5G Mobile Spectrum Auction Proceeds After Appeal by Three UK Fails

Last night the Court of Appeal in London rejected Three UK’s final attempt to have Ofcom impose a 30% spectrum cap on their forthcoming auction of 4G and 5G friendly radio spectrum in the 2.3GHz and 3.4GHz bands, which would have stopped EE (BT) from bidding and hampered Vodafone.

At present Ofcom has already imposed 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 (equivalent to a cap of about 37%), which will prevent EE from being able to bid on the 2.3GHz band but not 3.4GHz.

The regulator considers 3.4GHz to be too important for the future launch of “very fast” 5G based mobile broadband services and thus they don’t want to stop EE from bidding on it. Meanwhile Three UK have been arguing that EE holds 42% of all mobile spectrum versus their 15% and they suggest that a stricter cap of 30% would help to rebalance the market, while also significantly hobbling EE in the race to 5G.

The dispute ended up going to court, which in December 2017 “rejected all the challenges” to the regulator’s decision and ruled 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).

However Three UK quickly sought permission to appeal and the case was expedited to be heard yesterday. Perhaps unsurprisingly last night’s hearing resulted in another swift rejection of the latest legal challenge, which means that the regulator can now proceed with their auction as planned.

An Ofcom Spokesperson said:

“The Court of Appeal has very firmly rejected Three’s application for permission to appeal on all grounds. We welcome this decision, and will now press ahead with releasing these important airwaves. This new capacity will allow mobile companies to offer more reliable reception, and to prepare for future 5G services.”

Meanwhile Three UK claims that their threats and challenges have “not caused any delay to the delivery of 5G services to UK consumers” (technically correct since 5G won’t be ready for commercial launch until 2020) and they continue to believe that “a 37% cap is too high if the policy objective is to have a competitive four player market.” The auction had originally been due to take place during early 2016 (here), before various mergers and legal threats got in the way.

Despite all this Ofcom has continued preparations for the auction and overall around 190MHz of spectrum frequency in both of the bands, which were previously used by the Ministry of Defence (MoD) and are now being re-purposed for civil use, will be up for grabs. This reflects 40MHz of spectrum in the 2.3GHz band (many Smartphones etc. can already make use of this) and 150MHz in the 3.4GHz band.

Rivals have 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. Hopefully this time will be different. Ofcom will shortly confirm the official date for the start of bidding.