The bidding process for awarding mobile phone spectrum licenses was kicked off by Germany's telecom regulator, the Bundesnetzagentur, on Wednesday. The German government hopes in coming weeks to raise billions of euros as it sells off the frequencies to the country's three big mobile service providers, Deutsche Telekom, Telefonica Deutschland and Vodafone.

It has pledged to use the money to build up the network of fast broadband Internet connections, which Chancellor Angela Merkel has pledged to extend nationwide by 2018.

But analysts expect the auction to raise only a maximum of 4 billion euros ($4.4 billion), a far cry from the 50.8 billion euros the government raised in the auction in 2000 for new 3G network licences, when there were six groups bidding.

First in Europe

Nevertheless, the auction gives the network operators the chance to be the first in Europe to operate spectrum in the low-frequency 700 megahertz (MHz) band that was used to carry the analogue signals of regional television stations before the switchover to digital transmission.

Signals at the 700 MHz-band frequencies have the benefit of traveling further, and penetrating buildings more deeply, than the higher frequencies now being used by German mobile network operators.

Meanwhile, the German government has earmarked the proceeds of the auction for fostering the development of a fast fixed-line broadband network, which Transport and Digital Infrastructure Minister Alexander Dobrindt has said will be one of his top priorities in the coming years.

However, a small return from the auction will limit the German government's scope to steer investment in the country's broadband network, which was one of Europe's fastest before the costly 3G auction in 2000 left the mobile operators saddled with debt and disinclined to invest in more infrastructure.

Lagging behind

As a result cable companies such as Liberty Global's Unitymedia and Vodafone's Kabel Deutschland have been snapping up subscribers wanting faster Internet speeds.

Less than a fifth of German households had a broadband connection faster than 10 megabits per second (Mbit/s) as recently as last year, a study published by the United Nations' International Telecommunication Union (ITU) on Tuesday showed, trailing countries such as Hungary, Portugal and Spain.

The spectrum auction, expected to run for some weeks, takes place in the premises of the German telecoms supervisor, where bidders are escorted to secure rooms and communicate via encrypted messages with their head offices, whose staff are also locked away without access to phones or computers.

The process aims to minimize the risk of collusion between the big three German telecom network providers.

sri/hg (AFP, Reuters)