds to be carried out daily, which has no impact on the static efficiency of the auction, but increases its dynamic efficiency.
Since there is no change in the rules governing the structure of the auction, nor in the information revealed at the end of each round, and since neither is affected by an adjustment to the duration or number of rounds, this change is not considered as likely to affect the strategies of the bidders.
It is considered that reducing the duration of rounds to 30 minutes is appropriate and proportional, and will not undermine bidder strategies or distort the procedure. This is due to the fact that reducing the duration of the rounds does not, in itself, limit the preferences that can be expressed by the bidders in each round. On the other hand, it will a significant effect on the duration of the auction, since it will enable an increase in the number of rounds that can be completed each day.
It is also of note that the change which is proposed here is not an isolated practice. In the more recent spectrum auctions held in Europe, for example in the United Kingdom (2018), Germany (2019), Austria (2020), Czechia (2020) and Spain (2021), the auctioneer was able to define different durations for the rounds and for the intervals between rounds throughout the bidding phase, often with provisional durations defined that the auctioneer could change throughout the bidding phases. In some cases durations could be set at 15 minutes.
Additionally, in order to accommodate a greater number of rounds per day, it is considered that there is justification for extending the daily period in which rounds can take place until 7 pm. This small increase will make it possible to speed up the auction without affecting bidder strategies, without exceeding 12 daily rounds.
With these two changes, the intention is to introduce mechanisms that streamline procedures and prevent a potential extension of the auction procedure, avoiding the harmful consequences detailed above. At this time, it is considered that the proposed streamlining is appropriate and proportional, and ANACOM expects that it will be sufficient to prevent the auction from becoming excessively lengthy. Furthermore, these are amendments that focus purely on practical, logistical and procedural aspects, based on reasons of public interest that can be clearly addressed in specific terms, linked to an emerging set of external factors and decisions external to ANACOM, including the behaviour of participants in the auction, which justify the need to expedite procedures.
The measures in question are justified, fulfilling the requirements inherent to the principle of proportionality: i) they are adequate, since they are appropriate to the pursuit of the intended objective, which is the very relevant objective of expediting the auction; ii) they are necessary, as under the current circumstances they are the measures that best enable accomplishment of the objective; iii) and their advantages justify adoption, particularly taking into account the social and economic benefits to be derived from timely and rapid deployment of mobile networks and services, which are benefits that are considered extremely important.
With specific regard to the possibility of barring use of the lowest minimum increments (1% and 3%) in a given round, for purposes of expediting procedures, it is considered that this, along with other options, may be considered in a scenario where the auction's conclusion is subject to further delay.
Accordingly, pursuant to article 10 of ANACOM's Statutes and articles 98 et seq. of Código do Procedimento Administrativo (Administrative Proceeding Code), ANACOM gives notice of this draft regulation to the Government member responsible for the area of communications and undertakes its publication in 2nd series of Diário da República (Official Journal) and on ANACOM's institutional website, so making provision for the intervention of the Government, the entities that are constituted as bidders in the scope of the auction and other interested parties.
Contributions (made in writing and in Portuguese) may be sent within a period of 5 working days, by email to firstname.lastname@example.org:email@example.com.
It should be noted that, following publication of the notice to commence the regulatory amendment procedure, ANACOM considered the various contributions received, which reflected disparate positions. Before adopting this decision, ANACOM opted, as provided for in the Regulation, to reduce the duration between rounds, in order to accommodate an additional daily round and to verify whether this change would be sufficient to speed up the auction. However, it was found that the change in question did not expedite the procedure to a sufficient degree. Additionally, during the period in question, consideration was given to the results of specialised consultations carried out by ANACOM with regards to the changes now introduced.
Subsequent to these initiatives, it is concluded that, at this time, it is urgent to adopt measures that effectively contribute to speeding up the procedure, whereby the deadline set, pursuant to the provisions of paragraph 3 of article 10 of ANACOM's Statutes takes into account the urgency of the changes considered: firstly that the Auction procedure is ongoing with 580 rounds already completed in the main bidding stage and that there is a risk, where the bidding pattern observed until now is maintained, that the auction takes far longer than was initially foreseeable and than is required for the proper pursuit of the collective interest; and secondly that the bidders were given prior notice of the adjustments which are not being introduced. In fact, the amendments that are approved were already indicated in the notice to commence the regulatory amendment procedure and are a part thereof.
When applicable, information considered confidential in responses must be expressly identified as such, and reasons for confidentiality given. A non-confidential version must be sent for publication pursuant to the law and ANACOM's decision of 17 November 2011. The confidentiality of comments will be especially safeguarded in the case of bidders constituted as such within the scope of the ongoing Auction, pursuant to Regulation no. 987-A/2020.
Once the regulatory consultation has been concluded, ANACOM will examine the contributions and suggestions advanced by interested parties, and with approval of the regulation, will produce a report making reference to all replies received and providing an overall assessment that reflects ANACOM's position thereon and its reasoning for the options taken.
Amendment to Regulation no. 987-A/2020 of 05 November
Article 27 of Regulation no. 987-A/2020 of 05 November is replaced by the following:
1 - The rounds shall take place on working days, between 9:00 and 19:00.
2 - ...
3 - Each round shall have a duration of 30 minutes, notwithstanding paragraphs 4 and 5 of the present article.
4 - ...
5 - ...
6 - ...
7 - ...
8 - ...
9 - ...
10 - ...
11 - ...”
Entry into Force
The amendments made to Regulation no. 987-A/2020 of 5 November by this regulation enter into force on the 3rd day following its publication.
31 May 2021. - Chairman of the Board of Directors, João António Cadete de Matos.