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Three UK Formally File for a Judicial Review of Ofcom’s Spectrum Auction

Tuesday, September 5th, 2017 (3:55 pm) - Score 1,480

Mobile operator Three UK has this week carried out their threat to pursue a Judicial Review of Ofcom’s forthcoming 4G and 5G radio spectrum auction in the 2.3GHz and 3.4GHz bands, which will seek to impose a tougher spectrum cap that could stop EE (BT) from bidding.

Earlier this morning a spokesperson for the operator confirmed that Three UK had “filed a judicial review before the UK courts in relation to the competition measures that will apply in the spectrum auction” and they also rather optimistically predicted that this would be a “short process,” which could be followed by a court decision in early 2018. Similar cases against past auctions have tended to drag on for significantly longer.

A Spokesperson for Ofcom said:

“It is very regrettable that the auction will now be delayed by this litigation, which will harm consumers, businesses and ultimately the UK economy. It is now crucial that companies don’t drag their feet, so the case can be heard as soon as possible.”

At stake is the issue of spectrum caps and who can bid on the new bands. EE holds about 42% of all mobile spectrum, while Vodafone has 29%, O2 owns 14% and Three UK has 15%. The more spectrum you own, the better your services perform (e.g. faster speeds) and the wider your network coverage (assuming operators make the best use of their allocations).

2017 H1 spectrum bands by mobile network operator

Ofcom has agreed that the market needs a little correction and so their auction proposed to place a cap of 255MHz on the “immediately useable” spectrum (i.e. EE wouldn’t be able to bid on 2.3GHz). On top of that they also proposed a cap of 340MHz on the overall amount of mobile spectrum that a single operator can hold as a result of the auction (i.e. 37% of all the mobile spectrum expected to be useable in 2020, including the 700MHz band).

In other words, EE would still be able to bid for a slice of the 3.4GHz band. The regulator considers this necessary because otherwise they might be unable to prepare their own future 5G Mobile services for launch in 2020. However, Three UK wants a stricter cap of 30%, which would completely block EE from bidding and that might also reduce the money earning potential of the auction itself.

Meanwhile Three UK’s rivals have frequently noted that the operator’s parent company (CK Hutchison Holdings) has more than enough money to buy a good chunk of spectrum and indeed they’ve had plenty of opportunities to do so in the past, but haven’t.

On top of that Three UK’s recent purchase 5G friendly spectrum via their £250m acquisition of UK Broadband Ltd. (here) might give them an incentive to delay such auctions for as long as possible, although the operator denies having such a strategy.

It is now widely expected that EE will follow through on its own letter before action from August 2017 (here) and launch an opposing case, which won’t challenge the measures for 2.3GHz but will fight against any call for a stricter cap on 3.4GHz. But it remains to be seen whether or not EE will await the outcome of Three UK’s case before doing so.

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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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20 Responses
  1. Mike says:

    Seems the ideal result is EE sell some of their existing 4G spectrum to ‘balance it out’.

    1. wireless pacman says:

      Flying pork, anyone? 🙂

  2. CarlT says:

    Would have been far less grief to just allow Three to assimilate O2 rather than require an arbitrary 4 MNOs.

    1. Henry says:

      That might have made it difficult to then keep the remaining MNOs all below 30%, since 3*30% is widely thought to be less than 100%

    2. CarlT says:

      Given it was Three wanting that cap, not Ofcom, it seems reasonable to assume it wouldn’t have been an issue.

      Thanks for the maths lesson though. The things I missed in Pure Maths, then didn’t cover in advanced cryptography 🙂

    3. Mike says:

      I thought Three only wanted the cap after their merger got rejected?

  3. New_Londoner says:

    Presumably it is doing this as a legal challenge is cheaper than putting in a strong enough bid to win the spectrum through the auction process. Of course it wouldn’t have this problem in the first place if it had put in a decent bid during the last auction.

    1. Chris P says:

      Isn’t it more the case that orange and t-mobile where successful in the last auction and seperately there was no issue but now combined it’s pushed H3g to the bottom of the pack in a position where they can no longer compete effectively with EE and VF. H3g and O2 with their combined spectrum may stand a chance as they would have the same number of frequencies as VF albeit not in the same bands.

    2. New_Londoner says:

      Neither Three nor O2 did particularly well last time, could have secured more spectrum with higher bids but clearly decided not to do so. Three seems to be trying to overcome this blunder by securing spectrum on the cheap this time.

      Let’s hope the courts see through the ruse and throw it out, after all higher bids put more money into the treasury to fund public services. Important we’re not short-changed by corporates, glad I switched from Three a while back.

    3. GNewton says:

      A far better approach would be for Ofcom to get more spectrum sharing between the various mobile operators rather than sustaining a model of exclusive spectrum bought at auctions for excessive amounts of money.

      This whole approach is wrong, somewhat similar to the madness of trying to have multiple fixed-line access networks for same premises. Common sense and proper regulation doesn’t seem to exist in the telecoms sector.

    4. MikeW says:

      If the government wanted to allow spectrum sharing, wouldn’t the answer to have been to allow O2 and 3 to merge? Instantly shared spectrum…

      I think @New_Londoner has hit the nail on the head here – the majority of the spectrum imbalance comes from timid bidding in previous auctions, not from the EE merger. Trying to prevent the historically-strongest bidder from taking part in this auction is a ploy to reduce the winning bids this time around.

      If EE gained an advantage from unbalanced spectrum (which, remember, it has paid a premium to use), then the time to rebalance was as a condition of merger. Oh … that happened, with spectrum sold to 3.

      The worst thing to try to rebalance spectrum is to add up the total MHz available. When bands have different distinct purposes, that’s madness.

    5. CarlT says:

      Can any operator be blamed for being timid over bidding after the farce of the 3G auction?

      It’s pretty vexing thinking about where the UK’s mobile networks would be had they not handed that money to the government to urinate up the wall.

    6. MikeW says:

      You pays your money, and you takes your choices. Its a business decision … which businesses live and die by.

      No, I can’t blame them for choosing to be timid; that 3G auction had a wider catastrophic impact than just the networks. But I can expect the networks to live with the consequences of their choices.

      In this case, it turns out being timid was a bad business idea. If it went the other way, EE would be near death, and BT might have chosen a different MNO.

      Should 3 now be rewarded for its previous bad business decisions? Should EE be hampered from previous good business decisions?

      Or should it actually be the other way around? Should we court the successful, and chase away the failures?

      The dichotomy is that Ofcom’s job is to prevent success. Or rather, to prevent too much success, even if it comes from innate good business judgement rather than merely being the incumbent.

  4. adslmax Real says:

    3 network is crappy. EE are far the best.

    1. Mark says:

      You’ve clearly not been monitoring the rise of Vodafone over the last 18mths. There network has been transformed from awful to cutting edge and the gap between EE and Vodafone is marginal. Vodafone also have better 4G building penetration than EE due to their use of 800mhz for their LTE service. On top of that they’ve been rolling out 3CA, 4×4 MIMO and 256QAM.

      As for Three network I also disagree. I’m a long time 3 user and except for some network congestion in big cities, shopping centres etc the network is fine. If you buy a newer 4G device directly from 3 using their firmware you’ll have access to their 800mhz service which is being rolled out a lot quicker than the EE equivalent and you’ll find you have access to 3’s 4G service in even the most remote rural locations. They are also re-farming 2100mhz to address the 4G capacity issues.

      EE did have an advantage due to their early 1800mhz rollout, but the gap is closing fast.

    2. Chris P says:

      I’m a long standing 3 customer and never had an issue anywhere in the uk or abroad except this summer where in Cornwall/Devon it was useless. I also see “three wifi calling” displayed a lot which must be great for them to alleviate 4G bandwidth in built up areas to just those that need it, but could mask network availability problems.

      It’s like they’ve suddenly got magically worse, which is a shame. As even their Indian call centre isn’t that bad.

  5. NGA for all says:

    The density of access points needed for 5G suggests we are not building cellular networks anymore but large data transport networks. We need wholesale models to emerge so convergence can occur and these dense networks can be accessed by all.

    This suggests spectrum policy needs to change and switch from supporting the assumption of 3-4 cellular networks to perhaps 2-3 wholesale data transport networks.

    1. MikeW says:

      By golly…. I agree.

      So long as your “wholesale data transport” network is a converged fixed and mobile one.

      The ultimate outcome is like FON on super-steroids.

    2. NGA for all says:

      There was an unsuccessful attempt to make the low-powered 2.6Ghz options wholesale, so open femto capability might feature in our home hubs, but Ofcom fixed on their model for ‘mobile’.

      It is odd that spectrum policy is preventing convergence and is likely limit 5G to be a slightly better 4G.

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