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Ofcom won’t hold back in latest mobile spectrum auction

Aggressive pricing masks consolidation of UK airwaves

Comment Ofcom has announced its plans for the promised auction of 2.3GHz and 3.4GHz spectrum. And it’s “steady as she goes”.

A total of 190 MHz of new spectrum will be auctioned: 40 MHz of spectrum within the 2.3 GHz band (2350-2390 MHz) and 150 MHz of spectrum within the 3.4 GHz band (at 3410-3480 MHz and 3500-3580 MHz).

But, contrary to earlier plans, none of it will be held back.

The main use for these frequencies is mobile broadband. This is right at the top of the current mobile spectrum allocation and the signal doesn’t travel very well. It’s far better for adding capacity rather than coverage. The much more interesting 700MHz spectrum will be auctioned some time before 2022, once Ofcom has kicked Freeview out of that space.

Jesus Phones and some other high-end mobes already support 2.3GHz while UK Broadband, which sells the Relish service, has some 3.4GHz spectrum. Ofcom is proposing that this might be shifted as a result of the auction to give a contiguous block to the winner of new 3.4GHz space.

There is a lot of spectrum here, mostly a one-off bounty as a result of the MoD having relaxed its grip on the airwaves, and that has informed the decision for the auction process. It’s a tough call for Ofcom, which not only has to deal with a few fantastically powerful players but also has to cope with the demands of government to raise revenue.

On top of that it also has its own remit to make sure that spectrum is used efficiently – and, most complicated of all, an environment which is clearly going to change massively with the mergers of BT and EE, and O2 and Three.

Nationally, the UK will go from having had Orange, T-Mobile, O2, Three and Vodafone, with BT having a little bit of 4G spectrum, to BT, Three and Vodafone. Other operators have a little bit of spectrum but there is no national coverage from them.

The whole space is littered with damned-if-you-do, damned-if-you-don’t choices and Ofcom has negotiated these with a series of consultations. The emphasis of the announcement today (PDF) is how to release the spectrum in a way which promotes competition.

Ofcom debated systems of caps to allow no one operator to have too much of the high frequency spectrum. This would have mirrored the decision which forced EE to off-load some 1800MHz spectrum when it merged T-Mobile and Orange. Spectrum which Three bought.

Those companies which had relatively little spectrum, chiefly Three, thought caps a good idea while those with more spectrum were opposed to caps. In the event it was decided that the auction of so much spectrum meant that a cap was unnecessary as one bidder would have to spend so much to acquire it all.

The auction will be on a level playing field – there will be no provisions for new entrants as there were with the original 3G auctions. But then this is not useful spectrum for creating a whole new network. That may come with the 700MHz auction, which is the other side of the next general election.

The reserve price will be £10m for a 10MHz / 2.3GHz lot and £1m for a 5MHz / 3.4GHz lot.

Unlike previous auctions where Ofcom set up its own e-bay like site showing who was the current winning bidder there will be a policy of releasing relatively limited information: publishing the names of qualified bidders in advance of the auction, and some limited information to bidders about the level of excess demand during the auction.

In the last round of 4G auctions the 5MHz blocks sold for between £2.45m (Vodafone) and £8.25m (BT), which makes the £10m reserve for 10MHz seem a little aggressive.

One proposal, which has been kicked into touch, was that Ofcom would hold back some of the spectrum to action it later. This was seen as a way to be able to later balance allocations if one company bought too much. Ofcom, however, noted:

Eleven stakeholders submitted responses addressing the question of holding back some of the 2.3 and 3.4 GHz spectrum, four of them in confidential responses. Nonconfidential responses were received from BT, EE, H3G, Intel, Samsung, Telefónica/O2 and Vodafone. All of those respondents who addressed the proposal giving us the option of withholding spectrum from the award expressed opposition to the idea. Some respondents submitted detailed arguments, but a common theme was that an award of the spectrum in two stages risked distorting the auction and creating perverse outcomes.

While those “detailed arguments” may have included the thought that it’s wrong for the organisation which is charged with making best use of spectrum to hold some of it back the reasons for going ahead with the full allocation were more about money and the auction process. Today’s document talks at length about having planned to hold back 40MHz.

Ofcom has confirmed that our original reporting that it was looking at sitting on 60MHz was correct.

In addition to BT, Three and Vodafone it would be good to see more applicants. Candidates might include Sky, TalkTalk and AQL, all of which have a portfolio of fixed and mobile broadband offerings.

The current intention is to open applications for the auction during December, and for bidding to start early next year. ®

The Register has created a timeline of TalkTalk's contradictory comments following on from the initial announcement of a website outage.

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