Court Rules in Favour of Ofcom in EE and Three UK’s 5G Spectrum Fight

Ofcom’s planned auction of 4G and 5G friendly radio spectrum in the 2.3GHz and 3.4GHz bands might soon proceed after the High Court rejected an appeal by Three UK, which had demanded that the regulator impose a 30% spectrum cap in order to stop EE (BT) from bidding.

At present EE holds about 42% of all mobile spectrum, while Vodafone has 29%, O2 14% and Three UK 15%. Often the more spectrum you own, the better your services. Ofcom proposed to tackle this by tweaking their forthcoming auction to introduce a cap of 255MHz on the “immediately useable” spectrum (i.e. EE wouldn’t be able to bid on the 2.3GHz band).

On top of that the regulator also proposed a total 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), which meant that EE would still be able to bid on a slice of the 3.4GHz band.

Ofcom reasoned that EE should still be allowed to bid on 3.4GHz because it’s needed to help Mobile Network Operators (MNO) launch “very fast” Mobile Broadband (4G and 5G) services by 2020. Preventing the operator from using the band would have damaged their ability to compete with early 5G deployments.

Meanwhile Three UK (CK Hutchison Holdings) has long been campaigning for a punitive 30% cap and earlier this month they began a legal challenge of the auction in order to get it, which if successful could have completely blocked EE from bidding. On top of that such a cap could also reduce the money earning potential of the auction itself, which would have upset the Government.

In the end Ofcom, EE and Three UK all went to court and the High Court of Justice (Queen’s Bench Division) has today handed down their decision, which “rejected all the challenges to Ofcom’s Decision.” The outcome came a lot sooner than even the “early 2018” date previously forecast by Three UK.

Mr Justice Green, High Court of Justice, said:

“In the light of my review of the evidence I am clear that the approach taken by Ofcom was comprehensive, coherent and logical.

Ofcom’s findings are evidence based and justified. To arrive at its Decision Ofcom engaged in a detailed predictive analysis of how the market would work in the future under a series of different assumptions and scenarios. It consulted upon its economic and econometric analysis and modelling. In the Decision it sought to strike a delicate balance between protecting competition and consumers, on the one hand, and setting restrictive caps which were not disproportionate to BT/EE. The balancing exercise was sound.

I therefore reject the argument of H3G that the balance struck was too generous to BT/EE and I also reject the argument of BT/EE that it was too tight and rigid.”

Rivals have previously argued that Three UK’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.

Some critics also point to Three UK’s recent purchase 5G friendly spectrum via their £250m acquisition of UK Broadband Ltd. (here), which they claim might give the operator an incentive to delay the auction for as long as possible, although this is denied.

Never the less Ofcom has been quick to welcome today’s ruling and said they planned to “proceed with the auction as quickly as possible,” while a spokesperson for Three UK expressed disappointment at the “initial ruling” and warned that they would be “seeking permission to appeal.” Meanwhile EE said they didn’t really like the spectrum caps much but were “pleased” that a decision had been reached so quickly.