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Ofcom pushes ahead with 2.3/3.4GHz spectrum award despite industry concerns


Ofcom has finalised how the 2.3 and 3.4 GHz spectrum will be awarded and in doing so has decided on two different restrictions on bidders. The auction timetable expects bidding to begin as early as late October 2017, but given the strongly held positions by some in the industry, that looks ambitious. Yet an impasse reminiscent of what happened in 2011 with the 4G award would be in the interests of no one.

Two different restrictions to safeguard competition

While the rules are a tightening of what was initially proposed (at one point there were no caps at all), they reflect what was in the most recent consultation. Ofcom has moved to appease Three and O2 who were most concerned about the effects on competition. O2 had asked for a 35% overall cap, while Three campaigned for 30%.

  1. A cap of 255MHz on immediately useable spectrum that any one operator can hold as a result of the auction. This cap means BT/EE will not be able to bid for spectrum in the 2.3GHz band.
  2. A new, additional cap of 340MHz on the overall amount of mobile spectrum a single operator can hold as a result of the auction. This cap amounts to 37% of all the mobile spectrum expected to be useable in 2020, which includes not only the spectrum available in this auction but also the 700MHz band.

In some respects Three complicated things by acquiring UK Broadband’s spectrum (which includes 3.4GHz) as an insurance policy. Ofcom had been clear that any transactions like that would affect their view on competitive dynamics. It is highly questionable though whether Ofcom would have moved the cap down to 30% in lieu of Three not acquiring that spectrum.

An impasse similar to what happened with the 4G rules must be avoided  

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. It’s too early to say whether they will follow through with that threat, but Ofcom will need to seek to avoid any deadlock akin to what happened with the 4G award back in 2011.

“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. 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.”
— Three UK
“The announcement from Ofcom falls short of our expectations but it is important we now press ahead with the auction quickly so that the spectrum can be obtained by operators that will deploy it for the benefit of consumers, businesses and ultimately UK plc.”
— O2
“...while we don’t agree spectrum caps were necessary for this auction, releasing this spectrum is vital for the UK to lead the way in 5G”
— EE
“We welcome Ofcom’s announcement to kick off the auctions this year. However, we also need to see Ofcom and the UK Government support a pro-investment approach to infrastructure investment more broadly to ensure networks can be built out quickly and efficiently.”
— Vodafone
© 2017 Matthew Howett. Anyone is free to republish and/or quote this content without prior consent. Please attribute the relevant author as the source.