If the 3G auction took place during mobile’s infancy, the 4G auction is firmly ensconced in its adolescence. That was the turn of phrase used by David Stewart, Ofcom’s competition policy director, to describe the increasingly aggravated 4G auction process.
Three CEO David Dyson was well behaved during the event the operator sponsored on The Future of Mobile. He calmly outlined his objections to Ofcom’s proposals for the spectrum sell-off. These centred on the removal of a guaranteed sub-1GHz chunk for a fourth operator. Dyson described Ofcom’s technical modelling as flawed and urged it to reconsider. He said: ‘As a CEO of a mobile operator, the conclusion to the contrary would be irrational, questionable and unnecessarily risks future competition in the UK mobile market.’ Strong words, but delivered diplomatically.
Dyson was also critical of the two companies who currently hold sub-1GHz spectrum – O2 and Vodafone. He felt the licence fees for the operators’ refarmed 900MHz band need to be re-examined. He said: ‘It’s a valuable asset of the country and to not get the return on that asset is wrong and should have been sorted. It needs to be done as soon as possible.’
Not content with that, he also turned his attention to Ofcom’s provisional decision to grant Everything Everywhere permission to refarm its 1800MHz spectrum for 4G. Delegates entered the conference, held last week in central London, knowing that the consultation had been extended until May.
Dyson said the operator had been ‘gifted’ the spectrum and had a huge competitive advantage as a result. He felt Ofcom should have delayed that liberalisation until after the separate 4G auction. He said: ‘If Everything Everywhere get spectrum liberalisation, they will use it as a marketing position and push the strength of the network to differentiate themselves. It could be a premium to 3G services today – a bit more niche and targeted at a higher value segment. I’m not expecting a broad offer from day one.’
Dyson found an ally in Nicholas Blades, Telefónica’s head of spectrum. He said: ‘We are concerned about the market dividing between the haves and the have nots. We are concerned about strategic behaviour – essentially denying spectrum to others to be competitive.’
A counter view
Unsurprisingly, Everything Everywhere’s director of spectrum strategy Kip Meek disagreed. He warned there was a ‘great danger’ in regulators trying to engineer outcomes and said putting the brakes on Everything Everywhere refarming its spectrum was an example of that. In outlining his concerns, Meek played a rather populist card to delegates.
He said: ‘This is about consumers. They are already behind and we don’t want them to fall further. The thing that will give the biggest impetus is the launch of a slightly new service. LTE is much faster and it’s inappropriate to deny consumers the benefit of LTE when we are already behind most of Europe.’
It is easy to be cynical about Meek’s stance, but it could be argued that what has been forgotten amid the operators sniping at Ofcom (and in some cases each other) is the benefits that 4G will bring. The other speakers were somewhat crowded out by the spectrum debate, but the forum also heard how mobile is gearing up for the future, whether through mobile wallets or the increasing importance of mobile commerce.
Ian Carrington, director of mobile advertising sales at Google, spoke of the latter hitting ‘critical mass’ this year. He said: ‘If you don’t have a mobile-optimised site, it is effectively like closing your shop on a Tuesday [because of lost sales].’
As services become more sophisticated, demands on data will increase and this is why the auction is so important. Dyson said Three accounts for 40% of mobile data across the networks and raised the case of one customer who downloaded a staggering 573GB of data in February.
The conference was preceded by press reports suggesting that Dyson would use his speech to threaten Ofcom with legal action if the auction rules did not go Three’s way. While he eschewed this opportunity, he refused to rule it out entirely. Speaking to Mobile, Dyson said: ‘The most important thing is to get the right result. The decisions [Ofcom] will take will shape the industry for the next 10 years.
There’s a level of urgency to consider but with a 10-year timescale, it’s critical the right decision is made. If they need more time, we will support that.’
Ofcom’s Stewart opened his remarks by describing the mobile sector as ‘the great success and poster child of regulatory policy’. When Ofcom outlines the rules for the 4G auction this summer, we will see whether it will cause operators to resemble choirboys or surly teenagers.