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UK 4G Spectrum Auction - Ofcom's second consultation and revised proposals

17 January 2012

Ofcom recently published its second and final consultation on the upcoming award of 800 MHz and 2.6 GHz spectrum intended for 4G services in the UK.

UK 4G Spectrum Auction - Ofcom's second consultation and revised proposals

By Gerry Oberst in Brussels and Daniel Smith in London

Ofcom recently published its second and final consultation on the upcoming award of 800 MHz and 2.6 GHz spectrum intended for 4G services in the UK. The spectrum will be made available in 2013 largely as a result of the switchover from analogue to digital TV. The award will be the largest to date and the new spectrum, equivalent to three quarters of the total spectrum in use today, will allow mobile network operators to provide new and faster mobile services to consumers.

Ofcom has made various changes to the initial proposals it made in March 2011 (on which, see our article here and update here) in the hope of boosting competition and coverage. The regulator believes that consumers will receive better services at lower prices if, as at present, there are at least four national operators each with sufficient spectrum to provide credible high speed mobile broadband services.

Ofcom has continued in its proposal to reserve a minimum amount of spectrum for a fourth national operator (being an operator other than Everything Everywhere, O2 and Vodafone) which, assuming there are no new market entrants, will be H3G. However, Ofcom now believes that this minimum spectrum need not necessarily be in the sub-1 GHz range. Placing a limit on the amount of spectrum each operator will be allowed to acquire still forms part of Ofcom's proposals.

In its March consultation Ofcom proposed that operator(s) should be obliged to provide indoor reception to 95% of the UK population as part of the terms of the spectrum licences. In light of the responses to that consultation, and the availability of £150m of public funds as part of the government's "mobile infrastructure programme" (MIP), Ofcom has produced two revised proposals. The first of these is to simply increase the minimum coverage obligation to 98% of the UK population. In the second, however, Ofcom's new preferred approach is for operators to be obliged to provide 4G services both wherever 2G services are currently provided and wherever new infrastructure installed as part of the MIP allows. Ofcom hopes this latter approach will ensure that 4G services are provided where they are most valuable and not just in order to meet population coverage obligations. These obligations are likely to be included in only one of the 800 MHz licences awarded during the auction.

The UK has fallen behind some other countries (notably the U.S. and Germany) when it comes to its award of 4G spectrum. It has therefore been important for Ofcom to try to avoid further delays which might arise if an operator decides to mount a legal challenge against the proposed auction process. These revised proposals are an attempt by Ofcom to find a middle ground which is sufficiently attractive to each operator.

Three of the four major mobile network operators have signalled their initial approval of Ofcom's revised proposals. However, Everything Everywhere has expressed concerns over Ofcom's decision to withdraw the guaranteed award of sub-1 GHz spectrum to it. Ofcom has indicated that Everything Everywhere has sufficient spectrum in the 1.8 GHz frequency band to provide credible 4G services and that a guaranteed award of spectrum would not therefore be appropriate. Lower (sub-1 GHz) frequency spectrum is considered more valuable as a result of its ability to serve larger areas, thereby reducing the number of transmitters required and increasing mobile coverage.

The full consultation paper can be found here. Stakeholders have until 22 March 2012 to respond to the consultation. Ofcom intends to make a final decision on the auction design in the summer of 2012 with the auctions themselves taking place towards the end of 2012.

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