Ofcom's revised proposals for the auction of 800MHz and 2.6GHz spectrum in the UK have been cautiously welcomed stakeholders.
Ofcom’s insistence on preserving at least four mobile operators in the UK will have pleased Three UK, as its lack of spectrum compared with its rivals has put it at a disadvantage.
Matthew Howett, analyst at Ovum commented: ‘From this, Ofcom’s second consultation, it’s clear that Ofcom continues to value Three’s disruptive nature and wants to in effect guarantee its existence post-auction. However, it considers that Everything Everywhere has sufficient spectrum available not to be protected in the same way. Most importantly, Ofcom has recognised the attractiveness of the 1800MHz band in that it offers a nice balance between coverage and capacity.
‘It should be stressed that things could yet change if Everything Everywhere divest the 1800MHz (as required as part of the merger conditions from Europe) before the auction. If this spectrum is auctioned before the joint award of 800MHz and 2.6GHz it could remove the need for any spectrum reservation. This is not insignificant given the growing interest in launching LTE at 1800MHz,’ Howett pointed out.
David Dyson, CEO, Three UK, said: ‘Today’s proposals appear to be a pragmatic step towards bolstering the prospects of a competitive market for mobile data which would benefit all UK consumers. The decisions made by Ofcom as a result of this consultation will determine how much consumers can look forward to more choice and innovation in the mobile data revolution. We urge Ofcom and the Government to maintain momentum now and to ensure the auction is delivered in 2012 as planned.’
Both Vodafone and O2 lobbied hard for the removal of any caps or floors on 4G spectrum holdings and have argued that reserving spectrum for any bidder amounts to illegal state aid. They have succeeded partially in removing any minimum spectrum reservation for Everything Everywhere, but have failed so far with Three UK.
An Everything Everywhere spokesperson said: 'Everything Everywhere is very disappointed to see that Ofcom has again reversed its proposal to ensure all mobile operators hold a minimum amount of sub 1GHz spectrum. Ofcom is missing a huge opportunity for the UK to address the imbalance in sub-1GHz spectrum holdings, which has damaged consumer interests for the last 20 years – and is a situation which is now threatening to continue.
'The importance of sub-1GHz spectrum, which delivers service and cost benefits, has been recognised by other regulators across Europe and supported by economic analysis. All of the regulators bar Ofcom have made vigorous efforts to support healthy and sustainable competition by ensuring that the imbalance of sub-1GHz holdings is redressed.'
A Vodafone UK spokesperson said: ‘Ofcom has produced a lengthy document and we need to understand the regulator’s rationale for protecting a fourth operator, but it has made significant steps towards bringing 4G services to this country.
‘We welcome Ofcom’s revised proposals, which bring the UK closer to a fair and open auction that will benefit the wider economy, increase competition and ultimately lead to the creation of innovative and exciting new services for consumers.’
The Vodafone spokesperson added: ‘We share the regulator’s desire to see mobile internet services placed within the reach of many more people in rural areas and have already shown our commitment to improving coverage through the use of innovative technology.
Commenting on the revised proposals for extending broadband coverage to 98% of the population, Brian Potterill, director in PwC's telecoms strategy team, said: ‘Ofcom also proposes to have a coverage obligation with one of the licences equivalent to providing 2Mbps indoor coverage to 98% of the population; up from 95% in earlier proposals set out last year. This additional 3% is important, as it is to these households that it is proving particularly difficult and expensive to reach with the super fast broadband that is now widely being deployed in cities.
‘This increase in coverage obligation is, in part, due to the Government's recent decision to invest £150m to improve mobile coverage in rural areas. Ofcom proposes to link the award of this £150m funding to the award of the licence with the coverage obligation. This should provide a welcome boost to rural broadband, and is a pragmatic response to this important challenge,’ said Potterill.
Ovum’s Howett concluded: ‘Ofcom has essentially been stuck between a rock and a hard place. It wants to award these frequencies as quickly as possible to the benefit of consumers, but also wants to ensure that they do so in a competitive way. The decisions they take now are likely to affect the level of competition in the sector for at least a decade.
‘Striking a balance was never going to be easy. The set of proposals now on the table appear to leave everyone with something to be optimistic about, but at the same time requires compromises to be made. Perhaps Ofcom have got it right?’