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Executive Summary

1.1 Ofcom published on 29 June a consultation document setting out proposals to hold an auction in 2007 for the award of wireless telegraphy licences in the 10 GHz, 28 GHz and 32 GHz spectrum bands. It also proposed to defer the award of licences in the 40 GHz band.

1.2 The key elements of the proposed spectrum packaging and award process were:

Twelve licences would be offered. Most would have UK coverage - one in the 10 GHz band, two in 28 GHz, and six in 32 GHz. In addition, three in 28 GHz would have varying degrees of lesser geographical coverage.

• All licences would be awarded through a single auction.
• The auction would take the form of a simple simultaneous multiple round auction (‘SMRA’).
• The winning bidders would be those who submitted the highest bids for each licence.
• A minimum price of £50,000 would be set for each licence.

1.3 The consultation closed on 7 September. Several responses commented on the packaging and auction design. The main points raised were:

• It would be more appropriate to offer smaller lots in the 10 GHz band in order to maximise flexibility and overall efficiency of use. There was, however, no consensus on the appropriate size of lots; for example a number of respondents suggested that two lots of 2x50 MHz be made available while another suggested five lots of 2x20 MHz.
• One respondent suggested that there should be larger lots in the 32 GHz band and if larger lots were not available the respondent would be exposed to aggregation risk.
• There was some disagreement with the proposal to defer the award of the 40 GHz band. One suggestion was to auction it, with the other bands, in three packages of 2x500 MHz.
• One respondent suggested that the packaging of lots and auction design should ensure that aggregation risk to bidders was minimised as far as possible.

1.4 In the light of these responses and further work that Ofcom has undertaken it now proposes:

• to change the packaging of the 10 GHz band, offering ten lots of 2x10 MHz, but subject to a requirement that each bidder bid for at least two such lots (i.e. a minimum of 2x20 MHz);
• to include the 40 GHz band in the award; and
• to award licences through a simultaneous multiple-round combinatorial clock auction (‘combinatorial clock auction’ for short).

1.5 This discussion document explains Ofcom’s rationale for its revised proposals. It examines the options for packaging the bands. It sets out the proposed usage rights for 40 GHz and 10 GHz to reflect the revised packaging. It explains the key features of the combinatorial clock auction format and how it would work in practice. It also compares the relative strengths and weaknesses of the simple SMRA and combinatorial clock auction formats.

1.6 Ofcom will take account of any comments it receives in response to this discussion document in finalising its decisions on the award of these bands. It is asking for comments by 8 February 2007.

1.7 Ofcom intends to hold a stakeholder event in January 2007 to explain the proposals in this document.

1.8 Ofcom expects to publish a statement detailing its final decisions for this award, along with the information memorandum and draft regulations, early in 2007. The draft regulations will set out the auction rules and will be subject to public consultation.

• Award of available spectrum: 10 GHz, 28 GHz, 32 GHz and 40 GHz: Spectrum packaging and auction design [pdf]
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