Ofcom Sets Limits For 2012’s 4G Auction

Strict limits in the 4G auction next year will ensure the survival of four competing operators, says Ofcom

The UK telecoms regulator, Ofcom, has announced the long-awaited auction of licences for “4G” mobile spectrum, setting strict limits to how much any operator can buy.

The regulator has set itself the goals of increasing mobile broadband coverage, and maintaining competition, despite operators’ fears that the auction could squeeze out smaller players. The auction of spectrum around 800MHz and 2.6GHz will take place in the first quarter of 2012, according to an Ofcom release.

Spectrum floors and caps protect competition

The auction has been delayed for four years by legal challenges, and mobile operator 3UK has complained that it may be put out of business if it cannot secure enough bandwidth. The loss of 3UK would leave the UK with only three  competing mob ile operators – a situation which will prevail in the US, if T-Mobile’s proposed merger with AT&T goes through.

Ofcom has apparently taken this on board, explicitly designing the auction to preserve four competing mobile wholesale operators, by setting maximum and minimum limits to the amount of spectrum which can be bought by any one player.

“Ofcom considers that there are risks to future competition if bidders are free to acquire any amount of spectrum in an open auction,” says the announcement.

Ofcom has set out minimum amounts of spectrum, or “floors” which will ensure every player gets enough spectrum to compete. There are four minimum combination, combining some 800MHz spectrum and some at 2.6GHz.

To guard against longer term risks, Ofcom is settng “caps”, or maximum amounts of spectrum, to prevent the emergence of any dominant player in this spectrum. No operator can have more than 2×27.5MHz of the 800MHz spectrum band, and none can have more than 2x105MHz of the 2.6GHz band.

Re-farming clears the way

While the UK has delayed its auction, other European countries have settled the issue, and will turn on networks using the LTE standard for 4G before the UK does.

The main reason for the delay was legal action by O2 and T-mobile which forced Ofcom to settle the issue of “re-farming” first – opening the UK’s 2G spectrum to 3G services. the first operator to benefit from this has been O2, which launched 3G services on its existing 2G spectrum last week.

Despite warnings by 3UK about the auction and the re-farming, Ofcom has maintained that the 4G auction will be fair

“The auction is not only critical to the future of the UK mobile telecommunications market but it is also of significant importance to the wider economy,” said Ofcom chief executive, Ed Richards (pictured). “It will support a wide range of data services that are fast becoming essential features of the modern world.”

In order to get the best use of the spectrum for UK citizens, he said “we are proposing to design the auction in a way that not only encourages investment but also promotes competition and delivers wide coverage of services.”