The UK risks being a “laggard” in the race for 4G, with potential legal action threatening to disrupt a spectrum auction that is unlikely to attract new entrants, says PwC analyst Simon Harris.
Regulator Ofcom is due to finalise auction rules later this…
The UK risks being a “laggard” in the race for 4G, with potential legal action threatening to disrupt a spectrum auction that is unlikely to attract new entrants, says PwC analyst Simon Harris.
Regulator Ofcom is due to finalise auction rules later this month for the country’s so-called Digital Dividend spectrum, but legal action from operators has already delayed the process.
“The challenge for the UK regulator is to get the industry to buy in to the process quickly, to allow operators to deploy by early 2014,” said Harris.
“Even then, the UK would lag behind some other markets. If legal challenges continue to disrupt the process as they have done thus far, there is a significant risk of the UK being a laggard in the adoption of mobile 4G services.”
According to Harris, operators can expect to pay up to £1bn for an 800 MHz licence this year, but there is little chance of a new entrant bidding for the spectrum. This is because of the difficulty in penetrating a mature market and the significant start-up network investments that are required.
Also, because the merger between T-Mobile and Orange last year reduced the number of UK mobile operators from five to four, it “would seem unlikely that the auction will be as competitive as the 3G auction in 2000”, a statement from PwC added.
Speaking to TelecomFinance, Alexander Brown, a partner at Simmons & Simmons LLP, said he would be surprised if the upcoming spectrum auction had the same “buzz and fever” as the 3G auction did.
“The telecoms world and the economic climate look very different,” said Brown.
“At the time of the 3G auction, mobile revenues and penetration were growing and it was the time of the dot com boom and fairly heady optimism. Now the mobile operators are facing market and regulatory pressures on their revenue streams, penetration is not going to grow significantly in the UK and the economic climate isn’t particularly cheery.”
However, Ovum analyst Steve Hartley believes there is still a possibility of more novel approaches that could be employed with the right conditions, such as network sharing at the build stage and even spectrum sharing deals.
Hartley told TelecomFinance that, “all in all, the key as we move forward is to think creatively to overcome the barriers that the economics of previous auctions throws up. Ofcom undoubtedly has a key role in enabling this, but so do the potential bidders’ imaginations”.
But, complicating the process further, Ofcom announced plans on Wednesday to enable mobile operators to trade spectrum with each other for the first time. This followed a decision late last year to allow operators to refarm their 2G spectrum for 3G services.
A spokesman for Three, the country’s fourth largest mobile player, warned yesterday: “Refarming of 2G spectrum, originally gifted by the Government, for 3G use without pro-competition measures has created huge competitive distortions in the UK market for mobile data.”
