Threat of appeal against limits on UK spectrum
The UK’s communications regulator plans to limit the amount of wireless spectrum BT Group and Vodafone Group can buy at a coming auction.
The long-awaited decision risks being appealed against.
Ofcom will cap the amount of immediately usable spectrum an operator can own, which will prevent BT and its EE wireless unit from bidding in the 2.3GHz band. The regulator will also limit how much any carrier can hold of overall spectrum that is expected to be usable by 2020, affecting BT and Vodafone.
The regulator, seeking to even out carriers’ airwaves rights and spur competition, announced the rules on Tuesday following consultations over an initial proposal in November. The frequencies being offered will improve fourth-generation networks and support fifthgeneration technologies set for roll-out from around 2020. Any appeals could delay 5G.
“We want to see this spectrum in use as soon as possible,” Philip Marnick, Ofcom’s group director of spectrum, said.
“With smartphones and tablets using even more data, people need a choice of fast and reliable mobile networks.”
Ofcom is auctioning off 40MHz of 2.3GHz spectrum, which is supported by smartphones already on the market, and 150MHz of 3.4GHz spectrum, which will be important for 5G.
The UK has one of Europe’s most imbalanced wireless markets, where the former monopoly BT has 42% of the immediately usable spectrum after buying EE in 2016, Ofcom said. Vodafone has 29%, CK Hutchison Holdings’ Three UK has 15% and Telefonica’s UK division, O2, has 14%.
The sale was expected to raise £652m, with O2 spending the most at about £300m, Guy Peddy, an analyst at Macquarie Capital in London, said in June.
The auction’s design was expected and is “largely inconsequential” for the competitive positions of BT and Vodafone, given their existing holdings and ability to bid at future auctions, Dhananjay Mirchandani, an analyst at Bernstein in London, said on Tuesday.
Ofcom’s limit of 37% on any one company’s share of spectrum by 2020 does not go as far as some had wanted. O2, the UK’s second-largest mobile carrier after EE, had lobbied the regulator for a maximum of 35%. Three UK had called for a cap of 30%, which would have forced BT and EE to sell holdings to participate in the auction.
Three UK, the most vocal carrier on the matter, argued the auction design allowed larger operators to become more dominant, with its CE Dave Dyson calling it a “kick in the teeth for all consumers”.
Dyson has suggested Three UK could appeal against the rules if the regulator did not follow its recommendations.
Ofcom said on Tuesday Three UK’s acquisition of UK Broadband boosted the carrier’s spectrum position and “very significantly” reduces any concerns the regulator had about the company’s capacity from about 2020 onward.
O2 CEO Mark Evans said the auction design “falls short of our expectations but it is important we now press ahead with the auction quickly”. EE CEO Marc Allera said that while he did not think any caps were necessary, “we look forward to bidding for additional spectrum in this auction”.
THE AUCTION’S DESIGN IS LARGELY INCONSEQUENTIAL FOR THE COMPETITIVE POSITIONS OF BT AND VODAFONE