Ofcom reveals proposals for 800MHz, 2600MHz auctions

22 Mar 2011

The British telecoms regulator Ofcom has unveiled its proposals for what it claims will be the largest ever single auction of mobile spectrum in the country, with it saying that it will put up for grabs the equivalent of three quarters of the UK’s currently in-use frequencies. The regulator has said that it views the spectrum sale as ‘essential to meet the UK’s rapid increase in mobile traffic, fuelled by the growth of smartphones and mobile broadband data services such as video streaming, email, messenger services, mapping services and social networking sites.’

Under its proposals Ofcom has confirmed it will offer frequencies in both the 800MHz and 2600MHz bands, and the watchdog has said that it aims to incorporate a number of safeguards and coverage conditions as part of the sale process in order to ensure the promotion of competition and the widening of mobile broadband coverage to 95% of the population. Having been asked by the government to assess how the new spectrum might affect future competition in the UK mobile sector following a December 2010 study Ofcom has claimed that if bidders were free to acquire any amount of spectrum in an open auction it could impact competition in the sector. With the regulator claiming that the combination of scarcity and demand could create incentives for bidders to bid strategically and reduce the amount of spectrum available to other bidders it said it believed that there would be a ‘significant risk’ to national wholesale competition should there be less than four national wholesale competitors with credible spectrum portfolios for providing higher quality data services. As a result Ofcom has said that it will include limits on both the minimum and maximum amounts of spectrum bidders can win, with it proposing that the minimum amount be one of the following five combinations:

2×5MHz of sub 1GHz spectrum and 2×20MHz or more of 2600MHz; or

2×5MHz of sub 1GHz spectrum and 2×15MHz or more of 1800MHz; or

2×10MHz of sub 1GHz spectrum and 2×15MHz or more of 2600MHz; or

2×10MHz of sub 1GHz spectrum plus 2×10MHz or more of 1800MHz; or

2×15MHz or more of sub 1GHz spectrum.

In addition to the restriction on minimum and maximum spectrum awards Ofcom has also said that it will set down measures to protect against longer-term risks to competition from any one licensee holding a disproportionate amount of spectrum. In order to achieve this aim Ofcom has revealed that there will be a sub-1GHz safeguard cap of 2×27.5MHz – this means that no one competitor can obtain more than this amount of sub-1GHz spectrum – and there will also be an overall spectrum holdings cap of 2×105MHz. In terms of coverage obligations meanwhile, Ofcom has said that one of the 800MHz concessions on offer will include a requirement that the winner provide mobile broadband services to 95% of the UK’s population; the date for meeting this obligation would be end-2017.

Ofcom is aiming for the auction itself to be held in the first quarter of 2012, prior to which it has launched a consultation on its proposals, and has called on interested parties to make submissions prior to a closing date of 31 May 2011. Commenting on the development 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.’

United Kingdom, Ofcom