Three has won its battle to ensure a level playing field in the upcoming spectrum auction, with Ofcom announcing today that there will be strict caps on the amount of spectrum allocated to each bidder.
Explaining its decision to cap spectrum Ofcom said: 'There would be a significant risk to national wholesale competition if there were fewer than four national wholesale competitors with credible spectrum portfolios for providing higher quality data services.’
The ruling will be welcomed by Three which had lobbied hard for limits on the amount of spectrum allocated to each bidder.
Announcing plans for the largest ever single auction of additional spectrum for mobile services in the UK, Ofcom said there would be with limits on the minimum and maximum amounts of spectrum bidders can win, known as auction ‘floors’ and ‘caps’.
Bidding in the auction, which will begin early next year, will follow strict lines. Ofcom said it will disregard ‘any auction outcomes in which four companies do not win the minimum amount of spectrum necessary to provide higher quality data services’
Ofcom proposes that this minimum amount should be one of the following five combinations:
- 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.
Ofcom also proposes to put in place safeguard caps to guard against longer term risks to competition from any one licensee holding a disproportionate amount of spectrum. Two safeguard caps are proposed:
- 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.
- 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 also wants to include a coverage obligation in one licence for the 800 MHz spectrum. The obligation would require the licensee to provide a mobile broadband service covering 95% of the UK population.
It is expected that bidders will factor in the cost of achieving this obligation when making bids for the licence. This should result in coverage for future mobile broadband services that approaches today’s 2G coverage. The date for meeting these obligations would be the end of 2017.
It is also proposing a requirement to cover certain rural areas. Stakeholders will be consulted on this proposal.
Ofcom chief executive, Ed Richards, said: ‘The auction is not only critical to the future of the UK mobile telecommunications market but it is also of significant importance to the wider economy. It will support a wide range of data services that are fast becoming essential features of the modern world.
‘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.’
The auction will sell off the equivalent to three quarters of the mobile spectrum in use today and 80% more than the 3G auction which took place in 2000.
The new spectrum will provide much needed capacity for the fourth generation (4G) of mobile technology, set to deliver significantly faster mobile broadband services – approaching today’s ADSL home broadband speeds.
The auction will be for two spectrum bands – 800 MHz and 2.6 GHz. The lower frequency 800 MHz band is part of the digital dividend, which is being freed-up as the UK switches from analogue to digital TV. This spectrum is ideal for widespread mobile coverage. The 2.6 GHz band is at a higher frequency, and is ideal for delivering the capacity needed to deliver higher speeds. These two bands add up to 250 MHz of additional mobile spectrum.