Fears of 5G Auction Delay as Vodafone UK Ponders Legal Challenge

Mobile operator Vodafone has warned that it would consider a legal challenge against Ofcom’s forthcoming auction of the 5G friendly radio spectrum bands at 700MHz and 3.6GHz – 3.8GH, unless the regulator changes their proposed strategy of auctioning these as part of a bundled package.

Ofcom are currently preparing to award 200MHz of spectrum frequency to UK mobile network operators (i.e. 80MHz in the 700MHz band and 120MHz in the 3.6-3.8 GHz band) and they hope to complete this by Spring 2020 (here). The purpose, they claim, for auctioning off both bands at the same time is so that the winners can “bring the spectrum into use as soon as possible.”

Sadly auctions of new mobile spectrum have become increasingly synonymous with legal challenges, which have an ugly tendency of causing significant delays to the roll-out of faster Mobile Broadband services and related coverage targets. The recent 4G/5G auction (2.3GHz and 3.4GHz) suffered various delays as operators argued over spectrum caps, while different gripes stalled the 800MHz and 2.6GHz bands before that.

Unfortunately Vodafone have now signalled that they too might be prepared to hinder the latest auction. The operator is concerned that Ofcom’s decision to auction off two very different bands at the same time could inflate spectrum valuations by indirectly forcing operators to bid for licenses they do not need (i.e. it makes valuing spectrum a harder task for auction participants).

The 700MHz band travels further and so is ideal for helping to improve rural coverage via 5G (indeed it includes a coverage obligation), while the higher frequencies in the 3.6-3.8GHz band don’t travel as far but could be combined with other bands in urban areas to help deliver ultrafast multi-Gigabit fixed wireless broadband or mobile broadband speeds at low latencies.

Scott Petty, Vodafone UK’s CTO, said (Lightreading):

“Putting [these bands] together in unusual combinations creates a very difficult situation where your valuation is hard to work out and you end up buying things you don’t need because part of the bundle is something you do need. We could end up with a very fragmented spectrum situation depending on how the bundles are put together.

It would be disappointing if a falling out over the spectrum auction stalls leadership and we stop deploying for a year and lose that leadership position. … Do I want to spend money litigating? No, because it is a waste of money. If we have to, we might.”

On top of that Vodafone are worried about a so-called “two tier” outcome, where one or two operators end up dominating specific bands and others miss out. Mind you this is hardly a new scenario for mobile operators and much depends on their appetite during the bidding (nature of the auction). For example, O2 is the only operator to own a 40MHz slice of the 2.3GHz band and Three UK is the only one to currently own a huge chunk of the 3.6-3.8GHz band (see below).

A Spokesperson for Ofcom told ISPreview.co.uk:

“A combined auction could allow winning bidders to bring these airwaves into use as soon as possible, so that people and businesses can benefit quickly from better services. We’ve gathered a range of views on our plans, and we’ll set out our decisions later this year.”

Previous legal challenges have already caused the Government to toughed up Ofcom’s ability to fight them off (i.e. requiring operators to prove they’re challenging the substance of the regulator’s decision instead of its technicalities) and to introduce an updated appeals system. The changes have made it possible to resolve such situations in a shorter space of time, although they do not completely remove the possibility of significant delays.

Meanwhile other mobile operators, such as Three UK, are known to have concerns about the currently proposed coverage obligations on the 700MHz band and the possibility of future obligations for other bands. However any operator choosing to rail against the new obligation risks looking like a pariah to consumers, many of which have grown tired of the UK’s flaky mobile connectivity outside of busy towns and cities.

All of this puts Ofcom in a difficult position. If the regulator continues on its course then Vodafone may challenge and cause delays, but if they make any a big change(s) then that could require another consultation and this in turn might create its own delays.

The current distribution of mobile spectrum between UK operators can be seen below (correct as of December 2018).