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The year ahead – 4G for all?

One of the biggest stories in the UK Telecoms sector over the last year has been the continuing saga over the launch of 4G mobile services.

December 2012

At the start of 2012, the situation looked uncertain. The telecoms regulator, Ofcom, was effectively trying to get agreement from the UK's existing mobile networks (Everything Everywhere/EE, Vodafone, 02 and Three) to its own auction plans. While Ofcom was in the driving seat as far as policy setting in this area was concerned, the ease with which its decisions can be challenged, and the vested interests of each of the four mobile networks, appeared to have paralysed the process. When the 4G auction process discussions started in the UK, it had been expected that auctions would probably have been completed by 2012. A, at the start of the year, there was no guarantee at all as to when this would actually happen.

EE gets in early

Fast forward twelve months and we see a very different landscape. We already have 4G services being provided by EE on its existing 1800 MHz spectrum – sanctioned by Ofcom in August following receipt of an application from EE earlier in the year. This was a bold move by Ofcom, as it allowed EE to start providing 4G services well in advance of their competitors, effectively providing them with an early monopoly on 4G services in the UK. (read: "4G is finally coming to the UK, sort of …".

The October Deal on 4G

In October, a Government backed deal was announced whereby the networks agreed to allow the launch of EE services and thespeed process of the 4G auctions to proceed unimpeded. This was largely inspired by moves behind the scenes that had resulted in frequency in the 800 MHz band being made available for use by the mobile networks by May or June 2013, six months ahead of the previous target date of the end of 2013 (see: "UK 4G Accelerares into Summer 2013").

Final 4G Auction Rules Published

With the way forward now seemingly clear, Ofcom recently published the final regulations and a timetable for the 4G mobile spectrum auction. The rules set out in detail the process involved in the auction for new spectrum in the 800 MHz and 2.6 GHz bands – from applying to take part, through to bidding and finally issuing the licences to use the spectrum.

4G Auction chronology:

11 December 2012* The Application Day Prospective bidders submit their applications to Ofcom together with an initial deposit.
December 2012 Qualification Stage Applications are reviewed to determine who can go on to bid in the auction.
January 2012 The Principal Stage Bidding begins. This could take a number of weeks. Bids will be placed online over secure internet connections, using software that has been developed specifically for the auction.
February/March 2013 The Assignment Stage Bidders informed what they have won and its cost.
February/March 2013 The Grant Stage Licence fees are paid and licences granted.
May/June 2013 New 4G services launched New 4G services expected to go live from a range of providers.

* Final date to be confirmed before the end of November 2012.

Ofcom has also confirmed the reserve prices for the spectrum that is being auctioned. The combined total is £1.3 billion. It is expected that the actual prices reached will be somewhere in the range between £3 billion and £5 billion. This is higher than the reserve prices, although considerably less than the £22.5 billion raised through the auctions for 3G mobile spectrum in 2000.

Things to look out for…

The scene is now set for the auction process to begin. We have the rules in place and seemingly also the will on the part of the key participants to move forward to enable full launch of 4G services next summer.

However, there is still a number of interesting issues to look out for as the auction proceeds:

  • Pricing – as described above, it is widely expected that the successful bidders in the 4G auctions will end up paying significantly less than in the 3G auctions. However the pressure will still be intense on each of the current four network operators to maintain their business into the 4G future. Failure to secure key 4G frequencies could be disastrous in the current marketplace, and with 5G still a long way off, the current mobile networks simply cannot afford to miss out.
  • Bidders – It is of course widely assumed that the bidding will focus on the existing four mobile network operators. However, it is still possible that other players may also join the process in order to secure 4G spectrum. While it seems unlikely that anyone would try to build a new retail mobile platform from scratch using only 4G spectrum – however they would not necessarily need their own 2G or 3G infrastructure as they could get access to services in these frequencies as a mobile virtual network operator (MVNO). There has also been talk of using 4G spectrum for fixed wireless services, which could mean that an alternative provider (e.g. Virgin Media) could be interested in individual spectrum packages to complement their existing fixed networks. The participation of another bidder in addition to the existing four mobile networks is also likely to drive prices up further.
  • Legal challenge – Given the history in this area, and also the regulatory systems in place, it is still by no means certain that the auction process or its outcome will not be challenged if things do not play out as everyone is hoping. There are still very few details in the public domain about exactly the basis on which the October deal mentioned above was reached, so it is not impossible that one of the mobile networks could still raise a challenge. Also with one operator having launched 4G services already, and the other dependent on the finalisation of the auction process, there may even be a competitive advantage to be gained from doing so. Similarly, an alternative bidder (who would presumably not have been involved in the October deal) may also find themselves with valid grounds for an objection. Any challenge to the auction process or to licence awards could put the whole process back by months, if not years, so it will be interesting to see how the process unfolds over the next six months. You can also expect spectators to be very sensitive to any possible developments in this area.

Wrapping up…mobile

We will be following the auction process and will update on any significant developments. In the meantime, it looks very likely that those of you in the market for a new faster mobile broadband service will have at least four options to select from by this coming Summer - at least it looks much likelier now than it did this time last year …

If you have any questions on this article please contact us.

Patrick Clark

Patrick Clark

Patrick Clark looks ahead at the roll out of 4G and the auction process that will precede it.

"The scene is now set for the auction process to begin. We have the rules in place and seemingly also the will on the part of the key participants to move forward to enable full launch of 4G services next summer."