Cutting Room: Spectrum debate

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The future of UK spectrum hasn’t become any clearer with the announcement from the Government that an auction of 800MHz and 2.6GHz spectrum will go ahead next year

Government hopes this will pave the way for investment in 4G services and mobile broadband, and also raise it some much-need cash to help the country out of an economic quagmire.

But for operators, there continues the argument over who owns what and how they can use it. It is a long-running discourse, of course, and one that will continue to rear its head as the UK moves towards an auction date.

The argument essentially boils down to the cost of running a network on different spectrum.

Lower spectrum values carry signal further, so Vodafone and O2, which split the 900MHz space between themselves, require less infrastructure than Three and Orange, who work off 1800MHz.

So, as expected, Vodafone and O2, are happy to crow about the Government’s decision, hailing it a smart move. They are also pleased they will be in a position to use space previously reserved for 2G services for 3G.

Three meanwhile is downbeat, calling the decision unfair. Although it will be able to use 800MHZ spectrum following auction, it had hoped Ofcom might force Vodafone and O2 to refarm the 900MHz space and gain an even share of that too.

Everything Everywhere doesn’t currently have on official stance, but one suspects it follows the same line as Three as it is currently out of the 900MHz club.

It is also a legacy issue. In other markets, lower spectrum was redistributed evenly across the operators at an early stage, but in the UK, Ofcom has been slow to realise a problem existed and even slower to respond, making a rod for its own back in the process and creating two polarised views on anything it does.

If it had been quicker out of the traps, it might have been able to put all of the arguments to bed by now like in European markets such as the Netherlands, but instead finds itself in a sticky situation facing detractors whichever way it turns.

The real question is what will happen now? Will Three contest the Government’s plans in order to level the playing field in what it sees as a distorted market? Will consumers really get better services from the likes of Vodafone and O2 now they can shift their existing spectrum from 2G to 3G services?

And will the value of the auction be tempered now the incumbent spectrum owners know the value of their current systems and what they have to play with, both in terms of assets and capex? Or will new players be enticed into the auction and drive up prices?

As raised in the last issue of Mobile News, the issue remains of how you make a business case for any new entries to the spectrum market.

There are sure to be many unknown suitors who might consider buying up spectrum in the next auction as the world becomes increasingly mobile and the delivery of goods and services hinges on its mobility.

But how do they make it work for them on a financial level if the initial price is astronomical and they then have to invest in infrastructure?
Even the date of the auction is unclear, with the whole of 2011 being touted by various parties as possible dates for an auction.

What is clear is that the book remains firmly open on what the auction will bring, and we can be sure to expect some bumps and surprises before the curtain is brought down on the next auction.

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