“If you don’t have spectrum, you can’t provide wireless service,” said Steve Blythe, who heads spectrum strategy for Orange, a French carrier that operates throughout Europe and Africa.
Carriers say 5G networks will be made up of loads of small antennas much more densely packed into populated areas. Those antennas will need to operate over different frequencies than those used in today’s networks. Generally, sought-after bandwidth will be capable of transmitting more data, but over shorter distances.
Governments in each country typically hold auctions to lease channels of airwaves to wireless carriers, and proceeds go into government coffers.
Cellular providers are closely watching auctions even in countries where they don’t have a presence. In addition to trying to lock in rights to the spectrum, carriers also can learn bidding strategies and lobby regulators on what they consider to be the best auction rules.
Wireless auctions already vary widely in terms of how they work around the world, and the heightened interest in 5G has drawn extra scrutiny to some. In the Italian auction that ended Tuesday, the government reaped more than double the revenue it had forecast, drawing criticism from one prominent carrier.
Four wireless carriers essentially bought 200 chunks of airwaves that they coveted for 5G networks. But instead of auctioning off individual packages, the Italian government said wireless carriers had to buy one of four big bundles. Two bundles featured 80 chunks of airwaves each, and two packages had 20 chunks each.
Bidding for the two larger packages was fierce. In the end, the carriers spent €6.55 billion ($7.55 billion) in the auction – more than double the €2.8 billion the Italian government had written into its budget.
Vodafone, which operates in more than 20 countries and is the world’s No. 2 wireless carrier by subscribers, won one of the 80-chunk packages, spending €2.4 billion in the overall auction. But the high price it forked over caused grumbling at the London headquarters.
“Auctions should be designed to balance fiscal requirements with the need for investment,” said Vodafone Chief Executive Nick Read, in a statement. He warned against future “artificial auction constructs.”
A spokesman for Italy’s ministry of economic development, which conducted the auction, declined to comment. European wireless executives said they believed the auction’s cost was an outlier compared with other countries because both Italy’s government and wireless industry face unique circumstances.
Eric Sylvers in Milan contributed to this article
People using their smartphone on a subway platform in New York. Demand for 5G airwaves, or spectrum, even in this early stage, is heating up.