Edwin Vanderbruggen of VDB Loi in Yangon discusses the country's spectrum license auction
For fans of John Nash’s Nobel prize-winning game theory, highlighted in the motion picture “A Beautiful Mind”, you are about to see theory turn to practice in your very own Nay Pyi Taw, in Building No. 2. On October 17 2016, the Ministry of Transport and Communications, the new, somewhat odd couple of Government ministries, will hold its long-awaited spectrum license auction. The auction follows a public consultation stage that was organised in January and February 2016.
In this note, we look ahead at this potentially game-changing event, at who can participate, and how it will be run.
Game theory-based auction system
The method of the auction is something called “Second-Price Simultaneous, Multiple-round, and Ascending” or SMRA. SMRA is the oldest and probably best-known auction type for spectrum in case of excess demand.
Under the SMRA method, the Post and Telecommunications Department (PTD) will auction several blocks of frequency bands, in some areas simultaneously, by going through a sequence of rounds. An auction often has several blocks available in a number of regions. In Myanmar, there are three regions for this purpose. For every round of bidding, the standing high bid for the lot is determined, and the bidding rounds go on until there is only one bidder left for each lot.
For the mathematicians among us, a bidder remains active in round T by submitting the leading bid in T-2 or by submitting a higher bid than the T-1 leading bid. Interested bidders may read up on game theory strategies for spectrum auctions in the Handbook of Game Theory, edited by Petyon Young and Shmuel Zamir.
In practice it means that bidders are kept in separate rooms from 10am to 5pm and use runners to bring their bids for blocks, per round, to the auction room. Each time that there is excess demand, the PTD’s auction manager (a consulting company called Nordicity) will set a “Minimum Acceptable Bid” and a new round will be called with new bids from the separated bidders, unless one or more of them drops out. There may be one hour or less between rounds.
The advantage of this auction type is that it is simple. The problem is that unlucky bidders may end up with blocks of spectrum that do not match together. Bidders may also end up paying quite a bit more than they otherwise would have had to pay. Most importantly, perhaps, there is the possibility of tacit collusive behavior, based on an informal understanding of who should get which spectrum.
What can you bid for?
At this time, the PTD will only auction 40 MHz of spectrum in the 2600 MHz band (2575-2615 MHz), made up of two times 20 MHz (2575-2595 MHz, 2595-2615 MHz) divided into three regions. Each bidder will be able to acquire up to two regional licenses, thus allowing for three to six regional licensees in total.
The spectrum license is for 15 years.
The rules and processes for the 2600 MHz auction point out that a bidder will be allowed to “bid for a maximum of one spectrum lot comprised of up to two regional 20 MHz Lots in the TDD mode. Thus the spectrum cap in the 2600 MHz band will not exceed 20 MHz per licensee in the same region”. In the National Table of Frequency Allocations (NTFA), Myanmar has been subdivided into three regions.
The NTFA also points out that the band 2500-2690 MHz is intended for broadband services, while the band 2300-2400 MHz will be considered for use by broadband services.The blocks on the auction table are 2 x 20 MHz, for three regions in the 2575-2615 MHz band. In Myanmar, this band is within the 2535-2655 MHz and has been allocated in the NTFA to “FIXED MOBILE except aeronautical mobile 5.384A BROADCASTING-SATELLITE”.
Who can participate?
You need to already have a telecommunications service license; more specifically, an NFS-I license. The NFS-I is the most comprehensive form of telecom license Myanmar has, allowing the licensee to provide services and hold a network.
How can you participate?
You must have lodged your Expression of Interest by the deadline of August 9 2016. Interested parties then had until September 7 2016 to prepare and lodge their financial, technical and ownership documents for qualification. The qualified bidders will be announced on September 28 2016. After submission of more paperwork and a Q&A stage, a mock auction will be held on October 12 2016. Finally, the big day (or days if things get out of hand) will be on October 17 2016. Winners should be announced by October 20 2016, but the results will also be disclosed in the main auction room right during the auction itself.
By the way, you will also need to arrange for a bid bond of $500,000 (from a Myanmar-licensed bank or approved by the PTD), and you can’t have any common ownership with Telenor, Ooredoo or MPT.
If you are not participating in this auction, not to worry. According to the PTD, the following bands could potentially be made available for assignment in the next five years: