The UK telecoms regulator Ofcom today (24 July 2012) announced the final plans for the auction of 800MHz and 2.6GHz spectrum for mobile use in the UK. The decision broadly confirms the proposals set out in January 2012.
Contrary to some reports this morning, Ofcom CEO Ed Richards insisted there was no delay to the timetable it has set out previously. Applications to take part will be submitted at the end of this year and the auction is set to begin in the first quarter of 2013. Ofcom expects the auction to be complete in March 2013 with consumers expected to be using the services later that year.
‘There is categorically no delay,’ said Richards. ‘It is absolutely what we have set out many times before. The spectrum isn’t available until June 2013, as it will not be cleared of existing users until then anyway. We also have to solve potential interference issues between the 2.6GHz band and the radar band it sits next to.’
Ofcom has stuck to its guns and reserved spectrum for a fourth national wholesaler besides the big three operators: Everything Everywhere, Vodafone and O2 Telefonica. ‘We want four credible national wholesalers,’ said Richards. ‘We believe the UK has some of the best prices, choice and innovation across Europe and a significant amount of that is due to the level of competition we have here.’
The regulator has also kept the safeguard caps on the amount of total spectrum and sub-1GHz spectrum any one operator can hold – something both O2 and Vodafone have argued against. ‘The caps will make sure that the auction does not create a huge asymmetric holding, so one operator is dominant,’ said Richards. The caps are 2x105MHz in total and a sub 1-GHz spectrum cap of 2x27.5MHz.
Today’s decision is also designed to safeguard what Ofcom calls the ‘near-universal population coverage for mobile broadband’. One 800MHz licence holder is required to provide at least 98% indoor coverage of the UK’s population, which implies 99.5% outdoor coverage. The licensee must also offer indoor coverage of at least 95% of the population of each of the UK nations. The 98% coverage must be achieved by the end of 2017.
The licensee must provide a minimum Bit rate and it cannot just use femtocells to provide the indoor coverage, which is tethering – it must be a proper 4G network.
Richards said he expected that the arrangement would persuade the other operators to match the licensee’s near-universal coverage. Each of the four networks would have to provide coverage on its own spectrum, but Richards said infrastructure sharing is an option. MVNOs might also want to provide coverage thereby providing greater competition at a retail level.
There are two main changes to the January proposals. The first is that Ofcom will not reserve spectrum for low-power radio access networks. ‘We asked for evidence to make the case, but it was not clear enough. We were not persuaded that the benefits will outweigh the costs,’ said Richards.
That means that operators, such as potentially BT and Virgin, which might have been interested in this option, will now have to bid for 2.6GHz spectrum along with everyone else if they want to offer low-power radio services.
The other change is that modifications have been made to the spectrum portfolios reserved for the fourth wholesaler, which are now as follows:
Portfolio 800MHz 1800MHz 2.6GHz
2 2x10MHz 2x10MHz
3 2x5MHz 2x15MHz
4 2x15MHz 2x20MHz
In the third option the amount of 800MHz has been cut from 2x10MHz to 2x5MHz and in the fourth option the 2.6GHz has been increased from 2x10MHz to 2x20MHz.
The auction is complicated by the fact that Everything Everywhere has to divest itself of 2x15MHz of its 1800MHz holding (as part of EU approval for the merger between Orange UK and T-Mobile UK).
The above portfolios are predicated on the spectrum not being sold before the auction – in which case it is thrown into the auction for anyone to bid for. If it is sold before the auction, then the portfolios may be changed depending on who buys it.Richards pointed out that EE’s request to liberalise some of its 1800MHz spectrum to provide 4G services was an entirely separate issue.
Ofcom is looking at responses from the industry (other mobile operators have objected strongly at EE being given a headstart in 4G). He refused to say when Ofcom will rule on the matter, but an answer is ‘weeks or months away, but certainly before the end of the year’.
The auction has been long drawn out process in the UK partly because of the complications in clearing the spectrum of its existing users and partly by what Richards described as ‘the constant backdrop of the threat of litigation’ hanging over the process.
Richards placed the blame squarely on the UK mobile operators for delaying the process due to threats of legal action. He did not expect that Ofcom’s final decisions on the auction announced today would please everyone either.
He said: ‘It is a racing certainty that there will be objections. But it has been impossible to produce an answer that will satisfy all parties. It is an absolute certainty there will be disagreement.’ Interested parties have three months to object. Would litigation delay the process? ‘Of course,’ said Richards.
He added that Ofcom is quite prepared to fight its corner if litigation does happen, but he said he hoped it would not come to that. ‘We have made a very carefully considered judgement, which is absolutely independent and rigorous. There comes a point where everyone has to say the analysis has been reasonable, open and independent.’