700 MHz and 3.6-3.8 GHz auction – stakeholder Q&A

Ofcom will publish queries from stakeholders on the upcoming 700 MHz and 3.6-3.8 GHz auction below.

Please send any questions about the 700 MHz and 3.6-3.8 GHz auction to radiospectrum.award@ofcom.org.uk. We will make answers to relevant questions available on our website. However no questions will be attributable to any organisation.

1. Ofcom expects to limit the price increase for 700 MHz individual frequency lots to £5M per lot, which is 500% of the reserve price for this lot category. The corresponding limits Ofcom expects to apply to price increases for 700 MHz paired frequency lots and 3.6 GHz lots are 10% of the reserve price. Why is there such a large discrepancy?

We aim to give bidders a reasonable degree of predictability about price increases during the auction. Our bidder guidance states that 'our expectation is not to use increments greater than 20% or less than 2%', as well as our expectation to limit the absolute increment to £5m per 700 MHz individual frequency lot.

Based on our expectation to use price increments between 2% and 20%, the absolute price limit of £5m would only apply if the price per individual frequency lot reached a much higher price than the reserve price. As an illustrative example, at a 10% price increment the price per individual frequency lot would have to reach £50m in order to trigger the £5m absolute cap.

The reserve price for 700 MHz individual frequency lots was set on a different basis than for the other bands (e.g. low reserve price of £1m per 5 MHz lot, in the absence of meaningful benchmarks for market value). As such, we do not consider it appropriate to set the absolute price increase of an individual frequency lot at a fixed percentage of the reserve price for this band.

2. There is a possibility we may wish to pay the deposit from one bank account, and then use a different bank account (likely under a different name) for making the deposits as part of the actual auction. Can you confirm that it would not be an issue to use two accounts in the different parts of the auction process?

Paragraph A1.6 of the process guidance for potential applications and bidders (PDF, 960.0 KB) published on 4 November 2020, states that ‘Ofcom’s preference is for all payments to Ofcom to be made in GBP from one bank account, but this does not necessarily have to be in the name of the applicant or bidder’. However, where bidders have to make payments from two bank accounts they should provide details of both accounts in their application form.

3. Based on the published anticipated timing between stages, some critical milestones related to the notification and due dates for the additional deposit may fall over the Christmas and New Year period. So that we can plan accordingly, we would be grateful if you could confirm that these steps will be carried out in the New Year (rather than over the holiday period).

We are not planning to issue notifications under the auction Regulations during the period 24 December 2020 to 6 January 2021 inclusive, nor to set deadlines which would fall in that period.

4. At paragraph 6.8 of the process guidance for potential applicants and bidders in the auction Ofcom explains that it requires a detailed account of the circumstances which led to a bidder being unable to use the EAS, signed by two authorised persons, to be submitted within 24 hours of the event. Given the potential Covid-19 restrictions it may be challenging to get two physical signatures on a paper and deliver these to Ofcom within 24 hours, if for example two authorised persons are not both present in the office because of a Covid-19 requirement to self-isolate at home. We question whether one signature would not be sufficient for this purpose and suggest that Ofcom makes clear that the explanation could be sent by email in the form of a scanned copy of a document that bears the signature(s).

We are conscious that Covid-19 restrictions could mean it is impracticable for a bidder to provide this account within 24 hours. We also understand the potential difficulties that could arise in getting two physical signatures if the Covid-19 pandemic worsens. If this is the case, Ofcom will use its judgement and determine an appropriate deadline accordingly.

We note that in our process guidance for potential applicants and bidders in the auction (PDF, 960.0 KB), we explain that the detailed account of the circumstances requiring alternative bid submission must be submitted over email. We therefore would expect bidders to submit scanned PDF copies of this detailed account bearing the signatures via email. We consider that requiring bidders to submit their accounts by email should avoid some of the difficulties that may be associated with submitting hard copy accounts or obtaining physical signatures during the current circumstances with the pandemic.

5. We are concerned that, particularly for the partial adjacency form for which only one week is envisaged for both reaching any agreement and completing and submitting the forms, the requirement for delivery of the form with two original signatures in person to Ofcom could be unnecessarily challenging if the Covid-19 situation meant that one or more of the authorised signatories had to self-isolate at home and were not available in the office. Since each authorised signatory can bind the bidder for all purposes, would one signature not be sufficient?

We believe that requiring two signatories is reasonable and sensible in terms of ensuring that bidders are fully signed up and committed to the agreements. We note that under s.44(2)(a) Companies Act 2006, one way to execute a document on behalf of a company is with two authorised signatories.

However, it is worth noting that we will specify the method of delivery of any full or partial adjacency agreement forms in a notice to bidders at the start of the negotiation period, and, as set out in our process guidance for potential applicants and bidders in the auction (PDF, 960.0 KB), we expect to accept scanned copies of original documents as PDF email attachments with password protection.

In particular, if the Covid-19 pandemic worsens, we are unlikely to require physical delivery of adjacency agreement forms.

6. We’re working through the auction application form and are unsure what section 6(a) means exactly. Could you provide some explanation as to the background of what this is looking for, or perhaps an example of the kind of thing that it covers?

By way of example, an agreement providing a third party with the ability to influence the decisions and actions of the applicant is likely to fall within section 6(a) of the application form set out in Schedule 2 to The Wireless Telegraphy (Licence Award) Regulations 2020.

7. We note that para 2.7 of the Process Guidance for potential applicants and bidders in the auction document published on 4 November states:

“These documents must be scanned PDF copies of the originally signed documents.  Applicants should therefore secure original signatures on the documents set out in paragraph 2.3, and then provide Ofcom with scanned copies of these documents containing the original signatures.”

The following day, of course, the Government introduced the New National Restrictions in England.  The restrictions will run to 2 December. These have had a significant impact on working practices.

In view of this, would Ofcom accept documents signed using DocuSign?

Ofcom will not accept documents signed using DocuSign. We require PDF scanned copies of the originally signed documents.

8. Does Ofcom have in mind a start date for bidding in the forthcoming auction?  In particular, is that likely to be on/after 18 January 2021? Or before then?

The illustrative timings set out in the bidder guidance should now be considered alongside our response to a stakeholder question in respect of the Christmas and New Year holidays. On that basis, we confirm we do not anticipate bidding to start on or before 18 January 2021.

9. We note that the guidance states “Payment details must include information which identifies the applicant or bidder. This is a requirement of the Regulations.” On preparing the deposit payment, we note that the bank transaction requests a reference number; for a standard transaction that would be the invoice number, but clearly that does not apply in this case.

We understand that the Reference Number field can contain letters as well as numbers. If that is correct, we would prefer, for ease of identification of the payer, that the Reference Number include the company’s name.

10. We note than an additional deposit will be due, after receipt of which, Ofcom will notify bidders of eligibility limits and bid constraints. To assist with our governance processes, we have two questions:

1. When will the additional deposit be due?
2. In particular, will the additional deposit be before the 18 January?

We are unable to pre-determine precisely how long the process to qualify applicants will take. We do not currently foresee that the deadline for any additional deposit will fall due on or before 18 January.

11. Paragraph 84 in the Regulations (effective 18 November 2020) states that: “Only a winning bidder for 3.6 GHz lots which has paid the required assignment stage deposit (if any) shall have the opportunity to participate in the negotiation period”. This appears not to accurately reflect Ofcom’s intent as stated in paragraph 7.24 in the Process Guidance (version 3, dated 4 November 2020): “Any company may participate in the negotiation period, although only winners of 3.6-3.8 GHz spectrum may enter into an adjacency agreement”. Could Ofcom please clarify whether the Process Guidance is indeed still applicable on this point?

During the negotiation period, only winning bidders of 3.6 GHz lots can negotiate in order to enter into an adjacency agreement as defined in the Wireless Telegraphy (Licence Award) Regulations 2020. Whilst they could bring other parties into the negotiation if they choose to do so, those parties would not be able to enter into such an adjacency agreement.

In Regulation 84 of the Wireless Telegraphy (Licence Award) Regulations 2020, it is clear that only a winning bidder of 3.6 GHz lots which has paid the required assignment stage deposit may participate in the negotiation period in order to enter into an adjacency agreement. This is also reflected in paragraph 7.23 of the ‘Process guidance for potential applicants and bidders in the auction’, dated 4 November 2020, which states “Only winning bidders [of 3.6 GHz lots] that have paid their assignment stage deposit will be able to enter into an adjacency agreement.”  This follows from the fact that the negotiation is between winning bidders of 3.6 GHz lots and takes place in order potentially (through the mechanism of a full adjacency agreement or a partial adjacency agreement) to agree the particular numbered 3.6 GHz lots which are to be assigned to bidders that have won 3.6-3.8 GHz spectrum.

In paragraph 7.24 of the ‘Process guidance for potential applicants and bidders in the auction’ the word ‘participate’ is used to advise that any company may engage in the negotiation period, although only winners of 3.6 GHz lots (who have also paid their assignment stage deposit, as above) may enter into an adjacency agreement. Paragraph 7.24 goes on to explain that this means it would be possible for winners of 3.6-3.8 GHz spectrum to include any existing licence holder of 3.4-3.8 GHz spectrum in negotiations to discuss potential post-auction trades, regardless of whether they have won any spectrum in the award. Ofcom will not become involved in negotiations during the negotiation period between these winners and the terms and conditions of their agreement, including any third party involvement and any third party post-auction trades. Any full or partial adjacency agreement can necessarily only relate to the assignment of frequencies in the 3.6-3.8 GHz band.

12. We would like to get support from third parties to help us during the negotiation period. Do we need to add these third parties into our bidder group following the process described at regulation 8(3)?

We understand your question to be about whether regulation 8 of the Auction Regulations applies during the negotiation period, and confirm that in our view it does apply during such period. However regulation 122(2) has the effect that certain disclosures by a bidder group of information listed in regulation 124 which would otherwise fall under regulation 122(1) are permitted.

We consider that, in relation to bidders involving external advisers (in addition to those advisers mentioned in application forms) during the negotiation period, it is for bidders to take their own legal advice on the application of provisions of the Wireless Telegraphy (Licence Award) Regulations 2020 to their situations. Among others, relevant regulations appear to be regulation 8, regulation 122(2) and regulation 124.