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Ofcom outlines rules for mobile spectrum auction

UK comms regulator Ofcom has set out plans to release valuable new airwaves to meet the growing demand for mobile broadband.

Next year, Ofcom will auction 190 MHz of spectrum in the 2.3 GHz and 3.4 GHz bands – an increase of just under a third of the total mobile spectrum currently available. This represents more than three-quarters of the 4G airwaves that were released in 2013.

People and business increasingly depend on reliable, high-speed mobile broadband. More than seven in ten adults currently have a smartphone, and the amount of data carried over UK mobile networks is rising exponentially.

Acquiring extra spectrum is one of the ways operators can increase their network capacity, and the frequencies being sold will help meet consumer demand for mobile broadband services.

The 40 MHz of spectrum to be sold in the 2.3 GHz band is already supported by mobile devices, such as the iPhone. These airwaves could be used immediately after release to provide extra capacity, meaning faster downloads and Internet browsing for consumers.

The 150 MHz of spectrum to be sold in the 3.4 GHz band is not currently used by most mobile devices, but is likely to be usable by future devices in coming years. The 3.4GHz band has also been identified as central to the rollout of 5G across Europe.

Spectrum cap

Ofcom proposes to apply a cap, of 255 MHz, on “immediately useable” spectrum that any one operator can buy. As a consequence of this proposed cap, BT/EE would not be able to bid for spectrum in the 2.3 GHz band.

BT/EE currently holds 45 per cent of immediately-useable UK mobile spectrum. Vodafone holds 28 per cent, O2 15 per cent and Three 12 per cent.

Ofcom is concerned that, if these immediately usable holdings were to become more unbalanced, this could harm competition in the next few years.

As a result of the new spectrum in the market after the award, BT/EE’s overall share of immediately-useable spectrum will fall, from 45 per cent to 42 per cent. If BT/EE were to acquire all the 2.3 GHz being awarded, it would have almost half of the immediately usable spectrum in the market.

Ofcom is not proposing a cap on the amount of 3.4 GHz spectrum. This is because the band is not immediately useable, and it believes it is important that operators are given an opportunity to acquire this spectrum so they are able to consider early development of 5G services.

Promoting competition

Operators hold varying amounts of spectrum. But the UK mobile market remains among the most competitive in Europe and has been serving consumers well. For example, UK mobile users report much higher satisfaction with the cost of their service than people in other major countries.

The UK benefits from four national network mobile operators, as well as numerous ‘virtual’ operators who use the networks of the four national mobile operators to compete for retail customers. This competition helps ensure high-quality services, competitive prices, choice and innovation.

Unlike the 4G auction in 2013, Ofcom is not proposing coverage obligations on the winning bidders in this auction. This is because the frequencies being sold are best suited for delivering greater network capacity, not achieving wide geographic coverage.

Philip Marnick, Ofcom Spectrum Group Director, described spectrum as “the essential resource that fuels the UK’s economy,” suggesting that the auction could help ensure that UK consumers can access the mobile data services they need, and that operators can continue to innovate and build for the future.

“The UK has long benefitted from strong mobile competition. We are designing the auction to ensure everyone benefits from a market that continues to innovate and serve them well,” he stated.

Planning for the future

Demand for mobile data services is expected to rise considerably in the coming years. To address this, more spectrum is needed. Ofcom plans to release further spectrum for mobile use.

These airwaves include frequencies in the 700 MHz band, which is currently used by Freeview television and wireless microphones. Another potential source of future mobile spectrum is the 3.6 GHz – 3.8 GHz band. This is currently used by a mix of satellite services and ‘fixed links’, used for high-capacity data transmission.

The closing date for responses to Ofcom’s consultation on the next spectrum auction is January 30th 2017.

According to Kester Mann, Principle Analyst, Operators at CCS Insight,  the proposed restraints placed on BT/EE show that Ofcom is concerned that spectrum asymmetry could harm UK mobile competition over the coming years. “However, they also raise questions as to why the BT/EE merger was waived through with such little fuss, without any apparent need to mandate divestment,” he advised.

“Today’s announcement represents only a partial victory for Three, which campaigned hard for far more favourable conditions. Like O2, its very future as a standalone mobile operator is hugely reliant on a successful outcome at the auction.”

“Expect today’s announcement to be just the start of another round of wrangling and protestation from the UK networks, that could see the award of licences further delayed. Any additional hold-up works against Three and O2, which are most in need of new airwaves.”

“The auction is crucial to UK providers as it will likely represent the last opportunity to buy mobile spectrum for several years. The next major sale, expected to be the prized 700 MHz band, will not happen before 2020 at the very earliest.”

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