UK regulator Ofcom has proposed new bidding conditions for the 800MHz band in the 4G auction it expects to launch in Q4 2012.
The new proposals include ensuring one of the 800MHz licences up for sale will oblige the holder to cover 98% of the UK’s…
UK regulator Ofcom has proposed new bidding conditions for the 800MHz band in the 4G auction it expects to launch in Q4 2012.
The new proposals include ensuring one of the 800MHz licences up for sale will oblige the holder to cover 98% of the UK’s population with 4G, up from a previously planned 95% commitment, or cover so called ‘not spot’ areas with the help of a £150m government injection.
Despite there currently being four mobile operators in the country, it appears Ofcom is also effectively reducing the number of potential bidders for 800MHz spectrum to three, through limiting the amount of frequencies each operator can acquire. It will, however, reserve spectrum elsewhere for a small fourth operator such as Three, or a new entrant, in a process that will exclude larger spectrum incumbents Everything Everywhere, Vodafone and O2.
Earlier proposals had suggested Everything Everywhere, which is being forced to give up 25% of its 2G spectrum this year, would have also received some reserved spectrum.
Ovum analyst Matthew Howett said the new proposals show “Ofcom continues to value Three’s disruptive nature and wants to in effect guarantee its existence post-auction, however considers that Everything Everywhere has sufficient spectrum available not to be protected in the same way”.
Howett added: “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?”
Analysts at Bernstein Research were less optimistic.
“We think the consultation will marginalise Three and leave most of the best spectrum in the hands of the three largest operators,” the firm said in a note published shortly after Ofcom’s announcement.
The note added the consultation made it likely that there will be a final result “in which the more desirable 800MHz spectrum is shared equally by the three largest operators … We view this development as a positive for Vodafone, [O2 owner] Telefonica, [Everything Everywhere’s JV owners] DT and FT for whom the UK represents respectively 11%, 9%, 5% and 5% of FCF, as it would further increase the network quality gap held over Three, who now may well end up without any sub-1GHz spectrum”.
Ofcom expects to make a final decision on the auction rules from its second consultation, which was launched on 12 January 2012, this summer.
