Mobile operator O2 UK has described the communication regulators plan to auction off the 800MHz and 2.6GHz radio spectrum bands, which will be repurposed for use by superfast 4G / Mobile Broadband technologies (e.g. LTE ), as "illegal" under EU law because the proposed spectrum floors would effectively act as "state aid" and prevent them from bidding.


Admittedly O2 does have a point, although their rivals would probably disagree. Both O2 and Vodafone were recently granted approval to use their existing 2G spectrum in the 900MHz and 1800MHz bands for faster 3G based Mobile Broadband services. Contrary to the above perspective, this was no small measure.

Rivals, such as Three (3) UK, were less than pleased with this as it left them at a distinct disadvantage (they don't have the same spectrum and it devalues what they do have). Furthermore 900MHz in particular is already well deployed and able to reach some locations that traditional 3G bands cannot, which means fewer base stations and lower costs. The EU has also approved a process that would allow 900MHz to be used for LTE services too.

At the time Ofcom agreed that "there are risks to future competition if bidders could bid for and acquire any amount of spectrum in an open auction". This prompted the regulator to propose several new measures ("floors") that would stop operators (i.e. O2 and Vodafone UK) from dominating the market through spectrum ownership.

Both Ofcom and the European Commission (EC) are mindful that issues, such as those raised by O2 today, would almost certainly occur in some markets; that's one of the reasons why the UK process won't end until 2013 (i.e. plenty of time for arguments or possibly even court cases).

Ofcom is adamant that its proposals are not illegal, although it remains to be seen whether or not their final proposal will need to be adjusted. At most O2 may succeed in winning a delay or perhaps even a small concession. In related news, parts of O2's network in Southern England have gone down for the second time this week.

O2's Submission - Proposals for the Award of 800MHz and 2.6GHz Spectrum
http://stakeholders.ofcom.org.uk/binaries/consultations/combined-award/responses/Telefonica_UK_Ltd.pdf