Assessment of the use of frequencies assigned to RADIOMOVEL and of the obligation concerning the migration of the analogue and digital systems to the CDMA system

Determination of the board of directors on the assessment of the effective and efficient use of frequencies assigned to radiomóvel and of the obligation concerning the migration of the analogue and digital systems to the CDMA system assigned to Radiomóvel, S.A.

1. Chronologyhttps://www.anacom.pt/render.jsp?contentId=55129

2. Frameworkhttps://www.anacom.pt/render.jsp?contentId=55130

3. Assessmenthttps://www.anacom.pt/render.jsp?contentId=55131

4. Conclusionhttps://www.anacom.pt/render.jsp?contentId=55132

5. Non-Compliance with the migration obligation and innefficient use of CDMA frequencies

https://www.anacom.pt/render.jsp?contentId=551336. Determinationhttps://www.anacom.pt/render.jsp?contentId=55134

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  1. Chronology

A. Following the public tender for the allocation of two licenses of national scope for the provision of a Complementary Mobile Telecommunications Service – Mobile Service with Shared Resources, opened under Order MOPTC 70/92-XII of 18August 1992, RADIOMOVEL – Telecomunicações, S.A. (RADIOMOVEL), was awarded, on 10 March 1993, a license for the provision of the Mobile Service with Shared Resources (SMRP).

Pursuant to the awarded license, the technological system to be used by the undertaking should comply with the MPT 1327 signalling protocol, established by the Department of Trade and Industry of the United Kingdom.

B. In March 1999, RADIOMOVEL was authorized by the then ICP – Instituto das Comunicações de Portugal, to use the TETRA system (Terrestrial Trunked Radio system) for the provision of the referred service.

New frequencies in the 410-430 MHz bands were allocated thereto for the operation of this system, aiming to abandon gradually the spectrum previously used, as the customers of the prior system migrated to the new one.

C. On 1 February 2002, RADIOMOVEL requested of ICP – ANACOM the alteration of License no. ICP-012/TCM, in order to enable it to use the Code Division Multiple Access system (CDMA system), as well as the additional allocation of radio frequencies necessary for the implementation thereof.

It based that claim on certain aspects which are summarised below:

• The undertaking was facing serious expansion problems in the segment of the telecommunications market wherein it operated. Part of such problems concern, on the one hand, the fact that the existing analogue networks were no longer appropriate to fulfil thoroughly the professional needs of users of such services and, on the other hand, the degree of development of the TETRA digital technology fell short of the earlier expectations, not only at the level of the available service functionalities and but also at the level of equipment, which were put on the market at prices which were too high to be competitive;
• It deemed the SMRP to be a viable service, and several groups of customers, in different niche markets, still needed new specialized facilities of that service;
• The availability of new and attractive service facilities, to supplement the services traditionally provided in the scope of the SMRP, would give added value both to service users and to the telecommunications market in general;
• By abandoning the exclusivity of the TETRA technological platform solution, as well as of the MPT 1327 signalling protocol, for the provision of the SMRP, in favour of other solutions targeted by the principle of technological neutrality, the competition among manufacturers of technological solutions would be improved, for the benefit of users thereof, of the market in general and of RADIOMOVEL itself and respective shareholders;
• The CDMA narrowband platform was considered to be the technological solution that best combined price and performance as regards the SMRP provision;
• The installation of a CDMA platform, having in view the optimization thereof, called for a rearrangement of the table of frequencies allocated to RADIOMOVEL, which would involve the assignment of new frequencies and the devolution of others, within a reasonable period, aiming at an appropriate reallocation of radio channels required by the equipment to be used and thereby enabling the migration of subscribers placed in the analogue network and/or TETRA digital network to the CDMA platform.

In the scope of the proposal presented, RADIOMOVEL undertook to comply with a package of commitments regarding the implementation of the CDMA system, from which the following may be pointed out:

• The date of the commencement of activity;
• Coverage plan and consequent phased installation of base stations;
• Levels of quality of service to be provided;
• Strategy for the migration to the CDMA technology, which would be concluded within 6 months after the commercial launch.

D. On 14 March 2002, the Board of Directors of ICP – ANACOM submitted to the Minister of Social Equipment the following proposal:

a)  That, in addition to the technological systems provided for in the held license, RADIOMOVEL was also authorized to use the CDMA system in order to provide the SMRP;

b)  That RADIOMOVEL was allocated additional frequencies in the 453-457,45/463-467,45 MHz bands, of 2 1,25 MHz carriers and guard band spectrum (540 kHz), with the following use restrictions:

i)  In the south of the country – Alentejo and Algarve – one of the carriers would only be used after 2006 (date in which PT Comunicações, S.A., would abandon the use thereof);
ii) The other carrier would only be used in the second quarter of 2003, date on which it would be made available by PT Comunicações, S.A.

c) That ICP – ANACOM was assigned the alteration of the provisions of the SMRP license allocated to RADIOMOVEL, in accordance with the above-mentioned points and in compliance with the obligations resulting from the submitted proposal and draft project.

E. On 14 March 2002, the Assistant Secretary of State and for Transports drew up the following order:

“I hereby agree and authorize in accordance with the submitted proposal.
14/3/2002
Signed: Rui António Ferreira da Cunha”.

F. By determination of the Board of Directors of ICP – ANACOM, dated 2 May 2002, the document that qualifies RADIOMOVEL to provide the SMRP, involving also the use of the CDMA technology, was re-issued.

The license re-issued was amended on the initiative of ICP – ANACOM on 8 May 2002.

G. On 9 May 2003, RADIOMOVEL requested of ICP – ANACOM the amendment of points 10 and 11 of the license re-issued in May 2002, which involved:

• The extension of the time limit for commencing the SMRP commercial operation according to the CDMA technology system up to 9 May 2004 (1-year extension);
• The extension of the time limit for concluding the process of migration from the use of MPT 1327 and TETRA technologies to the CDMA technology up to 9 November 2004 (1-year extension);
• The extension of the time limit for the installation of base stations up to the period of 2004 and 2005.

RADIOMOVEL backed its request for the licence amendment with arguments which are summarized below:

i) Delay as regards the availability of the terminal equipment;
ii) To much time spent in obtaining municipal authorizations for the construction of support infrastructures for radiocommunications stations and respective accessories;
iii) Need for a larger number of sites;
iv) Delay in concluding interconnection agreements.

H. Following the request for license amendment, the Board of Directors of ICP – ANACOM, before taking a final decision, determined on 22 May 2003 to promote a public consultation on the grounds for the submitted request for time limit extension, which should comprise information on the particulars of the issued license and the corresponding obligations.

I. By determination of 23 October 2003, the Board of Directors of ICP – ANACOM determined as follows:

• To approve the public consultation report on the SMRP  provision according to the CDMA system;
• Pursuant to article 18 of Decree-Law no. 381-A/97, of 30 December, to grant the request for license amendment submitted by RADIOMOVEL and to endorse to the licence that qualifies RADIOMOVEL to provide the SMRP, a service that allows the establishment of bi-directional communications, whether addressed or not, between closed user groups, through terminal equipment of a non-fixed nature, involving the establishment of communications with users of other public use telecommunication services exclusively where there is an interconnection with the fixed telephone service, the following:
  
  Clause 10
  
  1. The time limit for the commencement of the SMRP provision according to the CDMA technology system shall be extended to 9 May 2004.
  
  2. The time limit for the conclusion of the process of migration from the MPT 1327 and TETRA technologies to the CDMA technology shall be extended to 9 November 2004.
  
  3. The time limits referred in the preceding paragraphs shall not be extendable and failure to comply therewith shall determine the automatic expiry of the right to use the frequencies reserved for the CDMA technology system.
  
  Clause 11
  
  The time limits for the installation of the set of infrastructures for the SMPR provision according to the CDMA technology shall be as follows:
  
  - 120 Base Stations up to 9 March 2004;
  - 210 Base Stations up to 9 May 2005;
  - 250 Base Stations up to 30 September 2005.

J. On 12 December 2003, RADIOMOVEL requested of ICP – ANACOM that it clarified (i) the content of the determination of 23 October 2003 of the Board of Directors thereof and (ii) the content of point 5.1.3 of the Public Consultation Report on the SMRP provision, both of which concerned the legal framework of the SMRP interconnection.

K. On 8 January 2004, considering that the Board of Directors had not confined itself to grant the request submitted, but in doing it had undermined rights to which RADIOMOVEL was entitled, this undertaking challenged in Court the Determination of 23 October 2003, lodging its defence by reference to several defects, such as the fact that the prior hearing of interested parties had not been taken into account.

L. By determination of 26 March 2004 and based on the acknowledgement that the formality concerning the prior hearing of interested parties indeed had not been taken into account, the Board of Directors of ICP – ANACOM determined the following:

• To entirely repeal the determination of the Board of Directors of 23 October 2003, with retroactive effect to the moment the act was performed (23 October 2003);
• To grant the amendments to the license no. ICP – ANACOM -012/SMRP in the precise terms of the request submitted by RADIOMOVEL on 9 May 2003.

Accordingly, the following endorsement was thus issued to license no. ICP – ANACOM -012/SMRP:

«1. The time limit established in clause 10, paragraph 1, of the License is extended up to 9 May 2004;

2. The time limit established in clause 10, paragraph 2, of the License is extended up to 9 November 2004;

3. The time limits established in clause 11 of the License shall be as follows:
- 120 Base Stations up to 9 March 2004;
- 210 Base Stations up to 9 May 2005;
- 250 Base Stations up to 30 September 2005».

M. In view of this Determination, the Court declared it unnecessary for the case referred to above in point K to proceed to judgment.

N. On 7 May 2004, RADIOMOVEL reported it had begun «(…) the provision of mobile telecommunications services according to the CDMA technology system and within the scope of the held license».

O. On 30 September 2004, REPART - Sistemas de Comunicação de Recursos Partilhados, S.A. (REPART), the share capital of which is wholly owned by VALKIA INSVESTMENTS B.V., which on its turn, owns the whole share capital of RADIOMOVEL, requested of ICP – ANACOM that the spectrum allocated to RADIOMOVEL for the provision of SMRP in accordance with the analogue (MPT 1327) and digital (TETRA) systems, was assigned to REPART, for the following reasons:

• Under the license held by RADIOMOVEL, it must terminate by 9 November 2004 the use of frequencies assigned thereto, which are associated to the MPT 1327 and TETRA technologies;
• REPART intends to provide some of the customers RADIOMOVEL performs services for through the MPT 1327 and TETRA technologies – such as Carris, CTT, DHL, Securitas, Rodoviária, STCP, Fire Brigades – with the same type of services they receive from RADIOMOVEL;
• Being it in the interest of such customers that the service currently enjoyed is maintained with the further use of the MPT 1327 and TETRA technologies, and taking into account that REPART and RADIOMOVEL are both undertakings of the same group, this was deemed as the best solution to further providing these services;
• The provision of such services to the mentioned customers of RADIOMOVEL cannot be severable from the spectrum/channel bands over which they are currently ensured;
• The alteration of spectrum/channel bands would imply modifications at the level of the programming of thousands of terminals in the network comprised by these services;
• In the TETRA network, the alteration of frequencies would render it impossible to use the transmitting equipment currently in service, and would require the need for some adjustments in the telecommunications base stations, as well as to re-programme frequencies in all network terminals;
• For the above-mentioned reasons, it is necessary that customers currently being provided services by RADIOMOVEL through the MPT 1327 and TETRA technologies, who wish to continue enjoying these services, may do so by means of same frequencies, and that such services are further provided without disruption.
• REPART offers to give back to ICP – ANACOM the spectrum bands it currently does not need, and points out that the final result of the operation would involve that a larger number of released spectrum bands would be available to ICP – ANACOM.

P. On 15 November 2004, the Board of Directors of ICP – ANACOM issued a draft decision wherein this Authority rejected the request for the additional assignment of frequencies submitted by REPART and promoted the prior hearing of that undertaking.

Still within the context of the request submitted by REPART, RADIOMOVEL presented on 24 November 2004 a letter (with the reference 053/DG/2004) confirming «(…) its intention to allow part of its customers – the part currently being provided with services through the MPT 1327 and TETRA technologies – to be provided with services by REPART. For this purpose, RADIOMOVEL confirms its intention to terminate the use of frequencies assigned thereto and which are associated to the MPT 1327 and TETRA technologies, returning them back to that Authority».

Following the conclusion of the procedure, ICP – ANACOM determined on 9 February 2005 to maintain its decision to reject the request submitted by REPART, basing its reasoning on the following terms:

«In the light of the provisions established in the concession of the right to use the frequencies assigned to RADIOMOVEL on 14 March 2002, the recovery of such frequencies by this Authority is not available to that entity, but rather depends on the conclusion of the migration process on the settled date.

For this reason, the commitment undertaken by RADIOMOVEL, of giving back the spectrum allocated thereto for the MPT1327 and TETRA networks (…) provided that this Authority authorizes the subsequent allocation thereof, as soon as such networks are available, to REPART,  cannot be accepted.

In fact, this matter is not about the will of RADIOMÓVEL to give the spectrum back, but rather a recovery on the part of ICP – ANACOM, which is to take place if specific circumstances occur – none of which concerns the commitment to allocate the spectrum to REPART. (…)At present, it can only be stated that it is not certain whether ICP – ANACOM may recover such spectrum, due to the fact that the compliance on the part of RADIOMÓVEL with the provision of paragraph 10, point 2, of the respective license has not taken place, and that situation presents the conditions based on which specific frequencies were assigned thereto, for the provision of the SRMP according to the CDMA technology system.

RADIOMOVEL and REPART, acting jointly, intend to associate the spectrum request of the latter and the decision on that request, to the compliance on the part of the former with the respective obligations or to the consequences of the non-compliance, which is unacceptable.

The request for frequencies submitted by RADIOMOVEL on 4 February 2002 and the conditions undertaken at the time, which were comprised in the spectrum assignment decided by order of the Secretary of State Assistant to the Minister and for Transports on 14 March 2002, did not presuppose the transfer of the respective clients, or of some of them, to REPART, together with the allegedly inherent “transfer” of the assignment of MPT1327 and TETRA frequencies from one of the entities to the other.

Thus, prior to the decision on the request now presented by REPART, the matter of the spectrum assignment (not only MPT1327 and TETRA, but also CDMA) to RADIOMOVEL should be defined.

Therefore, the minimum conditions on which depends the approval of the request submitted by REPART have not been met, such request concerning a spectrum that is not available; moreover, it is also not certain if and when it shall be available. Without prejudice, if the spectrum turns out to be available, the fact that on 30 September 2004 REPART manifested its interest in the allocation of the right of use of the MPT1327 and TETRA frequencies shall be taken into consideration».

Q. On 2 November 2004, as the date established for the conclusion of the process of migration from the MPT1327 and TETRA technologies to the CDMA technology drew close (9 November 2004), ICP – ANACOM urged RADIOMOVEL to “specifically provide, attaching supporting documents, until 8 November” several data on the action taken, characteristics, stages, number and identification of migrated customers.

R. On 10 November 2004, RADIOMOVEL submitted its response to the information request made thereto by ICP – ANACOM (letter with the reference 047/DG/2004).

S. On 16 November 2004, ICP – ANACOM deemed the information submitted by RADIOMOVEL not to be sufficient in order to assess the strict compliance with the obligation concerning the migration from the MPT 1327 and TETRA technologies to the CDMA technology, to which the undertaking is bound under the awarded license, and requested the presentation of additional information (cfr. official letter ANACOM-S-25275/2004);

T. On 19 November 2004, RADIOMOVEL presented a file with its response.

  2.  Framework

2.1  Migration obligation

The obligation concerning the migration from the MPT 1327 and TETRA technologies to the CDMA technology is provided for in Clause 10 of the License no. ICP – ANACOM 012/SMRP, amended in accordance with endorsement no.1, issued following the determination of the Board of Directors of 26 March 2004 (cfr. Point K above), as follows:

«1.  The provision of the SMRP according to the CDMA technology system shall begin no later than 9 May 2004, save in duly substantiated cases, acknowledged as such by ICP – ANACOM.

2.  RADIOMOVEL is bound to conclude the process of migration from the use of the MPT 1327 and TETRA technologies to the CDMA technology by 9 November 2004, under penalty of expiry of the right to use the frequencies reserved for the CDMA technology system.

3.  Having concluded the migration process referred to in the preceding paragraph, ICP – ANACOM shall recover the frequencies assigned to RADIOMOVEL for the operation of the SMRP according to the MPT 1327 and TETRA technologies.

4.  When the referred migration process comes to an end, the number of telecommunications infrastructures shall ensure the compliance with the coverage obligations undertaken by RADIOMOVEL in the proposal submitted for tender».

2.2  Scope of migration

The migration strategy – which RADIOMOVEL itself suggested to ICP – ANACOM – was accepted and became a condition for the allocation of additional frequencies by the member of the Government responsible for the communications area.

This migration involved not only a technological change of the systems under consideration (such as the acquisition of equipment, construction and deployment of the CDMA network) but also the “transfer” of customers from the analogue and TETRA systems to the CDMA system.

In fact, pages 20 and 22 of the presented proposal says the following:

« 5.2 Migration Strategy

Radiomóvel intends to implement an aggressive, voluntary, campaign to migrate existing subscribers to the new network. These subscribers will benefit from enhanced coverage and services, which are cost effective.

Radiomóvel is strongly committed to this migration process, which will allow the company to reduce the cost of maintaining the existing networks, free the spectrum currently in use, and provide current subscribers with superior service.

5.2.1 Analogue users

A voluntary migration of all the analogue (450/470 MHz) users will be implemented such that customers will have both economic and performance incentives to switch networks. In addition, the introduction of many enhanced services available on the digital trunking platform should help the migration process. Radiomóvel will implement a marketing plan to ensure that customers become aware of all the advantages of the migration.

Under this migration program, new terminal equipment would be either provided free of charge to Radiomóvel's existing customers or on the same leasing terms where applicable. Radiomóvel will transfer any special applications or configurations, which are specific to each customer to the new network. Existing customers will be offered the new system with a comparable tariff for the same services to those currently used for the analog network, e.g., a flat fee rate for PTT voice. Tariffs for advanced features will be the same as those for new customers. Radiomóvel expects to be able to complete the migration of these subscribers within 6 months of launch. The spectrum relieved by this process would be freed based on the current relationship between the number of users and the number of channels, in order to maintain the QoS for the remaining users. Since a high percentage of the analogue users have local or regional coverage agreements with Radiomóvel, this migration process can start as soon as the new network is up and running.

5.2.2 Digital users

Radiomóvel clients using the TETRA platform for digital PAMR services will be offered a similar migration path with similar incentives as the analogue clients.

Due to the technological and pricing issues, Radiomóvel's implementation of Tetra services was limited to two data oriented projects with the public transport companies of Lisbon and Oporto.

Radiomóvel currently has approximately 700 TETRA terminals installed with contractual commitments to increase this to 1,300 in both Lisbon and Oporto.

These 2 clients may migrate as soon as the new network is operational in both Lisbon and Oporto. Some engineering work will be required in order to adapt the current interface to the new terminals. Radiomóvel will perform this work without any extra cost to the customer. Radiomóvel believes that the clients will benefit greatly from the higher performance and additional features offered by the new digital trunking platform. This is especially true for higher speed data, which is a must to introduce new services (e.g. transfer of billing files from the bus, video surveillance, etc) that are being requested by these clients.

Radiomóvel will immediately hand back all the channels in the 410-430 MHz band, except for 15 channels. These will remain in use for the above mentioned projects until a full migration to the new platform is completed. This migration is targeted to be completed within 6 months from launch».

The background to the proposal presented by RADIOMOVEL, emphatically declared, is thus to abandon, within the proposed time limits, the analogue and TETRA technologies, and to provide the SMRP through the CDMA technology platform alone, that is, to become an exclusively “CDMA” operator.

Moreover, it is this background that provides an explanation to the fact that frequencies allocated to the first two systems were supposed to be recovered by ICP – ANACOM as soon as the migration process came to a close.

This state of affairs was accepted by ICP – ANACOM in 2002, acknowledging that the market would benefit from an SMRP operator based in the CDMA technology.

Therefore, at the act in which CDMA frequencies were conferred, the set of obligations undertook by RADIOMOVEL in accordance with the submitted proposal were safeguarded. In addition, when the license was issued, ICP – ANACOM safeguarded the same set of obligations, paying a special attention as regards time limits and implementation modus for the process of migration from the analogue and TETRA technologies to the CDMA technology.

Clause 8 of the RADIOMOVEL license thus reads as follows:

«In providing the SMRP according to the CDMA technology system, RADIOMÓVEL is bound to comply with the obligations resulting from the submitted proposal, which constituted grounds for the amendment authorized by order of the Secretary of State Assistant to the Minister and for Transports, on 14 March 2002» (emphasis added).

Furthermore, clause 10 established that the provision of the SMRP according to the CDMA technology system should begin no later than 9 May 2004, save in duly substantiated cases, acknowledged as such by ICP – ANACOM and also that the process of migration should be concluded by 9 November 2004, under penalty of expiry of the right to use the frequencies reserved for the CDMA technology system.

It should also be taken into account that, in the scope of the public consultation that took place in 2003, some entities raised reservations as far as the implementation of the CDMA technology was concerned.

In fact, whereas RADIOMOVEL and most of its clients highlighted the benefits resulting from the implementation of this system (such as national coverage, provision of innovating services and less inexpensive terminals), other entities, including subscribers of the operator itself, raised concerns as regards the abandonment of the TETRA technology in favour of the CDMA system.

2.3  The question of maintaining in force clause 10 of License ICP – ANACOM -  012/SMRP

Pursuant to paragraph 4 of article 121 of Law no.  5/2004, of 10 February, undertakings maintain the rights of use of numbering resources and frequencies assigned under the former regulatory framework, up to the end of the period established in the respective assignment entitlement.

RADIOMOVEL thus maintained the right to use the frequencies assigned thereto, both following the public tender (analogue system frequencies) and following the additional allocation of TETRA and CDMA frequencies.

On the other hand, Law no.  5/2004, of 10 February provided, under paragraph 2 of article 125 thereof, that all measures and determinations adopted by ICP – ANACOM pursuant to legislation repealed by the new law would remain in force.

As regards the specific case of the right of use for the CDMA frequencies, granted by act of the government, the respective conditions – turned into obligations for RADIOMOVEL – were declared in the determination of ICP – ANACOM of 2 May 2002.

Therefore, pursuant to paragraph 2 of article 125 of Law no.  5/2004, the referred determination is still binding upon RADIOMOVEL.

Moreover, the obligation to pursue the technological and customer migration represents, in this particular case, a means to implement the principle of effective and efficient use of frequencies.

In the scope of the new regulatory framework, this is one of the fundamental principles governing all spectrum management – cfr. point c) of paragraph 2 of article 15 of Law no.  5/2004 – and is provided for as one of the conditions attached to the rights of use for frequencies – cfr. point b) of paragraph 1 of article 32 of Law no.  5/2004.

It thus follows that not only this obligation is not incompatible with the new regulatory framework, but also that it complies perfectly with the principles and rules thereof.

In the light of the above, it must be concluded that the migration obligation provided for in paragraph 2 of clause 10 of the licence granted to RADIOMOVEL remains in force, and that this license has not been subject to an implicit revocation, contrary to what the interested party has claimed, in the presentation submitted to ICP – ANACOM on 8 November 2004, received at the premises of this Authority on 10 November.

 3. Assessment

In the letter received by ICP – ANACOM on 10 November 2004, that is, the day following the the deadline for the conclusion of the migration, RADIOMOVEL acknowledges a delay in the migration process, on account of several factors, such as:

• Insufficient coverage of the CDMA technology system;
• Customers have not immediately accepted the migration;
• Problems concerning the migration of customers with data applications;
• Instable software of the PTT terminals, which led to a complex process of terminal adjustments;

By means of information submitted on 19 November 2004 and complemented on 22 November, RADIOMOVEL presented its reply to the questions raised by ICP – ANACOM in the official letter ANACOM-S-25275/2004, attaching a series of documents which are differentiated below:

-  Lists of clients broken down in different technologies;
- Model of the letter sent to customers concerning the migration plan;
- Copies of written replies and record of contacts between RADIOMOVEL and its clients through the call center line rendered available by the undertaking for this purpose;
-  Transport bills signed by customers to whom CDMA terminals were delivered;
- Applications for terminal equipment;
- Maps of the coverage provided through the CDMA.

3.1    Letter sent to customers and replies received

As referred above, RADIOMOVEL attached the minute of the letter sent to its customers concerning the migration plan. The mentioned document is dated 25 October 2004, however there is no document attesting that it was actually posted.

The replies received by RADIOMOVEL are registered through a fax copy (illegible) dated 16 November 2004, as well as by reports of 11 phone calls made by clients to the call centre line on the undertaking between 17 and 18 November 2004.

The file provided further includes letters from Carris and the Municipal Council of Lisbon, both of which are dated 19 November 2004.

As to the matters referred above, it is not comprehensible how RADIOMOVEL, having declared that it had started the SMRP provision through the CDMA system on 7 May 2004 (cfr. point N., pg 6), only in October that year questioned or informed its customers as to the migration of technology systems– it had not done so earlier, in a formal way at least, as no document certifying it has been submitted.

Also on this point, taking into consideration that a technology migration process of this weight is necessarily complex, it also remains unclear why RADIOMOVEL confined to present documents concerning contacts with merely 14 customers, all of which are concentrated over 4 days (16, 17, 18 and 19 November 2004).

3.2    Identification to customers to whom the letters was sent

RADIOMOVEL presented a list of 230 clients to whom the referred letter had been supposedly posted.

However, it does not provide evidence as to the sending of the referred letter, let alone naturally the respective date of postal dispatch.

Moreover, in October 2005 RADIOMOVEL had a total number of 2676 customers, thus it did not even claim having sent the mentioned letter to all.

3.3 Maps of CDMA coverage

RADIOMOVEL submitted two CDMA network coverage maps, which correspond, respectively, to 123 and 144 installed base stations, with different levels of reception threshold.

Notwithstanding the fact that different technologies are at stake, the services of ICP – ANACOM carried out an approximate theoretical study, in order to compare the CDMA coverage and the current coverage of the MPT1327 stations.

It was concluded that, in spite of the large number of installed CDMA stations, these are highly concentrated on the main urban and coastal regions, coverage being ensured strictly for those areas.

The study also led to the conclusion that the CDMA stations installed in the interior and south areas of the country may not guarantee a level of coverage equivalent to that of the analogue network (MPT1327) – this being likely the reason for the weaknesses found by the customers of RADIOMOVEL who tested that network (weaknesses referred by the operator itself in a document attached to its letter dated 8 November 2004).

Therefore, the coverage conditions provided by the CDMA network, which are still poor, in some areas of the country, namely in the interior zones and in the Algarve, are likely to prevent the interest of analogue technology customers (MPT1327) in migrating to the CDMA technology.

3.4 Plan for the transition from the analogue and digital technology to the full transition to the CDMA system

RADIOMOVEL, in agreement with REPART, is planning to transfer to the latter the customers who do not wish, for the moment, to migrate to the CDMA system, as is evidenced by the action taken, mentioned above in point P.

It thus expects that «only in May 2005 will conditions be established so that there are no “substantial” reasons for the voluntary non-migration on the part of its customers».

This is deemed to mean that only on this date will clients be provided with the necessary conditions to make a decisive choice between migrating or not to the use of the new technology platform.

What is more, the conditions under consideration concern the network coverage, which is currently not enough to ensure the proper operation and adequate levels of quality.

On the other hand, the statement that only in May 2005 (exceeding by far the established deadline for the migration conclusion) will customers be able to opt for the new system, linked to the small number of customers who are currently using the SMRP-CDMA network, make evident that the CDMA frequencies allocated to RADIOMOVEL are not being used efficiently.

3.5 Project to be developed in partnership with INESC-INOV

RADIOMOVEL gives evidence of having signed in 2003 a collaboration contract with the Instituto de Engenharia de Sistemas e Computadores (INESC-INOV), aiming at making available a solution for analogue customers with data applications, in order to render the migration independent from the application supplier/manufacturer. The contract was supposed to last up to 31 December 2006. However, no supporting document is attached.

On the other hand, the reference to the existence of a presumed work plan is not clear. In fact, the copy of the presentation made by INESC-INOV refers only a request to carry out a task plan between September 2004 and April 2005, and no commitment on the part of RADIOMOVEL is referred to.

To the extent that the mentioned dates would be complied with at all, the corresponding time horizon exceeds the date imposed in the license for the effective migration.

3.6 Lists of customers

RADIOMOVEL submits a list of transport bills signed by several undertakings to which CDMA terminals were delivered, dated September, October and November 2004.  A set of internal documents of the undertaking regarding applications for terminals dated 29 April to 16 November 2006 are likewise presented.

Once more, the delay in the request for and deliver of terminals to customers becomes apparent, having regard to the dates established for the commencement and conclusion of the migration process.

3.7 Traffic data - CONFIDENTIAL
 
4. Conclusion

In the scope of the proposal submitted by RADIOMOVEL on 1 February 2004 for the use of the CDMA system and for the additional allocation of radio frequencies necessary for the implementation thereof, the company undertook to comply with a package of commitments, as follows:

i) To comply with the package of commitments undertook in the scope of the proposal thereof, which were the grounds to use the CDMA system for the SMRP provision;

ii) To commence the SMRP provision according to the CDMA technology system by 9 May 2003 (this time limit was extended, upon request from the undertaking, to 9 May 2004);

iii) To conclude the process of migration from the use of MPT 1327 and TETRA technologies to the CDMA technology by 9 November 2003 (this time limit was extended, upon request from the undertaking, to 9 November 2004);

iv) To install a set of telecommunications infrastructures engaged in the CDMA network, in compliance with the following evolution and accumulated quantification:

- 120 Base Stations by the end of 2002 (this time limit was extended, upon request from the undertaking, to 9 March 2004);
- 210 Base Stations by the end of 2003 (this time limit was extended, upon request from the undertaking, to 9 May 2005);
- 250 Base Stations by the end of 2004 (this time limit was extended, upon request from the undertaking, to 30 September 2005).

v) To ensure that the number of telecommunications infrastructures provided for in iv) guarantees the compliance with coverage obligations undertook by the undertaking in the proposal presented to tender (cfr. clause 9 and annex II of the initial qualifying document – License No. ICP-012/TCM).

From the listed package of obligations, RADIOMOVEL complied with those identified in points ii) and iv). It should be noted that the coverage obligation may only be verified on expiry of the time limit for the installation of all infrastructures (base stations) “engaged” in the CDMA system.

The assessment of the compliance with the obligation concerning the migration from the MPT 1327 and TETRA technologies to the CDMA technology system is thus here at issue.

Therefore,

Having analysed the responses provided by RADIOMOVEL, as well as the information received at ICP – ANACOM subsequently to 19 November 2004, it is deemed to be evident and clear that the operator failed to conclude the process of migration from the analogue and TETRA technologies to the CDMA technology platform within the time limit established in the license, that is, 9 November 2004.

This fact is acknowledged by the undertaking itself, in the letter dated 8 November and received at ICP – ANACOM on the 10th.

In this context it should be borne in mind that RADIOMOVEL had already been granted a one-year extension of the time limit for the conclusion of the migration process.

On the other hand, RADIOMOVEL, without having concluded the migration process and acting in agreement with REPART, indicated to ICP – ANACOM, on 24 November 2004 (the time limit for the migration having already expired), its intention to transfer to the latter the respective analogue and TETRA technologies customer base – which makes it evident that not only did RADIOMOVEL not comply with the time limits for the respective commitment, but it also abandoned the presented proposal (to which it was bound) of getting customers to migrate to the CDMA technology.

Moreover, having regard to the supporting documents presented by the undertaking, it must be concluded that RADIOMOVEL did not make diligent or timely efforts in order to ensure that, on 9 November 2004, the customers of the analogue and TETRA networks had carried out the respective migration to the CDMA network.

In fact, in the notification dated 8 November 2004, RADIOMOVEL informs that it distributed “test” terminals to “friendly” customers – clients and collaborators – in order to assess the proper functioning and operation of the service, and also that it launched a specific offer «in compliance with the target objectives set on the request submitted (…) for the introduction of the CDMA technology system».

Notwithstanding, the operator failed to substantiate and demonstrate the action taken.

The documents presented by the operator on 10 November 2004 (letter with reference 048/DG/2004) merely comprise a circular letter dated 25 October 2004, requesting customers to provide information, up to 30 November 2004, on the interest and readiness to join the migration project.

It is not comprehensible, nor is it acceptable in a framework of normal diligence, required in the scope of the compliance with specific obligations, that RADIOMOVEL only approached its customers at a date so close to the expiry of the implementation of the migration thereof to the new system (CDMA).

Also, the text of the mentioned circular letter is on its own quite revealing as to the disregard shown by RADIOMOVEL as to the timely compliance with its obligations: the undertaking requests of customers that they reply up to 30 November 2004, when the migration should have occurred by 9 November.

Customers were not provided with any details or information as to how such migration would take place, this clarifications being left to telephone calls on the initiative of customers, as well as to future visits paid by dealers of RADIOMOVEL.

In a different level, RADIOMOVEL itself did not offer supporting documents or referred to ICP – ANACOM any credible plan to ensure the creation of conditions that would allow a timely migration, if customers so wished, in view of the obligation to which it was bound on account of the held licence.

Not even the action taken by RADIOMOVEL in order to create conditions that would enable a possible use of facilities and other infrastructures already existent at the customers’ premises, appear to involve satisfactory efforts. Only the conclusion of a protocol with INESC/INOV is referred, which at best could result in a possible solution for this problem, although only in the course of the 2nd quarter of 2005.

All in all, it may be clearly concluded from the documents submitted that not only did RADIOMOVEL fail to fulfil its obligation to conclude the migration for the CDMA technology in a timely manner but it did not even use the available means in order to try to comply with it, rather acted in a significantly negligent way.

The undertaking thus failed to present evidence of an impossibility to conclude the migration process in a timely manner.

Moreover, it may be concluded that the customers of RADIOMOVEL were never faced with a credible and timely proposal presented by the operator so that, at the very least, they could have had the possibility to envisage a possible technology migration. This is particularly true, given that, when RADIOMOVEL requested authorization for the use of the new technology, it undertook to develop marketing action promoting that migration, and, also, to ensure that customers would not bear the corresponding burden.

In this context, it should be taken into account that, under the presented proposal (see point 2.2 above) the operator undertook to implement an aggressive, voluntary, campaign to migrate existing subscribers to the new CDMA network.

It thus seems that RADIOMOVEL abandoned the purpose previously stated of pursuing the migration of all customers to the CDMA technology, rather opting for the transfer thereof to REPART, notwithstanding being the migration one of the conditions it undertook to comply with – the abandonment of this purpose also carries with it the abandonment of the target set by the undertaking to shift into a CDMA operator.

RADIOMOVEL did not comply with the migration obligation undertook and imposed under the license granted in that scope, and evidenced gross negligence, if not deliberate action, as regards such compliance.

5. Non-Compliance with the migration obligation and innefficient use of CDMA frequencies

5.1 CONFIDENTIAL

5.2 Even if RADIOMOVEL had fully complied with its migration obligation - quite clearly, this has not been the case – the inescapable conclusion is that the operator failed to use efficiently the allocated CDMA frequencies.

Note that according to the information provided by the undertaking on 20 January 2005, regarding 31 December, RADIOMOVEL had 53 customers and had made 440 CDMA terminals available.

It is thus unavoidable that the current stage of operation of the SMRP through the CDMA system is considerably behind the initial estimates of RADIOMOVEL. Indeed, the implementation degree of the business plan attached to the request for the use of the CDMA system, nearly three years from the date on which the license qualifying RADIOMOVEL for the use thereof was re-issued, is far from having been actually brought to execution.

Moreover, it should also be emphasized that the undertaking did not take the trouble to request in due course of ICP – ANACOM the adjustment or update of its business strategy in view of the (negative) development of the operation.

In effect, in the request submitted to ICP – ANACOM for the use of the CDMA system in the scope of the SMRP operation, RADIOMOVEL presented an initial estimate of 500.000 potential subscribers of the SMRP. On 15 January 2002, that estimate was rectified by the undertaking to 300.000 “professional” subscribers (based on studies carried out by the companies AT Kerney and Anthur D.Little).

RADIOMOVEL further presented in its request an estimate, regarding the period from 2002 to 2006, of the evolution of the total number of subscribers of the SMRP service provided through the CDMA, as the table below illustrates.

However, by the end of 2004, and according to data submitted by the undertaking itself, RADIOMOVEL had 53 customers in the CDMA network and 440 terminals.

As the tables below make clear, RADIOMOVEL presented data at the time (cfr. pg. 60 of the proposal) forecasting several activity indicators which have by far exceeded the figures which were in fact achieved.

Total Operational Costs  (€)	Expected	Accomplished (Report and Accounts)
2002	8.186.636	5.065.338
2003	30.119.791	7.241.916
2004	42.530.859	n.d.

Marketing costs / Advertising expenses ¹

Staff

Staff	Expected	Accomplished (Annual questionnaire)
2002	70	30
2003	153	34
2004	220	n.d.

All headings pointed out register large deviations from the figures actually achieved.

Moreover, point 3.2 of chapter 12 of the RADIOMOVEL’s proposal includes the following:

«The new shareholders of RADIOMOVEL aim to implement at the undertaking a centre of excellence in trunking services and support data applications to all undertakings in which Racebrook/Inquam has a shareholding and/or which are acquired in the future.

With this purpose, agreements shall be concluded with Portuguese academic institutions, and likewise, study grants and training courses shall be financed in the investigation and development areas.

RADIOMOVEL aims to invests in the investigation and development areas around 2,7% of revenues, up to a total amount of € 6.000.000 by 2006, including the operation of this centre».

Although the Report and Accounts of RADIOMOVEL for the year 2004 has not yet been submitted, it should be stressed that the report and accounts for 2002 and 2003 fails to present any reference to the above-mentioned investment. The intangible fixed assets comprise only installation expenses, and no investigation and development expenses have been entered.

The report and accounts for 2002 and 2003 do not contain, likewise, any reference to the agreement with INESC-INOV, mentioned in point 3.5. of this document, not to any other agreements with academic or investigation and development institutions, aiming the implementation of the centre of excellence referred to in the presented proposal.

As matters stand, ICP – ANACOM cannot but note that all expectations which shaped RADIOMOVEL’s request for the allocation of additional frequencies, aiming at operating the SMRP through the CDMA system, were defrauded.

And those conditions and requirements, undertaken by RADIOMOVEL, were the reason that justified the decision of the member of the Government responsible for the communications area granting the request.

5.3 The allocation/assignment of CDMA frequencies to RADIOMOVEL complied and still complies with the principles of the effective and efficient management of radio spectrum.

This is one of the regulation objectives of ICP – ANACOM, which must stimulate efficient use and ensure the effective management of radio frequencies (cfr. point d) of paragraph 2 of article 5 of Law no.  5/2004, of 10 February).

Taking due account of gathered information, it is unmistakable that RADIOMOVEL is using the allocated CDMA frequencies in an inefficient way, bringing about the underutilisation thereof.

In this context, if the CDMA frequencies remain available to RADIOMOVEL, and bearing in mind the current state of operation of the SMRP provided by that undertaking, ICP – ANACOM is thus prevented from the possibility of reassessing the use of those frequencies, in the pursue of the mentioned regulatory objective, and also from possibly engaging such frequencies in a different way.

5.4 Pursuant to paragraph 1 of article 110 of Law no.  5/2004, of 10 February, where ICP – ANACOM verifies that an undertaking does not use effectively and efficiently the frequencies allocated thereto, as provided for point b) of paragraph 1 of article 32 of that statutory instrument, it shall notify the undertaking of those findings and give the undertaking an opportunity to, within one month from notification, state its views or, if appropriate, remedy any breaches.

Therefore, RADIOMOVEL should be notified of the fact that the non-compliance with the migration obligation involves the infringement of a condition attached to the right of use for CDMA frequencies, and also that frequencies allocated for this purpose are being under-used, a time-limit of one month being granted thereto in order to end the situation, subject to breach procedures.

6. Determination

In the light of the above, the Board of Directors, in compliance with the task incumbent thereupon pursuant to point n) of paragraph 1 of article 6 of the Statutes of ANACOM, approved in annex to Decree-Law no. 309/2001, of 7 December, in the pursue of the regulation objective set out in point d) of paragraph 2 of article 5 and according to paragraph 1 of article 110, both of Law no.  5/2004, of 10 February, hereby determines the following:

1º That the following has been thoroughly verified:

a) RADIOMOVEL has not fulfilled the obligation concerning the migration from the analogue system (MPT 1327) and digital system (TETRA) to the CDMA technology within the time limit set out in paragraph 2 of clause 10 of the License no. ICP – ANACOM 012/SMRP, granted thereto for the provision of the SMRP according to the CDMA technology system;

b) Frequencies allocated for the provision of the SMRP according to the CDMA technology system are not being used efficiently, in breach of the provision in point b) of paragraph 1 of article 32 of Law no.  5/2004, of 10 February.

2º To grant RADIOMOVEL a time limit of one month to remedy the breaches deemed verified, or to assess the issue in writing, within the same period, attaching reasoned and demonstrated arguments as regards charges, drawing its attention to the fact that the only elements to be taken into account for the final decision shall be those submitted in the presentation, up to the expiry of the established time limit.

3º Where the provisions above are not complied with, ICP – ANACOM shall accordingly re-assess the right of RADIOMOVEL to use the frequencies assigned thereto for the provision of the SMRP under License no. ICP – ANACOM 012/SMRP.

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1 The forecasting data presented by the undertaking concerns “Marketing costs”, yet data available at ICP – ANACOM on figures actually achieved do not regard this indicator but rather “Advertising expenses”, the two headings not being directly comparable.