4G is finally coming to the UK, sort of …
21st August 2012 marked yet another twist in the continuing saga in relation to the roll-out of 4G (otherwise known as "LTE" i.e. "long term evolution") mobile networks and services in the United Kingdom.
That twist was Ofcom formally announcing that the UK's largest mobile network, Everything Everywhere, ("EE") would be allowed to use its existing spectrum in the 1800Mhz range for the provision of 4G mobile services.
The decision, made after receipt of an application from EE earlier this year, was controversial on a number of counts, and perhaps also surprising in the context of the broader debate that has been taking place over the past couple of years between Ofcom and the UK mobile network operators to try to bring the necessary regulatory framework into place to enable the launch of these new 4G networks.
4G – the story so far…
LTE networks and services have already launched commercially in a number of countries, including the United States, Germany, Sweden and Australia. Android smartphone handsets that enable users to utilise 4G networks have also been available for around a year, and the new iPhone 5 (launched at the end of September) is also 4G/LTE enabled.
The United Kingdom has historically been seen as an innovator in the area of telecommunications networks and services. It liberalised its domestic telecoms market in the early 1980s, just after the United States, and long before most of continental Europe and the rest of the world. The UK also lead the pack in the roll-out of both 2G (GSM) and 3G mobile networks.
With 4G however, the UK has fallen behind. Under the current plans for spectrum auctions in the 800 MHz and 2.6 GHz bands (which were previously seen as the primary 4G frequencies in the UK) the auctions themselves are not scheduled to take place until Q1 2013 at the earliest, with network roll-out expected to begin in late 2013/early 2014 (see UK Next Generation Networks roll out ).
Why the delay?
The reason for these delays is primarily the caution with which Ofcom has had to tread in this overall process. Each of the existing mobile operators essentially has vested interests that, if care is not taken, could well lead to any of them formally challenging the auction process (see text box re the MNO Concerns). It is also easier to challenge Ofcom now than in the past – rather than pursing a claim for judicial review (which are notoriously difficult to obtain) Ofcom's decisions are now subject to a ready-made merits-based appeals process before the Competition Appeals Tribunal, which the operators have shown they are not afraid to invoke. It is also possible to file a complaints at a European level with the European Commission.
This dynamic has led to the auction plans having to be redrawn on a number of occasions, which in turn has led to the slippage that we are now experiencing on widespread 4G network roll-out.
Use of existing spectrum allocations
The application by EE to use its existing 1800 MHz spectrum (i.e. spectrum that it already has rather than having to be "won" via the new auction process) was a clever move on their part, as 4G technology is already available that also allows the use of that spectrum for 4G purposes. The other UK mobile operators (i.e. Vodafone, O2 and Three (3)) objected to this move on the grounds that it would give EE, which was formed via the merger of the Orange and T-Mobile UK mobile assets and is already the biggest UK mobile operator with around 34% share of UK subscribers (c.f. O2 with 27% and VF with 25% - Nov 2011 figures from Enders Analysis) an unfair advantage in the roll-out of 4G services and the capture of customers (many of whom now sign up to expensive 2 year plans together with their new mobile devices).
Ofcom undertook an extensive investigation into this area, including analysing the potential impact on the UK mobile market of allowing EE to commence 4G operations now prior to the formal auction process, and ultimately determined that this move would deliver significant benefits to consumers that would outweigh any competition concerns. Unsurprisingly Vodafone and O2 both immediately announced their disappointment with this decision. The other UK mobile network, Three, has largely been silent on this issue, although presumably that is because it has been in the process of completing the purchase of additional spectrum from EE. This additional spectrum is in the same 1800 MHz range and which EE has been compelled to sell off as a condition to allowing their 2010 merger. Three will ultimately need to make a similar application to Ofcom, even though recent reports indicate that it will not be able to launch services using this spectrum until some point in 2013.
A similar application to "refarm" existing 1800 MHz spectrum has also been made in France my mobile operator Bouygues. It will be interesting to see what view the French Regulator (ARCEP) reaches in response to their application.
Watch this space…
Assuming that 4G services are as popular as many observers expect them to be, and provided that the costs do not put off consumers and early adopters, it will be interesting to see how this story develops from here, both in terms of what it means for the general market for mobile services in the UK , and also as to any potential grounds for future complaints whether in the UK or at European level.
O2 and Vodafone – are unhappy that following the merger between T-Mobile and Orange EE has too much spectrum and should be restricted in its bidding for new 4G spectrum (even though EE have been required to sell part of their 1800 MHz allocation as a condition of the merger).
EE – does not believe that it should be subject to any restrictions, and is also still concerned that past allocation of spectrum in the 900 MHz bands at a cheap annual rent that is now also being used for 3G gives Vodafone and O2 an unfair advantage.
Three – currently only has spectrum in the 2.0 GHz band, and wants to make sure that it does not get further marginalised by the other three bigger players (essentially wanting priority access to new 4G spectrum to preserve its position).
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"The application by EE to use its existing 1800 MHz spectrum (i.e. spectrum that it already has rather than having to be "won" via the new auction process) was a clever move on their part, as 4G technology is already available that also allows the use of that spectrum for 4G purposes. "