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Fixed Line ISPs and Three UK Call for Spectrum Cap on EE and Vodafone

Tuesday, October 4th, 2016 (11:22 am) - Score 2,445

Mobile operator Three UK has today roped in Cityfibre, TalkTalk, Relish Wireless and the Federation of Communication Services (FCS) in order to press Ofcom for a 30% cap on the total amount of mobile spectrum that any one company can own, which is largely targeted at EE (BT) and Vodafone.

The fact that Three UK recently joined the ‘Fix Britain’s Internet‘ campaign against Openreach (BT), which houses some of the same outspoken members, is unlikely to be a coincidence and perhaps demonstrates an element of quid pro quo.

Certainly Three UK has made no secret of its desire to see a spectrum cap being imposed (here), not least upon Ofcom’s upcoming auction of spectrum in the 2.3GHz (2350 – 2390MHz) and 3.4GHz (3410 – 3600MHz) bands, and it’s easy to understand why.

Both BT (EE) and Vodafone currently hold a lot more spectrum than their rivals, which gives them a distinct advantage in terms of network coverage and service speeds (especially in urban areas). At one point Three UK had hoped to solve this problem by merging with O2, but Ofcom and the EU smacked that idea down like a frozen fish (here).

Any cap would seriously hinder EE / BT and Vodafone’s ability to bid on new spectrum, which in turn presents a problem for Ofcom because they also need to try and raise as much money as possible from future auctions (partly in order to satisfy the Government) and that won’t happen if two of the biggest players are forced out.

So far Ofcom has rejected the idea of a cap, but that was before BT and EE’s merger got waved through without any concessions and not forgetting the move to stop Three UK and O2’s proposed deal. Suffice to say that the regulator’s position against a cap is beginning to look a little shaky and they’ll hopefully want to avoid creating another monopoly in the mobile sector.

On the other hand BT / 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. It’s into this battle that today’s Open Letter has surfaced..

Open Letter to Ofcom’s CEO (Sharon White)

Dear Sharon,

Next year Ofcom will auction another tranche of a critical but finite national asset with the release of 190MHz of spectrum. Spectrum is the lifeblood of the mobile industry. It determines a network’s ability to offer consumers a fast, reliable and good value mobile network. It is therefore vital to competition, ensuring customers have a genuine choice of mobile networks wherever they are.

The UK suffers from the largest imbalance in spectrum distribution across mobile operators of any developed country. BT already owns nearly half of the UK’s vital airwaves and Vodafone nearly a third.

This imbalance has developed as a consequence of Ofcom’s failure to put protections in place that ensure all networks have access to sufficient amounts of spectrum to deliver both a great mobile service and competitive prices.

Ofcom has acknowledged the role that four networks with sufficient access to spectrum played in mobile prices falling by two thirds between 2003 and 2013. However, the growing imbalance in spectrum distribution has more recently led to a rise in prices for mobile users. Ofcom also recognises that there is a worrying inequality across the UK for consumers to access latest technologies as well as to the full choice of all 4 mobile operators.

Failure to tackle the imbalance will see consumers suffer the misery of higher prices for a poorer service at a time when mobile’s importance to the digital economy has never been greater.
You can fix this. The next auction of spectrum could be your last opportunity to give UK mobile customers a highly competitive mobile market which gives them the speeds, coverage and performance they deserve and demand.

We call on Ofcom to apply a cap of 30% on the total amount of mobile spectrum any one company can own following the auction.

A 30% cap will deliver:
* Real and sustainable choice of networks for consumers and businesses
* Better network coverage and faster download speeds for all customers
* A mobile industry that ensures that the UK is at the forefront of new technologies like 5G and the associated economic benefits
* More choice for consumers through a healthier wholesale sector

A 30% cap is not a radical intervention as it has no downside or negative consequences. A cap at this level will allow a competitive bidding process among existing operators and new entrants and provide a fair return to the public purse.

By protecting effective competition and supporting a market with genuine choice, a 30% cap would also deliver significant long-term economic benefits for the UK well beyond the short-term sales proceeds of the auction.

Most of all, it will ensure that UK consumers see real benefit from this vital national resource. BT and Vodafone already sit on large amounts of unused mobile spectrum, currently supported by mobile handsets. This denies customers of other networks access to increased speeds and better customer experience. The failure to implement the cap will mean that both BT and Vodafone have the opportunity to stockpile even more airwaves and increase their dominance with competition and consumers suffering as a result.

Even if such an outcome is considered unlikely, unless it can be completely eliminated as a potential scenario, it would be reckless to avoid making an intervention that has no downside for UK consumers.

Ofcom must therefore act to implement a cap of 30% to fulfil its duty to protect consumers and allow competition to thrive.

Yours sincerely,

[The CEOs of Three UK, Cityfibre, TalkTalk, Relish and FCS]

It’s worth remembering that Ofcom views 2.3GHz and 3.4GHz as being used by operators to foster “very fast download speeds“, which is something that EE has being doing a lot of lately. But their plan on that front might be hampered if EE and Vodafone are unable to bid. We also note that O2 didn’t sign the letter.

A Spokesperson for EE told ISPreview.co.uk last month, “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. 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.”

Ofcom are expected to outline their revised plans for the auction this autumn.

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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.
Leave a Comment
2 Responses
  1. Avatar Sledgehammer says:

    I think this time round OFCOM are going to have a NEW idea on the sale of any future spectrum.
    Like telling the mobile operators just how much money they are going to have to pay for a small part of what will be on offer. Also it should give each mobile operator a equal share of what’s on offer.
    Leaving things as a bidding war is no good, dooming mobile services.

  2. Avatar TheManStan says:

    There could be a bid value premium for EE and Vodafone.

    So this would mean that EE and Vodafone could still bid, but they would need to exceed the other bids by a certain percentage to win.

    This would allow competition to still take place and not result in low bids winning.

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