Ofcom says it wants the auction to take place in Q1 next year and will impose auction caps on operators to guarantee competition
Ofcom has today (March 22) outlined it’s plans for the auction of mobile spectrum to mobile operators allowing them to provide LTE technology to customers across 95 per cent of the UK.
Ideally Ofcom wants to start the auction of the spectrum, which is the equivalent of three quarters of the spectrum in use today, in the first quarter of next year.
The auction is set to be the single largest auction of frequency in the UK – a total of 250MHz extra spectrum (80 per cent more than was auctioned in 2000 for 3G services) will be available to the operators.
Two spectrum bands will be available for purchase – the 800MHz which has been freed – up due to the switch from analogue to digital television switch, and the 2.6GHz, which at a higher frequency is ideal for the delivering the capacity to deliver high mobile internet speeds.
Ofcom says, that in order to guarantee competition in the market moving forward it has proposed imposing limits on the amount of spectrum bidders can win. In order to achieve this it is introducing auction “floors” and “caps”.
The use of auction floors, Ofcom says will involve disregarding any auction outcomes in which four companies do not win the minimum amount of spectrum necessary to provide higher quality data services.
This can involve different combinations of spectrum, each of which could be sufficient to ensure a credible competitor.
It defines the minimum amount as one of five combinations. These are outline by Ofcom as:
“2×5 MHz of sub 1 GHz spectrum and 2×20 MHz or more of 2.6 GHz; or 2×5 MHz of sub 1 GHz spectrum and 2×15 MHz or more of 1800 MHz; or 2×10 MHz of sub 1 GHz spectrum and 2×15 MHz or more of 2.6 GHz; or 2×10 MHz of sub 1 GHz spectrum plus 2×10 MHz or more of 1800 MHz; or 2×15 MHz or more of sub 1 GHz spectrum.”
Auction caps according to Ofcom will guard against longer term risks to competition from “any one licensee holding a disproportionate amount of spectrum”.
Two of these safeguard caps are proposed:The first is a sub 1GHz safeguard cap of 2×27.5 MHz, which will mean that no one competitor can obtain more than this amount of sub 1 GHz spectrum.
The second is an “overall spectrum holdings cap” of 2×105 MHz, which will mean that no one competitor can obtain more than this amount of spectrum overall.
Ofcom says that statistics show that current 2G and 3G coverage in the UK differs between urban and rural areas.
It has, as part of its proposals suggested that in order to ensure more uniform coverage, operators would need to promise to supply LTE services to a certain parts of the country – rural areas in particular – on top of any services they will supply to urban centres.
“Vital” to the industry and the UK
Ofcom chief executive Ed Richards (pictured) said the auction was not only critical to the future of the UK mobile industry but also to the wider economy – providing essential features of the modern world.
Richards said: “Our role as the independent regulator is to award this spectrum in a way that secures the best use of the spectrum for the benefit of citizens and consumers in the UK.
“That is why we are proposing to design the auction in a way that not only encourages investment but also promotes competition and delivers wide coverage of services.”
Ovum lead analyst Matthew Howett believes the capping of spectrum could potentially cause discontent amongst some operators.
Howett said: “The use of spectrum caps is bitterly controversial since they effectively distort what is otherwise a market mechanism designed to allocate spectrum to those who value it most. However Ofcom is essentially stuck between a rock and a hard place.
“If they were to leave the auction open they risk a player leaving the market and further consolidation; possibly to the detriment of consumers.”
Howett also outlined the importance of the auction and said Ofcom needed to ensure everything was done correctly.
“Given that the licenses could be indefinite in duration and not be taken back for spectrum management reasons for at least 20 years, the importance of getting things right now can’t be underestimated.
“Operators are likely to focus their response around the assumptions Ofcom has made on the minimum amount of spectrum needed to support the services they are planning to launch, and the overall caps these imply.”