The issuance of frequency permits for the establishment of 5G networks is required by EU law, and by Dec. 31, 2020, EU member states must allow the use of frequency area 3,400-3,800 megahertz (MHz) for aboveground systems with which it is possible to provide the electronic communications services of 5G wireless broadband.

While the minister of entrepreneurship and information technology's January draft regulation saw two alternatives when it comes to competition — an option with four frequency permits, and an option with three frequency permits — the adopted regulation restricted the number of frequency permits to be issued to three, and each frequency permit was assigned a range of 130 MHz.

On Feb. 19, the Consumer Protection and Technical Regulatory Authority (TTJA) announced a public competition for the issuance of frequency permits, setting the deadline for participation at March 25.

On Feb. 21, Levikom Eesti OÜ challenged the notice of competition in court, and on the basis of preliminary legal protection, the court forbade the execution of the competition in the frequency range of 3,410-3,800 MHz until the entry into force of a solution concluding the proceedings of the case.

With Friday's ruling, Tallinn Administrative Court dismissed Levikom's complaint, finding that the Ministry of Economic Affairs and Communications had not violated the rules of discretion when issuing the regulation serving as the basis for the notice of competition and that the regulation was lawful.

The court first decided whether Levikom had any right of appeal at all. The right of appeal arises first and foremost when a company is able and likely to participate and qualify in a competition by assessing its financial capacity, among other things.

Levikom papers not in order

The court noted that at the time of the court ruling, Levikom had tax arrears and had not submitted its annual reports for the 2017 and 2018 fiscal years. According to data available from the 2016 annual report, the company's net assets did not meet the requirements of the Commercial Code.

Pursuant to the regulation, a participant's net assets must comply with the requirements of the Commercial Code, and the participant must not have any tax arrears. According to the regulation, a participant will not be deemed qualified if it does not meet the requirements laid out in the terms and conditions of the competition.

Levikom's 2017 and 2018 annual reports are not known to have been audited, and the court thus has no certainty that Levikom is able to eliminate its disqualifying tax arrears and pay the acquisition fee, the starting price of which is €1.6 million.

According to the court, Levikom qualifying in the competition and acquiring the fourth frequency permit is unlikely. Thus, the court found that Levikom has no right of appeal in the case in question, which is also what serves as the basis for dismissing the company's appeal.

Despite Levikom's lack of right to appeal, the court's assessment of the right of appeal is still an estimation. Considering that the court has accepted the appeal for handling and parties to the proceedings have also presented substantive positions regarding the object of the dispute, for the purpose of clarity, the court substantively analyzed the positions of the appellant regarding the regulation and the legality of the competition announcement.

190 MHz available for unrestricted use

The main issue was whether the issuance of three frequency permits instead of four breaches entrepreneurial freedom and whether or not this is lawful. The Ministry of Economic Affairs and Communications has explained that the decision was made in favor of three frequency permits in the frequency area regulated with the regulation as the wish is to give the frequency ranges to businesses that can develop a fully functioning 5G communications network via which it would be possible to provide all 5G services, including future services, which may also need a greater frequency range than 100 MHz.

According to the administrative court, the issuance of four frequency permits would violate the appellant's entrepreneurial freedom less than the issuance of three permits. The court said, however, that in the 400 MHz range to be assigned, 190 MHz will be in unrestricted use in Estonia, as 10 MHz has been reserved for the Estonian Defence Forces (EDF), and Russian radio communications cannot be disturbed in the extent of 200 MHz as they have the right of primary use of it due to the lack of a coordination agreement with Estonia.

Thus, considering Estonia's peculiarity, the decision in favor of three frequency permits can be considered a reasonable middle ground between business-owners, consumers and the context of public interest in a broader sense in order to ensure as good quality of service as possible, the court noted.

Tallinn Administrative Court added that although Levikom is not entirely part of the market sphere that the competition organized with the regulation has been aimed toward, which is the establishment of full functionality 5G communications networks through which future services, too, could be provided, in potential future competitions, the TTJA and the ministry should seriously consider also directing focus on the kinds of companies that may be interested in and capable of establishing independent networks for the use of a smaller 5G service spectrum.

The administrative court's ruling may be contested through Oct. 21.

Competition Authority: Don't divide it up

This July, the Estonian Competition Authority said that in auctioning off 5G frequency permits, the government should not divide the spectrum into three or four segments, but rather put smaller blocks of the frequency band up for auction instead.

"Frequency authorizations for 5-10 MHz at a time have been issued this way in other EU member states," the authority said at the time. "A solution like this would not only enliven competition among the three big mobile communications operators, but also offer an opportunity for actors with a new business model to develop a 5G network in Estonia. The expected area of application of 5G is significantly broader and more diverse than simply increasing data communication speeds."

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