Analysis What if you built a network, and nobody came?
In May this year, the frequencies 1781.7-1785MHz paired with 1876.7-1880MHz (known as the GSM Guard bands) were made available to 12 licensees under the Wireless Telegraphy Act (WTA).
They are known as the Guard bands as they separate parts of GSM spectrum from DECT spectrum. In the past radio equipment was known to "bleed" at the edges, so the guard bands were there to stop the bleeding spreading into spectrum that it shouldn't.
In the 20 or so years since GSM networks have been around, radio equipment is much more efficient and doesn't suffer from these effects, so Ofcom decided to make the spectrum available. Two sets of 3.3MHz is a valuable commodity in terms of spectrum.
Ofcom awarded the spectrum by holding an auction with a reserve price of £50,000 per license. Up to 12 licenses would be awarded. Ofcom allowed anyone to bid on any number of license slots (i.e. from one to 12 licenses) and the award was made purely on a financial basis.
Ofcom published the complete matrix of bids as the award was for between seven and 12 licenses. It was a close thing at eight licenses as a few bidders put in high entries for low numbers of licenses and dropped the amount as the license numbers increased.
Ofcom arranged the auction in a sealed bid process in a "what you bid is what you pay" arrangement, which led to the lowest price paid at £50,110 by Spring Mobil and the highest £1,513,218 by COLT.
Some have argued that the highest bidders paid over the odds, but Ofcom is putting a good spin on it saying it's in line with its mobile strategy. The total amount of the licence fees paid was £3.8m - not bad for Ofcom's first spectrum auction.
Of course, compared to the license fees paid for 3G spectrum (around £6bn per license) it's peanuts.
In the end it was close, but 12 licenses were awarded. They are national UK licenses, though the operators of the licenses have to cooperate so they don't interfere with each other. As part of the license condition all licence holders had a obligation to Ofcom to agree on an engineering co-ordination plan for the joint use of spectrum. The industry group is called Mobile200 and 11 licensees joined - O2 was awarded observer status for the discussions as it refused on principle to pay to negotiate the code of practice.
On 2 November the 11 members of Mobile200 handed the agreement into Ofcom, still without O2 having joined.
Much of the agreement concerns siting cells (like the Sitefinder database for GSM and 3G networks) and this database will be owned by Mobile200.
Though the licenses are only low power (sub 200mW compared to tens of Watts for traditional GSM systems), they are suitable for services such as in-building GSM, local area GSM (such as in a theme-park) or other constrained areas. There are 15 GSM channels available, each one being able to carry eight voice calls.
Having a reasonable number of channels will allow multiple operators to co-exist in an area and also allow single operators to cover larger areas (in such a way that multiple GSM basestations won't interfere with each other). If the cell is mounted on an external mast, it can't be more than 10 metres high, however, in-building use can be to any height (so build a plastic greenhouse on a terrace on Canary Wharf and you can get an "internal" cell quite high).
The 12 companies winning licenses and the prices they paid were:
British Telecommunications PLC - £275,112
Cable & Wireless UK (England) - £51,002
COLT Mobile Telecommunications Ltd - £1,513,218
Cyberpress Ltd - £151,999
FMS Solutions Ltd - £113,000
Mapesbury Communications Ltd - £76,660
O2 (UK) Ltd - £209,888
Opal Telecom Ltd - £155,555
PLDT (UK) Ltd - £88,889
Shyam Telecom UK Ltd - £101,011
Spring Mobil AB - £50,110)
Teleware PLC - £1,001,880)
A license, but what to do with it?
Having a license is all very well, but now licencees must be wondering what they've got themselves into. Just because they can run a GSM service doesn't mean anyone will use it, in fact it may well be difficult to get people onto your network. It's extremely unlikely the existing mobile operators are going to want to have anything to do with these new upstarts, they've invested millions (err, billions) to get to where they are today. The last thing they want is new entrants poaching customers or moving users off their networks when they move into, say, an office environment. They especially don't want their customer doing it with equipment (i.e. handsets) that they've heavily subsidised.
Unfortunately, what this means is that the new players are going to have to issue new SIMs (subscriber identity modules) and they won't work on existing GSM networks, or users will manually have to select the new network when they're in range. This makes it all very difficult, and users won't bother if it's hard.