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Spectrum Starved Three UK Asks Ofcom to Tackle BT / EE’s Mobile Power

Tuesday, September 6th, 2016 (2:53 pm) - Score 2,348
wireless mobile broadband mast vodafone uk

The CEO of mobile operator Three UK, David Dyson, has once again called on Ofcom to level the market by limiting BT’s (EE) ability to bid on new radio spectrum in the forthcoming auction of airwaves for the higher frequency 2.3GHz (2350 – 2390MHz) and 3.4GHz (3410 – 3600MHz) bands.

It’s fair to say that the EU’s recent decision to block a proposed £10.25bn merger between Telefonica UK (O2) and CK Hutchison Holdings (3UK) hasn’t exactly gone down too well at Three UK’s head office (here) , leaving the operator scrambling to establish a new way forward.

Three UK was somewhat banking on the deal to help it level the playing field of spectrum ownership with rivals BT (EE) and Vodafone, but Ofcom helped to scupper that plan. The regulator feared that the move would reduce the number of primary UK mobile networks from four to three and thus result in higher prices for consumers, as well as a less competitive market.

However Ofcom now faces a dilemma because the approval of EE’s merger with BT, which occurred without any major concessions being extracted, has meant that the United Kingdom’s market is now dominated by two large mobile networks and it’s easy to see the differences. Spectrum ownership is the lifeblood of any mobile network.

The suggestion being put forward by Dyson is that Ofcom should address this imbalance by restricting bids, which might for example prevent BT/EE from bidding on the new bands because they already own more than 30% of the total spectrum (they hold around 42%); this could also seriously restrict Vodafone’s ability to bid as they own 29%.

Dyson suggests that both BT/EE and Vodafone have plenty of unused spectrum and might therefore be encouraged to engage in strategic bidding, which would make it difficult for Three UK and O2 to secure a good slice of the new airwaves. Similarly O2 isn’t exactly cash rich at the moment and are in the process of preparing to float on the market (IPO).

David Dyson said (BBC):

“If you’ve got one or two players in the market that dominate spectrum then there is always a fear that innovation is slower because you don’t have people pushing each other.

If [BT/EE] were to bid on this spectrum, it would most likely be a mechanism to stop ourselves and O2 strengthening our position, which would effectively be anti-competitive.”

On the other hand EE has today demonstrated their plans for LTE-A Cat 9 (4G+) technology, which will allow customers in certain areas to achieve ultra-fast Mobile Broadband speeds of 300Mbps+ by making greater use of their existing radio spectrum (here). The approach is nothing new and was first discussed all the way back in February 2015, but their decision to announce this on the same day as Three UK’s moan does represent interesting timing.

Equally EE and Vodafone might well question why Three UK, which seems to be in reasonably good financial health, hasn’t previously tried to acquire more spectrum when it had the chance or whether it’s right that they should now be allowed preferential access to new airwaves on the cheap.

A Spokesperson for EE told ISPreview.co.uk:

“We have never stopped using our spectrum to deliver the very best network experience for customers. We pioneered 4G and we are a leader in network speeds. Today’s announcement of new Cat 9 technology keeps the UK a step ahead, providing even more capacity and some of the highest mobile download speeds in the world.

We are unique in our commitment to expand 4G coverage to 95% of the UK’s landmass by 2020, further than any other UK network has done, and will continue to ensure the UK stays at mobile technology’s leading edge.”

Bickering and legal threats are nothing new in the mobile industry. Indeed Ofcom has already had to delay its auction after Three UK pressured them to wait until both of the proposed mergers had been decided (here).

Meanwhile Ofcom has already said that they won’t hold any operator to a specific coverage obligation or impose spectrum caps on the auction because that could “prevent a bidder from buying large blocks of adjacent spectrum“, which is needed in order to support “very fast download speeds” and boost Mobile Broadband capacity (this is a clear focus for their auction).

However if Ofcom doesn’t act then they run the risk of allowing one operator to build a new monopoly in the mobile market, which would perhaps run counter to their supposedly pro-competition approach in other areas. We can see plenty more disputes ahead when the regulator publishes their final consultation in the next few weeks or months.

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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13 Responses
  1. Avatar dragoneast

    Good grief. Pontius Ofcom have kept 4 mobile providers. They’ve done their bit. Wash their hands of the consequences. What the rabble do next isn’t their responsibility.

  2. Avatar 23Prince

    For me Three lead the way not try to find ways to do it. You give me better speeds for free – even more than most of the EE speedtests I compare to. I can hit 100mbps easily on 3 and I pay half what EE charge and my data is unlimited with 30GB Hotspot.

    EE – you suck :/

  3. Avatar Onephat

    I find the opposite. I find EE much faster than Three. Yeh you can roam more places for free than me. In Europe i don’t have to put up with throttled speeds I can roam with nice speedy 4G. EE might not be the cheapest or give the most data but for me they win hands down for coverage, speed and reliability. I get 40gb a month and that normally lasts me just fine.

  4. Avatar TWKND

    Blocking the 3-O2 merger was a bad idea in my opinion, why didn’t allow it to go through on the basis that they sell off some of their low and high frequency spectrum for a new operator, as well as allowing this new operator full roaming on their network until about 2020 or so (when both the 2.3 and 3.4GHZ as well as 700MHz will have been auctioned off).

    • Avatar dragoneast

      Blocking the merger was far easier. Undertakings (or obligations) to sell can’t be guaranteed to work. No is easy. Kick the can down the road. It’s just that you don’t control what happens next.

    • Avatar TWKND

      Well by the look of it all we’re going to get is an even more dominant EE, and O2 going down the drain.

    • Avatar TWKND

      Free Mobile in France was what I was mainly comparing it to, they got given some spectrum to start up with, as well as a 2G/3G roaming agreement with Orange, and since have purchased their own spectrum and expanded their coverage to almost match the other networks.

  5. Avatar Steve Jones

    To block the largest and, maybe, the second largest mobile operators in the country from bidding for new spectrum will mean that the government can wave goodbye to any substantial money from that source. I can’t see that going down well.

    The fact that the UK will shortly be faced with two large mobile operators and a couple of minnows is Ofcom’s doing by lobbying the EU commission to block the O2/3 merger. UK competition and mobile infrastructure would have been much better served by three strong competitors than two and a couple of under-financed ones.

    As usual, Ofcom being clueless about the scale of commercial investment needed to finance large scale infrastructure and how to produce an environment that encourages it.

  6. Three has always done me best and personaly it’d better value I will always stay with three

  7. Avatar Rich

    The counter argument to this is that EE/Voda bidded for and won auctions. O2/Three have less spectrum because they bidded and paid for less. It would not be very fair if they then got a load of extra spectrum cheap/free, if that were going to be the case we should not have allowed bids in the first place, but just divided spectrum equally among the operators.

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