Ofcom’s decision to impose spectrum caps shows its support for Three’s disruptive role in developing a competitive mobile market, a leading analyst said today.
Responding to today's announcement from Ofcom setting out plans for the 2012 spectrum auction, Matthew Howett, telecoms analyst at Ovum said: ‘By ensuring at least four operators can obtain spectrum after the auction is a clear admission that Ofcom values Three’s disruptive nature and role in developing a competitive mobile market.’
However he warned that the auction timetable was tight and could face serious delay if legally challenged.
He said: ‘To achieve everything Ofcom is proposing in such a tight timescale is highly ambitious and could be set back by at least 12 months should any operator legally challenge the final outcome.’
Howett said Ofcom is facing a dilemma in choosing to cap spectrum. He explained: ‘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 believes the auction will raise far less than the previous spectrum auction in 2000.
“Whilst it will be the most significant auction for at least a decade, with 80% more spectrum available than during the 3G auctions of 2000, we are unlikely to see anything like the £22.5 billion bid during that time. A lot has moved on since then including the industry’s expectations of revenues from such data services.’
Howett also warned that Ofcom needs to get the allocation right, since the licences can run for 20 years.
He said: ‘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.’