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Big three telecomms firms question IT minister's 5G procurement changes

Telecomms mast (picture is illustrative).
Telecomms mast (picture is illustrative). Source: Siim Lõvi /ERR

Minister of IT and foreign trade Raul Siem (EKRE)'s decision to change the basis of the country's 5G procurement process has caused the big three telecoms companies in Estonia to question the direction of negotiations.

Some companies with skin in the game want to renegotiate the terms of the procurement, following the change.

As reported on ERR News, Raul Siem is looking at changing the competition process for the first 5G frequency band — the 3.6 GHz frequency band — which would expand the number of frequency permits from three to four.

Siem's proposal would have the 3410-3800 MHz frequency range divided into four equal frequency permits, rather than three, which he says will encourage competition, while also helping ensure the efficient use of frequency resources, according to the economic affairs ministry.

The upper 200 MHz of the bandwidth noted above is also used in the Russian Federation, and also reportedly requires Russian permission.

The main issue for the courts had been whether the regulations to give three frequency permits, instead of four, go against principles of freedom of enterprise. The three permits would favor the three big players in the Estonian telecoms market - Telia, Elisa and Tele2, it is argued.

Estonian-founded Levikom says the competition regulation was wrongly drafted, and that the 5G frequency permit issuance plays into the big three's hands.

On Wednesday, Raul Siem decided that the frequency band would not be divided into six but into eight parts. The principle remains the same - four companies now, not three, will receive one share for immediate use and one once Russian permission is squared away.

Elisa: New regulations would make things more expensive

Toomas Polli, head of Finnish-owned Elisa's technology unit, noted that the original rules clearly stated that if Estonia's eastern neighbor releases the frequencies, these would also be relayed between Estonian companies so that every company would still receive uniform frequency blocks. There is no such mechanism in Siem's new decision, he said.

"This division is actually such that whoever wants to participate in the market and build a network there will now find it twice as expensive to do so. This came as a surprise to the whole industry," Poll said.

"And instead, we can now see that time should be taken here and the situation calmly reviewed so that we can proceed wisely, since our entire digital society is moving on to the next stage."

Andres Visse, CTO at rival Telia, concurs.

"It is not technically possible to build a 5G network using the currently proposed frequency bands, on the basis of which the quality jumps advertised for 5G could be offered," Visse said.

Telia Eesti is registered in Estonia but its parent company is the Swedish multinational telco of the same name.

"It is not technically possible to build a 5G network using the currently proposed frequency bands, on the basis of which the quality jumps advertised for 5G could be offered," Visse said.

Meanwhile Swedish-owned Tele2 says waiting on the release of the "Russian" portion of the bandwidth might take some time too.

"Unfortunately for Russia, it is unpredictable how long it may take," Tele2 head of technology Tanel Sarri said.

Levikom promises high-speed internet nationwide

Raul Siem changed the conditions of the frequency license competition at the last minute ostensibly to promote competition.

Levikom has reportedly had its eye on 5G frequencies for several years. The company's CEO, Peep Põldsamm ,said that while competitors would be supplementing the already-existing 4G networks with 5G, they aim offer a slightly different service – WiFi.

"We consider our main role to concern land internet coverage, I.e. the last mile. Levikom, which today covers about half of Estonia with older technology, would immediately exchange these old technology base stations for new ones as soon as possible. Estonia would then be covered by the Internet based on 5G technology," said Põldsamm.

Tele2: one 5G network would be better

As noted above, under the original rules, what would have been shared between three companies may now go to four, meaning not only everyone gets a smaller share, but also, according to Tanel Sarri, that speeds would not be as fast.

"This is related to the maximum speed of the network and also the volume of the network. If there is 20 percent less bandwidth, then there is also 20 percent less speed," Sarri said.

Tele2 has from the outset been against sharing bandwidth in this way because, it says, there would be duplication of services with each company winning a contract constructing its own 5G network. 

Tanel Sarri says one technology-neutral network would be more sensible.

"Things are moving in a completely different direction from what we've tried to direct them towards. Where we've tried to switch from three networks to one to make it more efficient, going from three to four is the diametric opposite. The customer gets less speed, or the same, but for more money," he said.

Toomas Polli of Elisa also said that in terms of cybersecurity, duplication is not a good idea.

Competitors question how realistic Levikom's plans are

Levikom's competitors say that the company's plans may not tally with its financial situation, with a quarterly turnover of €300,000-400,000 and a tax debt of over €200,000, and question whether it really intends to go down that route.

However, Peep Põldsamm said that Levikom's parent company has the money, and the tax debt will be paid off before going to the procurement process, saying that it was the lengthy 5G discussions which were causing the difficulties.

"This two-year period has slowed down Levikom's operations a lot. But if things become clearer now, we will definitely push forward with the move," he said.

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Editor: Andrew Whyte

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