Digital Britain Lord Carter has proposed that UK mobile phone operators be allowed to hang on to 3G licences forever, and make better use of their 2G assets too.
The current 3G licences are due to run out in 2021, after which there should be another auction, but Lord Carter, in his Digital Britain report, wants to see the incumbents offered the option of Administered Incentive Pricing (AIP) for a perpetual licence, with those owning 2G spectrum being allowed to deploy 3G services in that space as well as lots more trading and sharing of networks.
The networks paid billions of pounds for 20-year licences to deploy 3G GSM technologies at 2.1GHz, but four of the five operators also have unlimited use of spectrum at 1800MHz, with two of them (Vodafone and O2) boasting holdings at 900MHz too. These bands were awarded rather than sold, and the operators pay a token £15m a year to use them, but the licences only allow the deployment of 2G GSM technologies at those frequencies - a restriction that Lord Carter proposes removing.
The GSMA - an international body representing GSM operators - has been campaigning for 3G to be allowed at 900MHz for a few years, pointing out that the greater range and building penetration would increase 3G coverage dramatically. Ofcom has always been sympathetic to this argument, which fits well with the general liberalisation of spectrum that the regulator has been pursuing.
Carter also wants to see more investment in 3G infrastructure, essential if the government is going to achieve their target of 2Mb/sec for all, but notes that as the end of the licence period approaches the licensee will proportionally be less willing to build infrastructure - a problem easily resolved by removing the time element of the licence.
Thus the move to Administered Incentive Pricing - a process whereby Ofcom uses a formula to establish what the spectrum would be worth on the open market and offers the licence to the existing user at that price, on an annual basis. This means that existing operators can be confident of their spectrum holdings, and happy to invest in new infrastructure.
Not that the future is guaranteed: network operators are still worried about the Digital Dividend spectrum, currently used for analogue TV transmissions. Lord Carter makes some references to that being used for wireless broadband, but not how it would be distributed with that in mind. That leaves Ofom's sell-to-the-highest-bidder plan as the only option on the table, which could create significant competition to the incumbent network operators, and some are saying they won't invest in more infrastructure until that's been clarified.
But it's not just about building more infrastructure: the report also recommends operators work harder to share networks at both the radio and physical level, though previous attempts have a patchy record. Vodafone and Orange proudly announced they'd be sharing networks back in 2007, and quietly dropped the project last year when no one (including us) was looking. 3 and T-Mobile are still planning to combine their 3G networks, so sharing is possible.
Of course, everything changes once operators are allowed to deploy 3G at 900MHz, and some operators will find themselves with an excess of spectrum. Lord Carter expects that to drive a lot of spectrum trading, and quickly: if the industry can't get a set of agreements in place by April 2009 then the Government will "support an imposed solution". Negotiating those kinds of deals in three months should keep everyone in the industry busy, if it proves possible at all. ®