Germany has given the green light to a digital radio spectrum auction set for 2010. The sale of the frequencies is expected to generate up to 5 billion euros, but EU regulators say the bidding terms are anti-competitive.
Mobile phone users need more bandwidth to download content from the Internet
Germany's largest bandwidth auction in 10 years is expected to generate up to 5 billion euros (US$7.4 billion). It will focus on licenses for spectrum made available due to the switch from analogue to digital terrestrial television - also known as the digital dividend.
At a press conference in Bonn on Tuesday, the head of Germany's Federal Network Agency, Matthias Kurth, maintained that the terms of the auction are fair and lawful.
"We can handle complaints," Kurth said. "We are confident that our decision has been made with care and in compliance with regulation."
The "digital dividend" will allow more people access to the Internet in Germany
Mobile phone operators will be scrambling to buy up frequencies that allow for the transfer of high volumes of data, as customers are increasingly using their phones to surf the Internet and download music and videos.
The frequencies up for auction can also carry mobile broadband over long distances, making them attractive to operators that want to expand coverage in rural and remote areas.
The digital frequency auction is part of a government plan to allow all households in Germany to access high speed internet connections rated at one megabit per second or more by the end of 2010.
However, the European Commission and small operators argue that the terms of the digital frequency auction could give larger companies an unfair advantage.
At a press conference in Brussels on Tuesday, European Commissioner Viviane Reding said she was "deeply concerned" about Germany's decision.
Reding called the digital dividend a "once-in-a-lifetime opportunity" that will "open up new growth opportunities, enhance consumer benefits and ensure Internet broadband coverage for all citizens - if it is allocated in a pro-competitive manner."
Under the terms of the auction, there is only room for three mobile phone operators to acquire spectrum that can transfer high volumes of data. Smaller operators such as KPN's German unit E-Plus and Telefonica's O2 are calling on the regulator to limit bidding rights for large players, so as to ensure that they also have a chance of acquiring important frequencies.
O2 Germany said last week it may consider legal measures if the auction goes ahead as planned.
Editor: Sam Edmonds