A war has broken out among the operators as they prepare to give their responses to Ofcom’s 2012 spectrum auction proposals.
Sources said the risk of a delay to the auction is now very real after the networks issued objections to the regulator’s proposals.
Operators submitted their response to Ofcom’s proposals this week, with Everything Everywhere admitting it has ‘fundamental disagreements’ with the regulator’s plans.
Mobile saw details of Everything Everywhere’s submission as it went to press on Tuesday (7 June). It is thought all the submissions will appear on Ofcom’s website this Friday (10 June).
Everything Everywhere VP of strategy, regulatory and planning Nicolas Ott said: ‘While we agree with the overall design of the proposals, there are several of Ofcom’s detailed proposals we disagree with fundamentally.
‘Unmodified, we believe that they will limit competition amongst the operators by undermining the long-term prospects of the MNOs who do not currently hold critical sub-1GHz spectrum, which offers significant cost and service advantages. This will not be in the best interests of the UK consumers.’
Meanwhile, Three said that Ofcom’s decision to allow other networks to refarm spectrum was ‘anti-competitive’ and ‘potentially unlawful’.
Three CEO Kevin Russell told Mobile: ‘Ofcom and the Government’s decision in January to authorise Everything Everywhere, O2 and Vodafone to repurpose 2G spectrum to provide 3G services fundamentally distorts and undermines the competitive marketplace developed in the UK since the 2000 3G spectrum auction.
‘Ofcom’s decision was anti-competitive and potentially unlawful and must be redressed through the upcoming “digital dividend” spectrum auction.’
Meanwhile, a Vodafone source said the operator is concerned that ‘in its desire to protect Three, Ofcom is inadvertently guaranteeing spectrum at 800MHz for Everything Everywhere, which already has plenty of spectrum to run LTE’.
O2 and Vodafone are also concerned that Everything Everywhere will be able to deploy an LTE network before themselves by reusing part of its existing spectrum.
A Vodafone spokesman said: ‘While we understand Ofcom’s desire to ensure that the UK remains one of the most competitive mobile phone markets in the world, to do that by giving the largest player in that market control over even more of the nation’s airwaves seems completely nonsensical.
‘The European Commission has already requested that Everything Everywhere sell some of its spectrum holdings to prevent a distortion of competition, so it would be odd if the effect of the rules that Ofcom lays down for the forthcoming auction was to guarantee it even more.’
An O2 spokesman said: ‘We believe that the proposed spectrum floors are a state aid and are therefore illegal under EU law. The spectrum floors would distort the auction process, allowing all bidders bar Vodafone and O2 to potentially acquire spectrum at discounted prices, which Ofcom’s own figures suggest could cost taxpayers £1bn.
‘The proposed floors, and the argument that Vodafone and ourselves have enough sub-1GHz spectrum, are based on the mistaken belief that 800MHz and 900MHz are directly comparable spectrums. They are not. Our response to Ofcom clearly explains why.’
Three’s response to Ofcom’s proposals
Ofcom must ensure that:
• ‘…at least four operators must have access to, at minimum, 2x10MHz of sub-1GHz low frequency spectrum, essential for offering fast and reliable mobile data services to over 95% of the UK population, indoors and outdoors;
• ‘No one operator must be allowed to obtain a disproportionate total amount of spectrum, as this will only harm consumers and competition;
• ‘Everything Everywhere, O2 and Vodafone must pay a fair price for the spectrum that they have now already been allowed to use for next generation mobile services.’
Everything Everywhere’s response revealed
• Increase the minimum amount of sub-1GHz spectrum to 2x10MHz to ensure that all operators have sufficient sub-1GHz spectrum to allow them to deploy LTE with the confidence to offer sufficient capacity, coverage and speed. From our trials we know that 2x10MHz is the minimum needed to be competitive in both rural and urban areas, to ensure future-proof, low-cost, networks capable of handling the explosion of data consumption. The current proposals for the sub-1GHz spectrum do not significantly reduce O2 and Vodafone’s dominance in the market as the only holders of this spectrum.
• If Ofcom is to impose a cap on spectrum, it should be set at 2x120MHz, to take into account the different characteristics of low and high frequency spectrum and differing numbers of customers (including MVNO customers) on each operator’s networks. The current level of 2X105 proposed by Ofcom will force Everything Everywhere to enter the auction in a weaker position than its competitors, and leave Everything Everywhere at risk of exiting the auction with far less higher quality spectrum per customer than our competitors - hampering the long-term stability and quality of our service and network. We are requesting the spectrum cap to be increased to ensure that we are able to enter the auction on an equal basis to our competitors.
• Our preference would be for Ofcom to abandon the notion of an overall spectrum cap, and to rely on competition law to ensure spectrum is distributed in a way which conforms to a competitive market.