The fight between Everything Everywhere and Vodafone and O2 over existing radio spectrum looks like getting ugly just as the flag waves over the next fight for bandwidth
Some interesting steps on the UK’s long and winding road to upgrade its antiquated wireless infrastructure last week, and to deliver finally on the promise of the mobile internet.
Except it was a case of one step forward and two back, as Everything Everywhere’s withdrawal of some early recourse to legal action against the UK Government is only likely to spiral up tension between it, the 1800MHz holder in the blue corner, and its chief rivals, O2 and Vodafone, the 900MHz holders in the red.
Because Communication Minister Ed Vaizey’s apparent acceptance of Everything Everywhere’s beef – that it has no choice 900MHz spectrum as it stands, and will have less choice sub-1GHz spectrum if no conditions are placed on rivals in the auction of the digital dividend – puts the industry effectively back to square one.
Which is not to say Everything Everywhere doesn’t have a case; it may well have a good argument, but the balance of spectral power is a tough call as Ofcom has found. Indeed, Vodafone and O2 can themselves put forward a strong case about the significant spectral holding Everything Everywhere has now with the unification of Orange and T-Mobile.
But Vaizey appears to have conceded that, although the playing field is more level with the merger of Orange and T-Mobile, there remains a marginal incline for O2 and Vodafone.
It seems Vodafone and O2 celebrated early. If indeed Ofcom is to consider again the case of Everything Everywhere, then O2 and Vodafone will be aggrieved, and fight it. Effectively, we are no clearer than we were 18 months ago. This latest turn has appeared like a cul-de-sac. Where next?
Well, it seems likely some clarity will come in February, if not sooner, as O2 and Vodafone see the reason and implications for Everything Everywhere’s new stance.
Ofcom will be, finally, required to make clear the bidding rules for the auction of 800MHz and 2.6GHz by Summer 2011, paving way for the horrifically-complicated auction proper in late 2011 or, as now seems more likely, early 2012. Word is the auction will be an open process, rather than a closed bidding, and follow the form of the recent German auction.
Which I have, at this point, little clue about. Except that it could stretch to 22 bids, or lots of spectrum. It is not even clear at this stage whether the 800MHz and 2.6GHz will be auctioned together, or apart. In six months, all this detail will likely be familiar to us all.
So, then, blam, super-fast mobile broadband, and operators dreams come true?
Well, not exactly. Though, it will be closer a reality by the time UK operators pull their socks up than it is now, as their grandstanding contemporaries in Sweden, Norway, Hong Kong and Germany, roll out LTE networks without any compatible handsets.
In this sense, UK operators and UK consumers will hardly notice the latency of the UK industry in technology roll out. Their timing is okay.
Investment in infrastructure, besides the money they are required to fork out to a Government that is decidedly short of cash, will be considerable. But this will not likely be a repeat of the 2000 3G auctions, which netted the then-Government £20 billion.
The recent German auction netted €4.4 billion (£3.67bn), and that should perhaps be a better marker. And investment in infrastructure is considerably less.
Operator conversations about next-generation infrastructure kit are happening now with the likes of Ericsson, Huawei and Nokia Siemens Networks.
They are claiming returns on investment for operators of around three years – compared with 10 years for fixed line infrastructure and seven years for wireless infrastructure, traditionally.
This is a remarkable calculation, and one that makes the gamble of a business with 20-odd million subscribers in a madly-competitive market much less.
Down the line – and we are talking 2013-2014 – LTE handsets will start to be mass-market as the handset replacement cycle turns full, GSM traffic will decline and the smart spectrum refarming Ofcom is just proposing now will enable operators to take better advantage of the efficiencies of LTE bandwidth.
More savings, fewer base stations, cheaper backhaul, better service. This is the dream.
And yet in all of this, operator revenues will hardly notice. They are stuck on pause now. Operators will be required to manage traffic, to guarantee quality of service as train commuters surf the web and download video at 100Mbps and 100mph.
This net neutrality debate will be old hat, some Generation Y concept.
Nothing in life is free, and fair controls will be in place on capacity and content. Recent moves by UK operators to eradicate unlimited data tariffs show that already.
And yet, users will get all this special service, with fast-lane bolt-ons, for £35 per month, plus inflation. O2 will probably still be telling business dealers to hit £40 ARPU to get full revenue share.
The advance comes in the efficiency gains, the reduced operational expenditure, the better profit margin.
And then, in 2016 maybe, LTE Advanced (or ‘4G’ proper, to split hairs) will be on the cards, promising (up to) 1,000Mbps on the downlink. And the industry will renew itself again.
And operator revenues will still be flat.