Solution to spectrum argument?

Finally a way out of UK spectrum re-farm deadlock?

Kip Meek, the UK government’s advisor on what to do over the re-farming of spectrum to even out the market, has come up with a solution where 900MHz spectrum could be liberalised in the hands of the existing holders, but access to other spectrum would initially be capped.

Meek’s solution to the deadlock, which has hit numerous roadblocks since Ofcom began digging into the area in 2007 as both Vodafone and O2 have fought to keep their 900MHz spectrum from being freed up for use by other networks, is to introduce a spectrum cap.

Under these proposals, for Vodafone and O2 to gain access to the digital dividend (at 800MHz), they must first give up some 900MHz. The 800MHz band would then become available with a basic national broadband coverage obligation at a speed to be determined through the final Digital Britain report, most likely 2Mbps.

For those holding 3G spectrum, an incentive to extend coverage and share their infrastructure would be offered in the form of indefinite licence terms. Operators are likely to respond positively to this given the high amounts paid for the licences back in 2000 and the increasingly common practice of sharing network elements to save costs, said Matthew Howett, senior analyst at Ovum.

The proposals would have the following effect, Meek said: Vodafone and O2 each already have access to 2 x 17.2MHz of sub-1GHz spectrum at 900MHz. They would be able to obtain 800MHz only if they were to give up an equal amount of 900MHz within a specified period. However, they would face few restrictions on bidding for 2.6GHz.

Orange and T-Mobile each already have access to 2 x 30MHz of contiguous high frequency spectrum at 1800MHz. They would be able to bid freely for 800MHz (or any 900MHz that Vodafone or O2 choose to give up). However, if they were successful in gaining 2 x 10MHz of low frequency spectrum, they would only be able to bid for an additional 2 x 10MHz of 2.6GHz, so as to remain within the spectrum cap. If they wanted access to a greater amount of 2.6GHz, they would have to relinquish 1800MHz or 2.1GHz.

3 and any potential new entrants would be able to bid freely for 800MHz (or any 900MHz that Vodafone or O2 choose to give up) and 2.6GHz (or any 1800MHz that the 2G operators choose to give up) up to the maximum allowable per operator determined in the auction.

Howett added: “Structuring access to the digital dividend in this way will provide an interesting example for other countries in Europe. The positive benefits associated with this band have been talked up considerably over the past year, but without any real proof that operators are interested in acquiring it. Certainly, the availability of equipment, network devices and handsets capable of operating in the 800MHz band seem yet to have materialised.”

Successful lobbying on behalf of the operators has resulted in a change in policy. The dispute arose in 2007 when Ofcom consulted on how to implement an EU decision to allow 3G services to be deployed at 900MHz; so called ‘spectrum re-farming’. Although only required to liberalise the 2G band, Ofcom was concerned that the advantages associated with re-farming would mostly be enjoyed by Vodafone and O2, since between them they hold all of the 900MHz.

To allow the remaining operators to participate, Ofcom’s preferred approach was to take back some spectrum from both operators and make it available to the other MNOs and new entrants by way of auction. Vodafone and O2 reacted badly to this and threatened Ofcom with legal action. The process was halted. The uncertainty also halted the award of the 2.6GHz band (also attractive for mobile broadband).

Howett commented: “Ofcom responded by proposing to take back less spectrum from Vodafone and 02 but this wasn’t accepted either. At this point it looked like no amount of trying could find a way through. The government rightly became worried that by delaying the award of this valuable resource, the future competitiveness of the UK could be at risk and so declared that if a voluntary solution couldn’t be found then it would impose one, and so the appointment of Kip Meek.

“The way out that he identified is remarkably forward looking. The proposal argues for some joined up thinking and to consider all spectrum bands together, keeping in mind the objectives of Digital Britain. Could this approach be a defining moment in the history of regulation in the UK?,” questioned Howett.

“At the moment, almost all proposals from Ofcom are marred by legal challenges, which result in costly delays for both operators and consumers. Whilst it is seen as leading the way in the some respects, Ofcom has become slow in evolving its overall approach to regulation. Despite being a converged regulator it seems that issues are still treated in their traditional silos,” continued Howett.

“It is undeniable that the issues being dealt with are far reaching and complex,” he said, “However, Ofcom’s current speed and disparate approach threatens to undermine the future competitiveness of the UK. In this instance, focusing on the end goal has resulted in a much more palatable solution and Ofcom would do well to extend this approach elsewhere, particularly towards next generation access and where telecoms and other forms of media converge.”

The proposals outlined by Meek will now be developed and finalised by the Department for Business, Enterprise & Regulatory Reform (BERR), leading to a government direction to Ofcom.