Providing Support for Three Ireland in 5G Spectrum Auction Appeal

The Situation

ComReg published a decision in December 2020 on its multiband spectrum auction (MBSA), a process that has significantly expanded the availability of spectrum in Ireland for mobile and fixed wireless services. The auction was an important step for mobile network operators (MNOs) planning long-term investment essential for the widespread rollout of 5G services in Ireland.

The MBSA included spectrum in four frequency bands, including in a sub-1 GHz band at 700 MHz. Sub-1 GHz spectrum is valuable for 5G rollout as signals at these frequencies travel further and penetrate better than high frequencies, making them important for rural coverage and in-building penetration.

Three Ireland is one of three MNOs active in the Irish mobile market (along with Vodafone Ireland and eir). All three MNOs entered the MBSA with significant spectrum holdings, including in the two existing sub-1 GHz bands at 800 MHz and 900 MHz, where Three had five blocks and Vodafone and eir each had four blocks.

In its MBSA decision, ComReg imposed a spectrum competition cap of 70 MHz (or seven blocks) on the amount of sub-1 GHz spectrum that any operator could hold post-auction, as it was concerned that undue asymmetry in sub-1 GHz holdings could distort downstream competition. Given the three MNOs’ existing sub-1 GHz holdings, the spectrum cap effectively limited Three to bid for two blocks of 700 MHz, whereas Vodafone and eir could each bid for three blocks. ComReg also adopted a combinatorial clock auction (CCA) format, which applies a second price rule (i.e., the winning bidder pays the price bid by the second highest bidder).

At consultation, Three opposed the combination of the sub-1 GHz cap and the CCA format, but its arguments were rejected by ComReg. Following ComReg’s MBSA decision, Three appealed to the High Court of Ireland on the grounds that the MBSA decision was disproportionate and discriminatory against Three.

NERA's Role

A NERA team led by Senior Managing Director Richard Marsden and Managing Director Dr. Soren Sorensen supported Three throughout ComReg’s MBSA consultation process and provided advice on bid strategy in the auction. Mr. Marsden also acted as economic expert for Three and its legal advisor Matheson in its appeal before the High Court against ComReg’s MBSA decision. Mr. Marsden was supported by Director Adrien Cervera-Jackson.

The NERA team prepared two expert reports explaining that (i) ComReg’s competition assessment failed to establish a likely distortion of competition sufficient to justify its decision to impose a sub-1 GHz spectrum cap of 70 MHz, (ii) the combination of the sub-1 GHz cap and the CCA format created a discriminatory competitive advantage to Vodafone and eir, (iii) alternative auction designs, which could secure ComReg’s objectives while avoiding harm to Three, were available to ComReg, and (iv) there would likely be harm to Three if the auction proceeded as proposed. 

Mr. Marsden acted as economic expert on Three’s application to the High Court for a stay to the MBSA, pending delivery of the High Court’s judgment on its appeal.  The NERA team prepared two further expert reports explaining there was potential for significant harm to Three (and other bidders) owing to mispricing and inefficient allocation of spectrum if ComReg proceeded with the auction under the current rules.

The Result

The High Court granted a stay on the start of the auction. Subsequently, the Court of Appeal allowed the main stage of the auction to proceed but maintained the stay on the issuing of licences, pending a decision on the main case. ComReg held the auction in December 2022, about 12 months later than originally planned, with Vodafone, Three, and eir each securing two blocks of 700 MHz spectrum. Three subsequently discontinued its appeal, as it was satisfied with the auction outcome, bringing an end to the substantive challenge to ComReg’s MBSA decision.