Spectrum wars in Chile

Posted on Tuesday, August 14, 2018

The usually well-managed and relatively calm Chilean regulatory scene has exploded over the past few months into open warfare between the operators, the regulator and the courts. The implications for mobile broadband are huge.

The opening salvo concerned the 3.5GHz band. On June 20th, 2018, Chilean regulator Subtel suspended the use of this band pending “the study and development of 5G”. The justification was an accusation that Entel and Claro had national spectrum which they were not using (or not using “adequately”) today. Since 3.5GHz is a potential 5G band, it was an unfair competitive advantage for only two operators to have this but, the lack of use means no clients would be inconvenienced if the band was suspended.

The next attack came less than one week later when Subtel celebrated a Supreme Court decision which declared the 2015 700Mhz auction to be illegal, again for competition reasons. One of the reasons has to do with the operators’ current 60MHz spectrum cap and Subtel was instructed review the caps.

Just under a month later, Entel and Claro filed lawsuits against the 3.5GHz decision saying their rights had been violated. Subsecretary of Telecommunications, Paola Gidi, responded to the suits with xenophobia, “”It is natural and expected that there would be legal action. They are international companies,” as if Chilean companies would not be concerned about confiscation of assets and rights violations.

On the 25th of July, Subtel called for public commentary on a 5G plan.

Last week, Subtel filed its response to the suits and Entel announced it was suspending its investments in the residential market. An Entel official told an analyst event that “This short-term measure will stop growth because Entel Hogar is held up by the 3.5 GHz network and we are not so stupid as to continue investing in something that is frozen.”

Firstly, I am not qualified to talk about the implications of Subtel’s actions nor the lawsuits by Entel and Claro. Someone with a deep understanding of Chilean jurisprudence would be far better for that.

I can say that in most jurisdictions I am aware of, companies do not own spectrum but have a ‘right-to-use’. Government’s rights over spectrum are absolute – the contracts use language like ‘national asset’ – and usually governments have the right to seize spectrum that is not being used in the nation’s best interests. Normally, there are objective criteria for this and the kinds of things mentioned in the 3.5GHz decision conform to those criteria: using spectrum for other than its original stated purpose, exceeding power levels, not using it at all.

(That, after all, was how the telecom industry got access to low bands like 600 and 700MHz. Governments were convinced that rural and fringe urban mobile broadband was a better use of the resource than over-the-air TV.)

That said, I have not looked into the details so I have no idea if Subtel’s observations justify their actions. ‘Exceeding power levels’ occurs commonly with pirates who take advantage of unused frequencies to blast their own signals. It may not be the operators at all. But then the ‘violation’ would pass from being ‘exceeding power levels’ to ‘unused’ so the companies would still be on the hook.

The press release is written strangely (to my eye) with the real purpose being to freeze the spectrum for 5G use and the charges of inappropriate commercialization being the ex-post justification. Maybe Subtel’s lawyers said that ‘eminent domain’ over spectrum was insufficient grounds to take back the bands.

See you in court.

I can also say that 60Mhz is woefully inadequate for the current state of mobile technology and laughable for what is being planned for 5G, where 100Mhz aggregation is frequently discussed.

On paper, Subtel’s plan makes sense:

  1. Freeze underutilized spectrum assets until we know what best to use them for;
  2. Study 5G to know how much spectrum we need and in what bands;
  3. Raise spectrum limits to cover the requirement;
  4. Re-assign spectrum assets as required for 5G.

I do not know how much discussion took place with the industry before acting but from an outsider’s point-of-view, however, the implementation looks ham handed:

  1. Seize the spectrum on vaguely defined and possibly dubious grounds, inviting legal action;
  2. Celebrate confiscatory legal decisions that seemed to be based on Subtel’s inaction on spectrum caps;
  3. Leave the impression that Subtel and the Courts are trying to intervene in competitive markets;
  4. Blame the foreigners.
  5. Announce a study etc. etc.

Surely there was a better way to do this.



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