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

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).

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.