Networks tell Government committee that sub-GHz spectrum allocation is unbalanced
Everything Everywhere (EE) and Three have told a Department for Culture, Media and Sport (DCMS) select committee there is an imbalance in the UK regarding the sub-1GHz spectrum.
The sitting, held at Portcullis House in Westminster, was the first of the select committee’s investigation into the impact of spectrum allocation on a competitive market and the forthcoming auction spectrum for LTE and 4G services earlier this year.
Evidence was given to the committee by EE deputy CEO Richard Moat (pictured) and VP of strategy planning and regulatory Nicolas Ott, as well as then-Three CEO Kevin Russell and director of net- work strategy Phil Sheppard.
Both networks told the committee they had been put at a disadvantage because O2 and Vodafone were given the go- ahead to re-farm the 900MHz spectrum that had originally been handed to them, free of charge in the early 1980s, for 3G services.
Moat, who was the first to address the committee, said because the go-ahead had been given by
Ofcom for the re-farming of the 900MHz spectrum, it was vital that both EE and Three were able to purchase large portions of the 800MHz spectrum when it goes to auction possibly in Q1 next year.
Sub-1GHz spectrum, such as the 900 and 800MHz bands, is seen as a necessity in any 4G roll-out by the operators, as it is better suited to distributing this service to a wider audience. It is also better suited to penetrating ‘indoor areas’ with 3G coverage.
“This (the handout of the 900MHz spectrum in the 1980s) was perpetuated by the fact that spectrum was liberalised with- out charge at the beginning of the year for 3G,” Moat said.
“If there are not provisions put in place to allow Three and EE to get significant portions of the 800MHz spectrum, then it will perpetuate itself into the 4G environment into the future.”
Russell said the issue of equal amounts of lower bandwidth spectrum across the market was a necessity for a truly competitive market to be established, something that had been done in every other EU country Three operates in.
“There is a well-documented and well-understood competitive advantage towards this spectrum, one that O2 and Vodafone have enjoyed in the marketplace for a long time. It has been carried over into 3G with the liberalisation,” Russell said.
“It’s a distortion that has been largely addressed in other European countries that Three operates in and there has been an allocation of 900MHz spectrum (in those countries).”
Both Moat and Russell said they believed revenues and company growth would be severely affected should they be unable to obtain a substantial part of the 800MHz spectrum, as they would not be able to attract customers to what would be an inferior network.
Russell said the strength of Three’s business was based on its ability to supply a strong mobile broadband offering.
He warned that should Three lose out on a large portion of 800MHz spectrum, it would be unable to compete.
“To get ourselves up to a 20 per cent market share we must do that with leadership in mobile broadband and data, and the fundamental requirement of customers to have a strong network.
“Our abilities to take custom- ers from O2, Vodafone and EE and to build market share, has a fundamental premise that we will have at least a comparable network in terms of in-building coverage, and the capacity and speed to support customers.
“In other words we would not be able to grow as rapidly as we needed to, unless we can match our competitors on spectrum.”
Level playing field
Moat agreed, and said if O2 and Vodafone had a significant advantage over, in particular, the strength of their in-building coverage, in the long-term this would have a massive impact on the mobile broadband sector as a whole.
He said EE wanted ensure this did not happen, by acquiring enough sub-1GHz spectrum to create a “level playing field” in the UK.
Moat also said should EE have to try to do this on a higher spectrum band, the costs would be crippling.
He said: “There is a massive impact on cost. If you are try- ing to achieve the same end- results using a higher spectrum frequency, say 2.6 or such, it may be significantly more expensive to do.”
As well as highlighting his grievances with the go-ahead for Vodafone and O2’s spectrum to be re-farmed, Russell also said the level playing field all four operators had previously enjoyed would be jaded over the next 18 to 24 months, as the ‘original’ operators began pulling ahead.
He said this was because Vodafone and O2’s networks would become stronger as their networks could better penetrate indoor areas with 3G services on their 900MHz band.
Russell said while Three was able to supply 99 per cent of the country with strong outdoor 3G coverage on its 2.1GHz spectrum, it was only able to provide 79 per cent of the population with strong indoor coverage.
“It’s important for us to talk very clearly around indoor and outdoor coverage,” Russell said.
“The challenge with the high-frequency spectrum (Three uses) is, while it might cover the population, you struggle to penetrate the buildings.
“So, for ourselves and EE, it is vital we acquire low spectrum to be able to take indoor coverage up to the high 90s, to compete.”