Ofcom 5G auction ends with UK carriers spending £23m for choice spectrum positionings

What's £23m compared to £1.35bn?

The three most important words in any estate agent's lexicon are: "Location, location, location." The same is true for the UK's mobile carriers, who have just spent £23m to get their choice positions for their recent spectrum purchases.

Dubbed the "assignment phase," this comparatively modest spendathon has followed Ofcom's latest 5G spectrum auction, where the UK's four carriers forked out a combined £1.35bn on access to the lucrative 700MHz and 3.6-3.8GHz airwaves for 20 years.

The assignment phase allowed carriers to place a monetary sum on where they want their new holdings, and how much they value avoiding spectrum fragmentation.

Larger blocks of spectrum are more efficient and better suited for the data-intensive nature of 5G.

Despite that, some fragmentation proved inevitable. EE's holdings in the 700MHz bands were broken up into two chunks of 10MHz and one chunk of 5MHz (723-733MHz, 778-788MHz, and 738-758MHz). It's a similar story for Three and O2. Vodafone, which plans to reuse its existing 900MHz holdings for long-distance 5G connectivity, did not bid in the 700MHz band.

Originally snatched from terrestrial digital TV service, the 700MHz band has proven attractive to carriers, thanks to the long ranges offered and its ability to penetrate buildings.

In a statement, Philip Marnick, Group Director Spectrum at Ofcom, said: "Now the auction is complete, these companies can use these airwaves to rapidly rollout better mobile services to people across the UK.

"This additional spectrum will also support the ongoing launch of new 5G connections for people and businesses. Importantly, the bidders also have the flexibility to make trades, so they can optimise use of the spectrum they have won in the auction with their existing airwaves."

This optional assignment phase process followed a negotiation period, where carriers could arrange to divvy up the spectrum pot between themselves on an amicable basis, without any money necessarily changing hands.

O2 and Vodafone have entered into an agreement to swap some of their existing holdings in the 3.6GHz band, which would create a contiguous block of 80MHz for the former, while creating several blocks in close proximity for Vodafone. This deal is subject to Ofcom's approval.

Although all carriers have regarded fragmentation as something to be avoided, there's no real consensus about how to go about it. An Ofcom consultation, published earlier in 2019 [PDF], showed Three arguing for market-based solutions, with the other three carriers urging for Ofcom to take a leading role.

Top-down intervention has proven to be the most likely outcome. The Telecoms Diversity Taskforce report, published last month, urged the government to address spectrum fragmentation in order to lower the barrier for new OpenRAN entrants to the UK market.

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