Ofcom drops plan to give Everything Everywhere sub-1Ghz spectrum

Everything Everywhere is not to receive a chunk of sub-1Ghz spectrum from Ofcom in the upcoming 4G spectrum auctions. Instead, Ofcom is set to encourage a fourth player to compete harder in the market, potentially 3UK.

Between March and May 2011, Ofcom consulted on its assessment of how 4G spectrum is likely to affect future competition in mobile electronic communications services markets. Based on this assessment Ofcom outlined a number of proposals for how the spectrum should be auctioned to promote competition in those markets.

The responses to this consultation and the evidence submitted, together with further analysis by Ofcom, have helped Ofcom to develop and refine its proposals. Ofcom has today launched a second consultation to provide stakeholders with an opportunity to comment on these proposals, before making its final decisions for the auction.

In the March 2011 consultation Ofcom proposed that a special condition should be attached to one of the 800MHz licences, obliging the holder to roll out a 4G network to 95% of the UK population. In October, the Government announced plans to invest £150m to boost mobile coverage in those areas with poor or no mobile service. A significant part of this money is likely to be spent on building new mobile infrastructure in areas of the UK where there is little or no commercial incentive for operators to do so.

Ofcom now believes that the special condition it previously proposed can be strengthened in one of two ways.

The first option is to increase the obligation to 98% of the UK by population. However, the second and potentially more effective option, is to require that one 800MHz operator provides 4G coverage that not only matches existing 2G coverage but also extends into mobile ‘not spot’ areas of the UK where the £150m will provide infrastructure capable of supporting 4G coverage. This may have the potential to extend 4G mobile coverage even further than 98% of the UK by population. Also, this second option would make it more likely that mobile broadband services would be provided in locations where they could be most valued by consumers, rather than in those areas where it is easiest for a licensee to meet the obligation.

Ofcom continues to believe that consumers are likely to receive better services at lower prices in the future if there are at least four national wholesalers of mobile services. Without the right quality and mix of spectrum, an operator might struggle to compete with other national wholesale providers.

In light of the consultation responses and evidence, and Ofcom’s further analyses, Ofcom has identified a number of options for measures in the auction to promote competition in future mobile services markets. This reflects our revised assessment of the technical and economic factors and includes options for the reservation of varying amounts of spectrum so that at least four operators may have sufficient spectrum to be credible national wholesalers of future mobile services.

Ofcom is also proposing to reserve some spectrum in the 2.6GHz band to be shared by a group of companies to deliver innovative new mobile services for consumers. Potential applications include local mobile networks for student campuses, hospitals or commercial offices, which operate on short-range frequencies serving a small area.

Ofcom Chief Executive, Ed Richards, said: “This is a crucial step in preparing for the most significant spectrum release in the UK for many years. The proposals published today will influence the provision of services to consumers for the next decade and beyond.

“The UK benefits from being one of the most competitive mobile phone markets in Europe. This means that consumers pay less for mobile communications services and have the choice to shop around for packages that suit them best. As the UK enters a new generation of mobile communications, Ofcom’s objective is to promote effective competition and to stimulate both investment and innovation.

“In addition we are proposing a significant enhancement of mobile broadband, extending 4G coverage beyond levels of existing 2G coverage – helping to serve many areas of the UK that have traditionally been underserved by network coverage.”

Stakeholders have 10 weeks to comment on Ofcom’s revised proposals. A final decision on the auction design will be made in the summer of 2012. The auction itself will follow a few months later, starting in Q4 2012.