Sweden’s 800 MHz Spectrum Auction

Our spectrum management services and auction platform successfully supported PTS’ 800MHz auction and used a cloud-based platform to generate $325 million.

Introduction:

In June 2010, Sweden’s telecom regulator, the Swedish Post and Telecom Agency (PTS), released a Procurement of Framework Agreements on Auction Consulting Services for auction design, development, implementation, and operation of SMRA and/or clock auctions over the Internet.  PTS awarded Computech, Inc. the contract for auction consulting services and software in support of their upcoming 800 MHz band auction, which took place in the first quarter of 2011.

Challenges:

Sweden’s 800 MHz band plan contains 2×30 MHz in six paired frequency blocks of 2×5 MHz each (FDD1 – FDD6), and is suitable for wide area coverage in sparsely populated areas.  PTS ruled that no bidder could win more than two paired 10MHz blocks.  Sweden’s Government set out a Broadband Strategy, which stated, “All households and businesses should have good opportunities to use electronic public services and other services via broadband”.  To support this goal, PTS required the FDD6 license to be subject to coverage and rollout requirements.  Thus, the auction treated FDD6 slightly differently – the first SEK 300 Million of bids counted towards coverage and rollout costs, and any competing bids above SEK 300 Million were to be paid as auction proceeds.

For the actual auction design, PTS chose a Simultaneous Multiple Round Ascending (SMRA) auction with switching.  Switching involves moving a bid from one or more frequency blocks to one or more other frequency blocks.  This is achieved by cancelling bids on one or more frequency blocks and placing bids on one or more other frequency blocks, on which the bidder does not have bids, in the same round.  The number of points associated with the new bids and the number of points associated with the cancelled bids must be equal.

Solution:

For this framework, Computech teamed with two top economists to serve as advisors on the contract – Dr. Paul Milgrom, an Economist and expert in Auction Theory and Game Theory, and professor at Stanford University in the Department of Economics; and Dr. Karla Hoffman, an auctions advisor to the FCC, and Professor in the Systems Engineering and Operations Research Department of George Mason University.
Computech initially worked with PTS to finalize the auction design and rules, based on PTS’ spectrum policy objectives.  Following the release of the final auction rules, Computech tailored its Computech Auction Platform (CAP) to address PTS’ specific requirements, notably incorporating switching functionality and accounting for the unique requirements surrounding FDD6.

Following the final software release of CAP, Computech’s team was on-site in Stockholm to lead internal system training with PTS stakeholders, conduct mock auctions for the bidders in advance of the auction, and support the auction during the live production event.  The auction platform, which was hosted in the Cloud (Amazon AWS), allowed for a quick, cost effective deployment and enabled bidders to securely access Computech’s software over the Internet.

Notable Results:

On March 14, 2011, PTS announced the successful conclusion of its auction of licenses for the use of radio transmitters in the 800 MHz band, after almost five days of bidding and 31 rounds.  With the consulting and software support of Computech, PTS awarded three winning bidders (HI3G Access AB, TeliaSonera Mobile Networks AB, and Net4Mobility HB) two frequency blocks each (2×10 MHz), to provide mobile telephony and wireless broadband services to their customers.  Notably, the auction had all blocks issued above their reserve prices and the FDD6 block sold at well above the 300M coverage mark, for a total of SEK 2 054 000 000 ($325 Million) in winning bids.

“Computech’s auction platform contributed to a successful auction and offered the flexibility to accommodate our unique requirements, which resulted in PTS achieving its objectives for the auction,” explained Jonas Wessel, Head of Section at PTS.  “Computech’s team was professional, responsive, and diligent in their efforts, enabling us to move forward with our spectrum strategy.”