Regulator Ofcom has proposed a series of bidding floors and caps for next year’s 4G auction as part of efforts to ensure a minimum four-player wholesale market.
Speaking to journalists in London on 22 March, Ofcom CEO Ed Richards said the proposed 800…
Regulator Ofcom has proposed a series of bidding floors and caps for next year’s 4G auction as part of efforts to ensure a minimum four-player wholesale market.
Speaking to journalists in London on 22 March, Ofcom CEO Ed Richards said the proposed 800 MHz and 2.6 GHz auction rules were designed to keep competition in the market, rather than focusing on maximum revenues for the Treasury.
“We are concerned about whether we move to a position of having fewer than four national wholesale competitors,” said Richards.
The rules, which are open to consultation until 31 May, state that at least four parties (Everything Everywhere, Vodafone, O2 and 3) must each hold sufficient spectrum to be credible national wholesalers. Rather than re-auctioning the frequencies if these conditions are not met, Ofcom will instead examine previous bids to determine how to allocate the spectrum.
Safeguard caps will also be imposed on sub 1 GHz and overall spectrum holdings to ensure no one operator holds too much spectrum.
In addition, the regulator intends to impose one 800 MHz licence with a coverage obligation, requiring the holder to guarantee mobile broadband for 95% of the UK population by the end of 2017.
Ofcom is also consulting on the option of reserving some 2.6 GHz spectrum for sub-national network operators to be used on a shared low-power basis.
Richards described the auction, which will offer 80% more frequencies than those released in 2000’s 3G auction, as the “most significant event ever” in the history of spectrum management.
He dismissed suggestions from some journalists that the UK was a laggard in the race for 4G, behind countries such as Germany and Sweden, insisting it was not “behind the pack”.
However, Richards acknowledged that the auction process has so far been bogged down by a series of disruptions, including the threat of legal action from mobile operators.
Although it was natural for the auction to be “fiercely contested”, he encouraged operators to keep this debate from spilling over into litigation to avoid further delays.
He warned that if there were delays to the auction process then “there is only one loser, and the loser is the British consumer”.
Win-win for 3
Kevin Russell, CEO of 3, welcomed the proposed rules, which he said would help address a distortion in competition created following this year’s refarming of 2G spectrum for 3G services.
“Ofcom’s proposals set out the core principle that the UK must retain four wholesale mobile operators,” said Russell.
“Against a background of consolidation in the UK and US, this is a clear and strong commitment from Ofcom and the UK government that will stimulate investment in mobile broadband and protect UK consumers.” Russell had earlier warned that the decision to refarm 2G frequencies “exacerbates” competition issues surrounding the country’s next 4G auction, and the group threatened to leave the UK.
In more good news for 3, its latest financial results reveal the group has made its first operating profit after almost a decade of losses. According to figures posted by its parent, Chinese conglomerate Hutchison Whampoa, 3 achieved earnings before interest and taxes of HK$2.9bn (£232m) for 2010, compared with a loss of HK$8.9bn (£712m) in 2009. Total revenue reached £1.4bn, driven by a 23% gain in customer numbers (pre-paid up 51%, post-paid up 7%).
Reaction from the big 3
Tom Alexander, CEO of leading operator Everything Everywhere, welcomed the proposals in principle, but added that his group was looking forward to further details from Ofcom.
“We hope that, through consultation Ofcom may look to address a number of issues, including the overall spectrum cap, which is currently set at a level which ignores the different characteristics of low and high frequency spectrum and differing numbers of customers, meaning that it may constrain the normal development of the market,” said Alexander.
“In addition we are concerned that the proposals for the allocation of sub 1 GHz spectrum do not significantly reduce the dominance of the incumbent holders of this spectrum.” Ronan Dunne, CEO of mobile operator O2, said his group was still assessing Ofcom’s “detailed proposals”, but offered initial welcome for “the opportunity to bid for sufficient spectrum to operate LTE services in the 800MHz and 2600MHz bands”.
He continued: “I am glad that Ofcom has responded to my call for industry to explore innovative solutions, including sharing, in order to achieve a balanced outcome from this process.
Echoing Dunne’s sentiment, a spokeswoman for mobile operator Vodafone agreed it would take “some time” to consider Ofcom’s “complex” proposals to judge its response to the consultation.
z Proceeds raised from the auction should be used to support plans for a national high-speed broadband network, argues the Communication Workers Union (CWU).
CWU deputy general secretary Andy Kerr believes the current £830m committed by the government until 2017 is insufficient to deliver universal superfast broadband to remote areas. The union expects the 4G auction could fetch up to £4bn, although reports have suggested that £2bn is a more viable figure because of restrictions on spectrum allocations.
