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4G Auction Process in the UK

Ofcom published its Statement of decision for the auction of wireless telegraphy licences for the use of 4G mobile spectrum in the 800 MHz and 2.6GHZ bands on 24th July 2012. This Ofcom Statement follows a number of further consultations that started in March 2011, which have essentially meant that the auctions, when they do finally take place, will be at least a year behind the original anticipated schedule.

October 2012

The highlights of the Ofcom Statement are as follows:

  • Four Networks - Ofcom wants to ensure that there continues to be a fourth credible national mobile network operator in the UK (in addition to EE, Vodafone and O2 – who are by implication assumed to bid and win spectrum under the auction process). Ofcom has therefore reserved spectrum in the 800 MHz, 1800 MHZ and 2.6 GHz bands for this fourth operator. The obvious candidate for this spectrum is Three (who are currently a 3G-only operator (subject to roaming arrangements on 2G) and who currently only have spectrum in the 2.1 GHz band. The reserved package would therefore theoretically be perfect for them, although as this is an auction there is no guarantee that Three will be successful . It will all depend on whether any other credible players come forward as part of this process.
  • Coverage Obligations – in order to promote competition and drive roll-out of networks and services, Ofcom has decided that one of the 800 MHz licences will have an obligation to provide a service offering indoor reception to users for 98% of the UK population and to an area in which at least 95% of the population of each of the UK nations live (thereby avoiding initial concentration on key towns and cities in England, at the expense of areas of Scotland, Wales and Northern Ireland). These obligations need to be satisfied by 31 December 2017.
  • Ofcom comments that while it will only impose a licence obligation on one licensee, it
  • network cables
  • expects that competition will encourage the other operators to build similar networks with similar coverage. It will be interesting to see what impact the coverage obligations will have on
  • the relative prices paid at auction, and also as to which of the "big three" networks will end up with this obligation.
  • Spectrum packaging and reserve prices – the Statement broadly sets out how frequency bands will be packaged (as each licensee will effectively be slotting into different slices of the same general spectrum band), adopting the simpler of the two options initially proposed. Reserve prices have also been set. While the actual sums paid will depend on the amounts that the network operators ultimately bid to secure key frequencies, the reserve amounts are moderately low (e.g. £225m to £250m for spectrum in the 800 MHz and 1800 MHz bands, and ranging from £0.1m to £15m for different slices of the 2.6 GHz band). However it is thought highly unlikely that we will see similar amounts bid this time round as were seen in the 3G auctions in 2000, which raised a total of £22.5bn. Recent experience in other countries (e.g. Germany where the 4G auction raised "only" €4.4bn as compared to €30bn for 3G), would tend to suggest that the total amount raised through the 4G license auctions will be more in the region of £3bn to £5bn. Pressure will be intense on each of the current four network operators to maintain their business into the 4G future . The presence of another genuine contender could still drive prices up beyond currently anticipated levels.
  • Licence conditions – Licences will be UK wide and technology and service neutral – therefore allowing other technologies to be deployed using these frequencies (e.g. fixed wireless broadband technologies). Spectrum trading will generally be permitted (save in the case of the 2.6Ghz band where restrictions will apply). Licences will initially be granted for an indefinite duration – in the first 20 years Ofcom will only have limited powers to revoke a licence, and after that will be able to revoke on five year's notice for spectrum management reasons.
  • DTT Co-existence – the Statement also addresses potential issues with 4G services interfering with DTT (digital terrestrial television) signals transmitted in adjacent bands, which may effect up to 2.3 million UK households. These measures focus in particular on support (financial) for those households that are likely to find it most difficult to self-install a filter that will avoid this problem.

At the time the Statement was published, Ofcom expected to invite applications to take part in the 4G auction before the end of 2012, with the bidding process expected to commence in early 2013, with a view to enabling the successful bidders to start offering 4G services to consumers later in 2013. Some commentators have already suggested that this ttechnologiesimeframe will be difficult to stick to, especially if any party (whether a mobile network operator or otherwise) launches a complaint arising out of the auction process. Unfortunately, given the various conflicting vested interests in play and the amounts of money at stake, this cannot be totally ruled out even at this stage (see 4G is finally coming to the UK).

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Patrick Clark

Patrick Clark

Patrick Clark looks at the impending 4G Auction Process in the UK and what Ofcom is hoping to achieve.

"Licences will be UK wide and technology and service neutral – therefore allowing other technologies to be deployed using these frequencies (e.g. fixed wireless broadband technologies)."