Ofcom’s new rules for 5G spectrum auction place caps on operators but Three hints it could take action
Ofcom’s plans to auction off more mobile bandwidth later this year could be thwarted by Three which wants its larger rivals to subject to stricter spectrum caps, risking a similar delay to the 2013 auction of 800MHz and 2.6GHz 4G spectrum.
The communications regulator is to auction 40MHz worth of 2.3GHz airwaves, which can be used right away to support existing 4G services, and 150MHz of 3.4GHz of bandwidth that is earmarked for 5G in 2020.
Proposals published today would see any single operator limited to 255MHz of ‘immediately usable’ spectrum (that is 800MHz, 900MHz, 1400MHz, 1800MHz, 2100MHz and 2.6GHz) and 340MHZ of all airwaves available in the UK – an overall cap of 37 percent.
Ofcom spectrum auction
As of July 2017, BT has 255MHz so is banned from bidding in the 2.3GHz auction but could gain as much as 85MHz of the 3.4GHz band. Vodafone has 176MHz so is limited to 85MHz of each, while Three and O2 have no restrictions.
When plans were first announced in October 2015, they included no cap, and later it was announced BT and EE would not be allowed to participate in the 2.3GHz sale. However the auction was delayed by the proposed merger between O2 and Three, which failed last year.
Ofcom said recent developments, such as Three’s takeover of UK Broadband, operator of the Relish fixed wireless broadband service, and Qualcomm’s sale of 1400MHz airwaves to both Three and Vodafone, had influenced its proposed rules which are designed to promote competition.
However Three had campaigned for a cap of 30 percent in its ‘Make The Air Fair’ campaign. At present, it has 90MHz of ‘usable’ spectrum, as well as 40MHz of 3.4GHz which it acquired from UK Broadband. It has voiced its displeasure at the proposals.
“Ofcom’s proposal is a kick in the teeth for all consumers and in particular for the near-200,000 people who signed up to the ‘Make the Air Fair’ campaign,” Three CEO Dave Dyson declared.
“By making decisions that increase the dominance of the largest operators, Ofcom is damaging competition, restricting choice and pushing prices up for the very consumers that it is meant to protect.
“The mobile market is imbalanced and failing customers. Ofcom has shown little interest in tackling the problem. We will consider our response as a matter of urgency.”
Observers say the proposals were never going to please anyone, but a protracted saga like the 4G auction must be avoided if operators are to meet growing demand for mobile services. A failure could harm British businesses and the economy.
“Three’s immediate response represented a stinging attack on the regulator following months of campaigning for more favourable conditions,” said Kester Mann, an analyst at CCS Insight.“
Spectrum is vital to it turning around its precarious position in the UK and re-energising a disruptive strategy. However, it now needs to push ahead with a bold strategy for the auction and invest strongly to counter criticism from rivals that say it has shied away from previous opportunities.
“The sale is every bit as vital for O2, which has a similar spectrum holding as Three, but more than twice as many customers. It also desperately needs a positive outcome at the auction, but today’s announcement at least offers some clarity to parent Telefonica, as it seeks an IPO of the UK business later in the year.”
“The response to the rules from the industry has been mixed, but it’s clear that Three feels the most aggrieved, and in the past have suggested that legal action would be the only course open to them if Ofcom didn’t come round to their way of thinking,” agreed independent telecoms analyst Matthew Howett.