My Thoughts on Technology and Jamaica: Stakeholder Consultation Forum on the 700 MHz Spectrum Auction - How the Spectrum Auction process for Band 17 and Band 13 of the 700 Mhz Band Works

Saturday, September 21, 2013

Stakeholder Consultation Forum on the 700 MHz Spectrum Auction - How the Spectrum Auction process for Band 17 and Band 13 of the 700 Mhz Band Works


Breaking news that a few days stale, folks! I knew of this but I’ve decided to delay in publishing this article as its super interesting to me personally yet is occurring so quietly that unless you’ve got my kinda interest in Telecoms, you’d never know this was going down.

This as the requirement of US$3 million (JA$304 million) for Telecom Operators to participate in the 700MHz Spectrum License Auction has been waived and Telecom Operators, both incumbent and new entrants based on the article “Spectum drops US$3-m deposit requirement for BroadBand license auction” published Thursday, September 12, 2013, The Jamaica Observer. Not only that, but the requirement to present a bank Guarantee or Bond that indicates that they have the money to hit the ground running is no longer required.

This is the same Spectrum Auction process, which had started in March 2013 with the Minister of Science, Technology, Energy and Mining Phillip Paulwell declaring on Tuesday March 26th, 2013 in Parliament that they had 700MHz Band of Spectrum up for auction as stated in my blog article entitled “Minister Paulwell in Parliament debut two 700MHz Licenses for 4G LTE for Monday July 15 2013 Auction - 4G LTE Means After Earth Everything is Possible”.

Clearly these are very difficult requirement to fulfill, so the Minister of Science, Technology, and Energy has removed the pre-requirement for Bid. After all, it’s not ever necessary as far as I know anywhere for anyone to have to put up a bond in order to Bid on a License for Spectrum for which you’ll have to invest more money in order to bring in equiptment in order to develop.

Stakeholder Consultation Forum on the 700MHz Spectrum Auction

On Tuesday September 10th 2013, the SMA (Spectrum Management Authority) had their Stakeholder Consultation Forum on the 700MHz Spectrum Auction at the Jamaica Conference Room in Caucus Room 2 at the Jamaica Conference Center. The meeting began at 10am and was chaired by Cecil McCain from the Ministry of Science, Technology Energy and Mining and a distinguished panel from the SMA that included Mr. Henry Batson.

Minister Paulwell was a no-show due to prior engagements. But without his presence, the presenters, all six (6) of them behind their table at the front of the room were quite a cagey bunch. They stuck faithfully to their Powerpoint slides, of which I got a copy, and fielded only a few questions from ODPEM (Office of Disaster Preparedness and Emergency Management), LIME and Digicel and myself, mainly about future technology backhaul i.e. Licensing of FLORA (Fiberless Optical Receiver Array) and the use of Solar Panels to power the BTS 9Base Station Transceivers) and RBS (Radio Base Stations), for which I got no response.

The 700 MHz Band – What’s being Auctioned

The 700 MHz Band is basically from channels 52 to channels 69, which corresponds to 698MHz to 806MHz, basically in the UHF (Ultra High Region) region of the NTSC (National Television Spectrum Committee) Band. According to the SMA, this Band is clean and clear and free of activity at the time of the auction, hence it’s prime Spectrum real estate for use to provide 4G LTE (Long Term Evolution) Wireless BroadBand Service.

It was allocated by the IMT (International Mobile Telecommunications in Region 2 by the ITU (International Telecommunications Union) WRC-07. The Band is basically 108MHz of virgin Spectrum which is divided into 6MHz Blocks and can be used fro TDD (Time Division Duplex) and FDD (Frequency Division Duplex).

Of that 700MHz Band as described above, only 48MHz of it is up for grabs in this upcoming Spectrum Auction in paired Blocks of 12MHz each. Based on the requirements of the 3GPP (Third Generation Partnership Project) for the IMT-Advanced (basically the same thing as 4G LTE), no Block of Spectrum for Guard Bands are allocated.  In other words, the 6MHz Blocks sit side by side with no IBG (Inter Block Gaps) as is the case with Analog Spectrum such as NTSC for TV Broadcast.

As mentioned before in previous articles on My Thoughts on Technology and Jamaica, the Blocks of Frequency within the 700MHz Band up for grabs are as follows:

1.      Band 17 made up of two (2) Blocks of 12 MHz Frequency each from 704 MHz to 716 MHz and 734 MHz to 746MHz
2.      Band 13 made up of two (2) Blocks of 12 MHz Frequency each from 746 MHz to 758MHz and 776 MHz to 788MHz

The Bands to be auctioned are as shown in the Diagram below:
Both Spectrum Licenses for Band 17 and Band 13 are fifteen (15) years License for successful Bidders and are priced as thus:

1.      Band 17 Reserve price is US$45 million for a fifteen (15) years License
2.      Band 13 Reserve price is US$40 million for a fifteen (15) years License

The requirements for the Bidders, both the incumbents and the New entrants into the Jamaican Telecoms market can be seen in my blog article entitled “Spectrum Management Authority moves up 700MHz Spectrum License Auction to Wednesday May 22 2013 - Everything is Possible despite 5 year Mission Impossible Ghost Protocolare as follows:

Incumbent

1.      50% coverage of the population in eighteen (18) months
2.      90% coverage of the population forty eight (48) months

New Entrants

1.      30% coverage of the population twenty four (24) months
2.      90% coverage of the population sixty (60) months

In order to make their 4G LTE Rollout a little easier, the SMA has also become very generous and has allocated the following sweeteners for winning Bids for either Blocks of Spectrum:

1.      2 5 MHz 18000 MHz or 1900 MHz Bands for the provision of GSM (Global System Mobile) Voice Services, most likely to coordinate their staff as well as make money while they get the 4G LTYE Network up
2.      Spectrum License free Backhaul for 2 years given achievement of the first coverage targets a listed above. This is most likely Microwave Frequencies for Microwave RBS (Radio Base Stations), albeit the option does exist for the New Entrants to use any of the technology, including FLORA (Fibreless optical Receiver Array) for which they’ll incur no Spectrum Licenses
3.      Optional Award of a Undersea Fiber Optic License, most likely to aid in Bandwidth issues that may be incurred if not sufficiently available from Triple Play Provider FLOW or Telecom Provider LIME

Licensing and Awards Process

The Licensing and Awards for the two (2) Bands of 700 MHz Spectrum is as follows:

1.      Stage 1 – Request for Bids
2.      Stage 2 –Auction
3.      Stage 3  - Post Qualification
4.      Stage 4 – Grant of License

The Timeline for the Spectrum Auction of the 700 MHz is as follows:


However, the following were made clear during the Stakeholder Consultation Forum on the 700MHz Spectrum Auction that the Bidders have to meet the following Requirements

1.      Each Bidder has to provide a sworn declaration of the day of the auction attesting to being “independent” and not colluding with other Bidders or partnerships i.e. not getting help from anyone
2.      Provider a Bank Guarantee or Bond in the amount of 50% of the proposed Bid on the day of the auction
3.      Holder or be eligible to become a holder of a Carrier or a Service Provider License as per the Part III of the Telecommunications Act of 2012
4.      Each bidder is required to submit one Bid per Band i.e. Sealed Bid Single Round
5.      If there are two (2) or more bids of equal merit as judged by the OUR and SMA, a runoff is held between those two bidders to determine a winner
6.      If less than 2 bids per Band, the entire process is aborted
7.      The SMA reserves the right to abort the Process at any stage
8.      Bidders will be told if their final submission was successful. An increased bid offer is only possible in order to resolve tie.

The Post Qualification Stage is the stage where most of the worrying takes place:

1.      After the Bidder has being successfully chosen, they must meet these Post-Qualification Criteria in order to be awarded a 700 MHz Band
2.      Failure to complete this process will result in the Bid being rejected and the License not being granted and the process restarting afresh

Full Details of the bidding process for the 700MHz Band are provided in this “ADDENDUM TO THE INFORMATION MEMORANDUM LICENSING THE 700 MHz BAND (Channels 54 – 69 i.e.698 - 806 MHz)” on pages 3 to 8 of this document dated August 30, 2013 as issued by the SMA, which was emailed to be from the SMA!

Proposal Requirement and Assessment to enter Bid for a Band License

Albeit this is a Spectrum Auction for the Bands mentioned above, the OUR’s also involved, being as they are the Utilities Regulator in charge of Telecoms. Their role in the Bidding process is as follows:

1.      Processing the Applications for a Carrier License for the New Entrants
2.      Processing the Applications for the Fiber Optic License for the New Entrants
3.      Joint evaluation along with the SMA of the Proposal Bids

The actual Proposal Document also has to be done in triplicate i.e. three (3) copies, one (1) original and two (2) copies, one for the SMA and one for the OUR, which implies some very thick and heavy documents! The Proposal has to be structure as follows with the required information in order to be successfully entered into the Bidding Process:

1.      Company Data
2.      Legal and Regulatory Requirements
3.      Technical Data
4.      Business and Financial Data

As this is really a general guide to doing proposals for GOJ Contracts, I’ve decided to include a hyperlink to the relevant document on the Proposal Requirements. Full Details of the Proposal Requirements for the 700MHz Band are provided in this “ADDENDUM TO THE INFORMATION MEMORANDUM LICENSING THE 700 MHz BAND (Channels 54 – 69 i.e.698 - 806 MHz)” and are located on pages 9-11 of this document dated August 30, 2013 as issued by the SMA, which was emailed to be from the SMA!

Problem with the Bidding Process – Only Incumbents need Apply

Aside from the onerous document requirements of the Bid process being hosted by the SMA and the OUR, everything is very thorough and precise. The requirement of 50% of the value of your Project upfront is understandable, as you want Bidders that is cash-rich and rearing to go come 2014, not coming to take advantages of the financial resources that already exist in the island. They must, in reality, be cash rich and packing a lot of Cash ready to spend and in good standing with the Government of Jamaica!

The requirement of there being no partnerships are troubling, however, as this is far from reality for any business. These as not even FDA (Foreign Direct Investors) have that kind of Cash up front to start spending. The most they may have is the Bid Bond. But to finance an adventure over a five (5) year period would require substantive VC (Venture Capital) Funding either via Direct Investment by a VC Fund Manager or a US Denominated Bond to raise Capital on the FOREX (Foreign Exchange) Markets in both the US of A and the EU (European Union)!

It somewhat suggests that the incumbents i.e. Telecom Provider Digicel and Telecom Provider LIME would be the ONLY Bidders involved in the process. The current low rates in the Voice Market isn’t particularly profitable and the Data Market isn’t mature enough to attract New investors, as not many Jamaicans use the Internet extensively enough to make it financially worthwhile for any investor to come to Jamaica to build such a Network!

I’d done an article on the process put forward by the SMA for the 700MHz Spectrum, which up till about that meeting hadn’t reached anywhere, mainly due to concerns expressed by some Telecom Providers over the cost as argued in my blog article entitled No Bidders thus far for the 700MHz Spectrum Auction for 4G LTE - CAPEX concerns as Serious Man of Steel Investors are needed to assist Jamaica to become a more Connected Society”.

After all, it really very difficult for a Telecom Provider to invest in Jamaican when we show very little interest in the utilization of Broadband Internet for anything other than Facebook and Twitter as argued in my Geezam blog article entitled “Jamaica’s Low Net Penetration – BroadBand Internet A Universal Right”.

Granted, the usage of smartphones is on the rise, but it’ll take more than smartphones and Tablets. It’ll require a mindset change in terms of our view of the importance of the Internet, such as helping Jamaicans to make money from the Internet as stated in my blog article entitled “How Jamaicans can set up a Payment Gateway in order to process Credit Card purchases - E-Commerce the main Catalyst for Increasing Jamaica's Internet Penetration”.

Thus it’s my assertion that this Bid process will end up being cancelled, as when I was at the Stakeholder Consultation Forum on the 700MHz Spectrum Auction, the representative from Telecom Provider LIME was asking if they could source the 50% in installments, suggesting that Telecom Provider LIME may be seeking to fund their Proposed 4G LTE Project using a US Denominated International Bond to raise capital on the FOREX (Foreign Exchange) Markets!

First off the bat, I’m a Bidder as well, and I’m somewhat independent, leveraging my experience from my years working at CLARO Jamaica as a RF Technician (2008 to 2009) and at C&W (2001 to 2004). That’s how I got all this information thus far! I have sufficient knowledge about 3G and 4G LTE to design the physical infrastructure of the 4G LTE Network, including basic maps from CLARO!

I’ve even asked questions of the SMA (Spectrum Management Authority) after having visited them at 13-19 Harbour Street that I was given the email Spectrumauction@sma.gov.jm as well as I was told to check their Website SMA as well as their Twitter handle @JaSpectrum for updates. I mainly, however, received my updates via a Miss Ida-Gay Warburton (iwarburton@sma.gov.jm) at the SMA!

I had initially sent a series of questions as listed in “Questions for the SMA - 25-07-2013 LHDEER” for which I got the following responses in “700MHz Auction - Response To ATI Request (August 2013)” from a Miss Ida-Gay Warburton (iwarburton@sma.gov.jm) at the SMA! It’s from these Questions that I was drawn into the entire process of the Bid for the Spectrum License for the 700 MHz Band and thus through subsequent communications via email I received the “ADDENDUM TO THE INFORMATION MEMORANDUM LICENSING THE 700 MHz BAND (Channels 54 – 69 i.e.698 - 806 MHz)

On Monday September 16th 2013, I had received my RFP (Request for Proposal) in the file “RFB - 700 MHz Auction - (Issued 20130916)” from the SMA via email. Thus I’m in the process of putting together a proposal in order to Bid for the Spectrum.

However, what I lack is capital and a ready army of employees along with Technical Resources! My plan therefore involves forming a consortium of companies and thus I’m not independent.
My proposal for my Network Idea, which I’ve called Audia_Gypsy_Danger (sorry no hyperlinlks!!), involves getting a partner to fund the Project while I provided the proposal as to how to build the Network.

I’m still seeking that partner(s) which has to have a Carrier License or must have the ability to gain such a Carrier License as explained above, as I don’t have one, despite this being illegal according to section 11(6) of the Telecommunications Act. Add to the fact I am not a holding company as per the Companies Act, making me even more disqualified. In fact, my Plan involves the following:

1.      Sagicor – They’d be in charge of Property Services and Insurance for my company
2.      FLOW- They’d provide the Technical Engineering know-how and manpower to build the Network
3.      ACCENT Marketing – They’d provide the Call Center Services and possibly staff for the Company during the initial Start up stages. They’d also provide training and assessment for Staff

Aside from the price of the Band, this amount of money no one in Jamaica has upfront for my Project, which is approximately US$5.6 billion! I’d have to raise that amount of money via the flotation of a US denominated Bond instrument or find a Partner that the OUR’ll accept that’s cash rich and who’ll be willing to partner with me and satisfies these basic criteria.

Stakeholder Consultation Forum on the 700MHz Spectrum Auction – Open but not Publicized

Thus far the process has been fair and open, albeit I’ve made it known that the Public (as in the General Public) were missing from the Stakeholder Consultation Forum on the 700MHz Spectrum Auction which was billed as a Open Public Consultation for which there was no cost to attend.

Good to note too that I walked to the meeting – as did the Digicel Representative, being as the Jamaica Conference Center is only a few Blocks away from Telecom Provider Digicel’s Solar powered Headquarters as described in my Geezam blog article entitled “Digicel Jamaica’s Alternative Energy Future – Increased Electricity Bills and Energy Sector Opportunities collide”. So pretty much anyone with an interest could’ve taken the day off and participated, had it been more publicly advertised, despite the cagey-ness of the SMA bigwigs!

Even the lack of Media coverage is obvious, as so far no discussions on Television on the 700MHz Spectrum License Auction, no Public Awareness Campaign and aside from the SMA, no videos or even photography’s explaining the entire process to the Jamaican Public.

The date to hand in the Proposals was on Monday September 16th 2013 and the date of the Auction is on Friday October 11th 2013 with the winner of the Spectrum License being announced on Wednesday December 18th 2013. In short, the 700MHz Spectrum License Auction will be wound up just in time for Christmas and for the winner to begin construction in the New Year 2014.


Here’s a link to the entire set document’s I’ve collected thus far in my investigation of the Bidding process for the 700 MHz Spectrum:

  1. ADDENDUM TO THE INFORMATION MEMORANDUM LICENSING THE 700 MHz BAND (Channels 54 – 69 i.e.698 - 806 MHz)
  2. Questions for the SMA - 25-07-2013 LHDEER
  3. 700MHz Auction - Response To ATI Request (August 2013)
  4. RFB - 700 MHz Auction - (Issued 20130916)

For more information about the Spectrum Auction for the 700 MHz Bands, you can contact the SMA at the following address:

The Auction Manager
C/O Spectrum Management Authority
13-19 Harbour Street
Kingston
Email: spectrumauction@sma.gov.jm

No comments: