Ofcom Press Forward UK Auction of 4G and 5G Mobile Spectrum

The UK telecoms regulator, Ofcom, has said that they will publish the auction regulations for the 2.3GHz and 3.4GHz radio spectrum award process on Wednesday 24th January, which is despite the fact that Three UK are continuing to disrupt the process via litigation.

The spectrum bands are both being freed up in order to help boost the performance of 4G and future 5G based Mobile connectivity. In this regard the 3.4GHz band is highly prized because it’s aimed at future 5G services, which Ofcom says will be needed in order to help Mobile Network Operators (EE, O2, Vodafone and Three UK) to launch “very fast” Mobile Broadband services by 2020.

Unfortunately the regulator’s efforts to get the spectrum released have been hampered by a bitter feud between EE and Three UK. In particular Three UK is unhappy that EE holds 42% of all mobile spectrum versus their 15% and they want Ofcom to impose a 30% cap on spectrum ownership, which would effectively prevent EE from being able to bid on the 3.4GHz band and also cause problems for Vodafone.

A 30% cap could also reduce the money earning potential of the auction itself, which might upset the Government.

On the flip side Ofcom has already proposed to introduce a cap of 255MHz on the “immediately useable” spectrum frequency and a total cap of 340MHz on the overall amount that a single operator can hold, which would prevent EE from being able to bid on the 2.3GHz band but not 3.4GHz. As above, Ofcom considers 3.4GHz to be too important for 5G and they don’t wish to stop EE from bidding.

The dispute ended up going to court, which last month “rejected all the challenges” to the regulator’s decision and added that the “approach taken by Ofcom was comprehensive, coherent and logical … 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” (here).

Since then Three UK has won permission to appeal and today Ofcom confirmed that the Court of Appeal is also expediting that case, which will be heard on 13th and 14th February 2018. In the meantime the regulator has decided to continue as though the auction will still go ahead this year (a wise approach given the firm rejection of Three UK’s first challenge).

Ofcom Statement

The litigation by Three is continuing to delay access to the spectrum and the benefits to consumers and businesses that can flow from it. We are keen to ensure that we can move as quickly as possible to hold the auction once the judgment of the Court of Appeal has been given.

We have therefore decided to proceed to make the auction Regulations for this spectrum award process on Wednesday 24 January, and follow the timetable as set out below:

* On 24 January we will publish the regulations, which will come into force on Wednesday 31 January.
* On the same day we will also publish guidance for potential bidders on how to take part in the auction.
* Once the regulations are in force, we will confirm the date for when we will be accepting applications.
* We anticipate the day for receipt of applications will be around seven days after the regulations come into force.
* We propose to commence the steps necessary to decide whether to qualify applicants to participate in the auction immediately after application day.
* We will stop short of formally qualifying bidders until after the Court of Appeal’s decision is announced, and all parties know whether Ofcom’s decision to impose an overall spectrum cap at 340 MHz is upheld.

The steps described above are all steps that we would need to take whether or not the Court of Appeal upholds our decision, and the judgment of the High Court. If we have to change any of the Regulations in light of the Court of Appeal’s judgment we will do so with utmost expedition to minimise further delay.

Once the judgment of the Court is known, applicants will in accordance with the Regulations have a period to indicate to Ofcom whether they wish to withdraw from the award process and be refunded their initial deposit prior to the “last day for withdrawal”.

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 if they really wanted to do so and indeed they’ve had plenty of opportunities to do so in the past, but haven’t.

Some critics also point last year’s purchase of 5G friendly spectrum via Three UK’s £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 and we’ve yet to see their final plans for the related spectrum bands (we were expecting to see this before the end of last year).