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Ofcom Sets Rules for the 2.3GHz and 3.4GHz UK Mobile Spectrum Auction

Monday, November 21st, 2016 (9:15 am) - Score 1,577
wireless broadband radio spectrum signal

After a long delay Ofcom has unveiled the rules for their forthcoming auction of radio spectrum in the 2.3GHz (2350-2390MHz) and 3.4GHz (3410-3600MHz) bands, which will help mobile operators to launch Mobile Broadband (4G) services with “very fast download speeds“. But it’s bad news for BT / EE as a cap will apply.

Overall around 190MHz of spectrum in both of the bands, which was previously used by the Ministry of Defence (MoD) and is now being re-purposed for civil use, will be up for grabs. This reflects 40MHz of spectrum in the 2.3GHz band (some Smartphones etc. can already make use of this) and 150MHz in the 3.4GHz band that is not currently used by most mobile devices.

The original auction had been due to take place around early 2016 (here), although a combination of the usual legal threats from primary Mobile Network Operators (MNO) and concern over the impact of several proposed network mergers (i.e. BT + EE and Three UK + O2) quickly put pay to that idea (here).

Since then much has changed. Firstly, the £12.5bn merger between BT and EE was approved without any concessions and as a result the combined business is now the largest single mobile operator in the market with some 45% of all the related spectrum vs 28% at Vodafone, O2 15% and Three UK on just 12%.

Shortly after that the £10.25bn merger between Three UK and O2, which might have helped to rebalance the market and make future auctions a lot less contentious, was effectively blocked because Ofcom and the EU were worried about rising prices and required a minimum of four primary operators (here).

The current situation leaves Three UK and O2 to sit in a weakened position (spectrum ownership), while O2’s parent (Telefonica UK) is struggling with debt and not exactly flush with cash. As a result Three UK has been lobbying Ofcom to impose a spectrum cap of around 30% to prevent a new monopoly forming (here), which would hinder EE / BT and Vodafone’s ability to bid.

On the flip side EE and Vodafone would perhaps complain that Three UK seems to be in reasonably good financial health, yet they’ve often shied away from grabbing more spectrum when they had the chance.

Three UK’s complaint does have some merit, although Ofcom has previously rejected the idea of imposing a cap because that could “prevent a bidder from buying large blocks of adjacent spectrum” and this is needed in order to support the promised “very fast” speeds.

In the end Ofcom has proposed to apply a cap in the auction, of 255MHz, on “immediately useable” spectrum that any one operator can buy. As a consequence of this proposed cap, BT / EE would not be able to bid for spectrum in the 2.3GHz band (i.e. once the auction is complete then BT / EE’s share of the overall spectrum will drop to around 42%).

However Ofcom are NOT proposing a cap on the amount of 3.4GHz spectrum because “the band is not immediately useable, and we believe it is important that operators are given an opportunity to acquire this spectrum so they are able to consider early development of 5G services.”

Furthermore they have also decided NOT to impose a coverage obligation on the spectrum, which is because the related bands are “best suited for delivering greater network capacity, not achieving wide geographic coverage.”

Philip Marnick, Ofcom Spectrum Group Director, said:

“Spectrum is the essential resource that fuels the UK’s economy. This auction can help ensure that UK consumers can access the mobile data services they need, and that operators can continue to innovate and build for the future.

The UK has long benefitted from strong mobile competition. We are designing the auction to ensure everyone benefits from a market that continues to innovate and serve them well.”

At this point we should mention that the 2.3GHz band is already being used for 4G services in a number of countries outside Europe (e.g. China, India and Australia) and general hardware support isn’t such an issue, with many existing devices already offering support. In that sense a big slice of the 2.3GHz band could prove to be very attractive.

Meanwhile the 3.4GHz band is also being used for 4G in six countries including the UK (UK Broadband Ltd’s ISP ‘Relish’ in London), Canada and Spain, although much of this reflects Fixed Wireless Access (FWA) style networks. However in the future it could also be used for 5G Mobile services.

Otherwise we note that Ofcom has retained their original reserve price of £10m for a 10MHz (2.3GHz) lot and £1m for a 5MHz (3.4GHz) lot. The reserve price for all this apparently totals up to £70m, but of course the operators are expected to pay well above that level.

The closing date for responses to today’s consultation is 30th January 2017. We should add that Ofcom are also preparing or exploring future spectrum auctions for the 700MHz and 3.6GHz – 4.2GHz bands, as well as others.

4g_auction_radio_spectrum_bands_2016

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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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