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Britain Braced for 4G Fight

Michelle Donegan
LR Mobile News Analysis
Michelle Donegan

With Ofcom 's plans for a 4G spectrum auction now revealed, the U.K.'s mobile operators can now decide whether or not to challenge the proposals in court or focus on how to acquire the best spectrum for their mobile broadband networks. (See UK's 4G Auction Set for 2013 and Ofcom Unveils 4G Auction Plans.)

Either way, it's going to be a big fight.

When the bidding finally starts early next year, the auction will be the country's biggest ever spectrum sale, with 250MHz of spectrum available in the 800MHz and 2.6GHz frequency bands.

It will also arguably be the country's most infamous auction for all the delays the process has endured, thanks to various legal threats from mobile operators. (See A 4G Pig's Ear.)

And Ofcom's announcement today doesn't necessarily eliminate the potential for lawsuits.

Shaun Collins, CEO at CCS Insight , described Ofcom's proposal as a "tweak" rather than a "wholesale restructuring" of the auction design. And given that, he said, "I wonder if we won't get the same backlash from the same operators as last time." (See Ofcom Tweaks LTE Spectrum Proposals.)

But the regulator appears to be ready for a legal fight, if operators chose to litigate.

Ofcom published more than 500 pages in today's consultation document. According to Ovum Ltd. 's Matthew Howett, there's not a material difference from what Ofcom produced in January, but the majority of pages are made up of them justifying their proposals. "If there is a legal challenge, they know they'll come out on top," he said.

So what's new?
The changes Ofcom has introduced, while seemingly slight, will have a big effect on how much of the valuable 800MHz spectrum each of the U.K.'s four mobile operators will be able to get. This spectrum's value lies in its lower frequency range, which has better propagation qualities; and that means operators would need to deploy fewer base stations to cover wider areas, compared to using higher frequency spectrum.

Ofcom has proposed that one of the licenses for a 2X10MHz block of 800MHz comes with a coverage obligation to bring mobile broadband services for indoor reception to 98 percent of the population by the end of 2017.

Also, Ofcom has reserved some of the 800MHz spectrum for a fourth mobile operator -- which is likely to be 3 , but could also be any other alternative service provider -- to enable them to be a credible competitor to EE , Telefónica UK Ltd. 's O2 and Vodafone UK .

Those restrictions means there is less unfettered 800MHz spectrum to go around.

"One of the leading operators in the U.K. isn't going to get an 800MHz license," says Gabriel Brown, senior analyst at Heavy Reading . "Having the 800MHz spectrum is a big advantage for getting coverage -- and you need a 10MHz channel for LTE. They have to decide how much they want to bid to make it worth their while."

This has always been the case with the 800MHz spectrum in particular, however. According to Ovum's Howett, "it's not possible to get everyone to have the same spectrum -- they're just going to have to roll out different networks."

What's at stake in this auction is U.K. mobile operator's future networks.

"Spectrum is literally the air [operators] breathe -- without it, they will die," said CCS Insight's Collins. "It's that crucial."

— Michelle Donegan, European Editor, Light Reading Mobile

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User Rank: Light Beer
12/5/2012 | 5:26:37 PM
re: Britain Braced for 4G Fight

Here we go again.... another auction destined to squeeze enormous amounts of cash out of the operators, which will then be capital-constrained....

Shouldn't these companies be encouraged to invest more in their networks, applications development and support services instead of handing bilions over to the U.K. government?

Wouldn't it be wiser to put in place an annual payment based on revenues that would deliver long-term returns on the spectrum for the government, which bleats on about how it wants to do all it can to encourage the broadband services market? 

The UK mobile sector was put on ice for years following the 3G spectrum auction in 2000 because of the short-sightedness and greed of the government. And now it's going to happen again.

Well done... (sarcastic applause)

Michelle Donegan
Michelle Donegan,
User Rank: Light Beer
12/5/2012 | 5:26:36 PM
re: Britain Braced for 4G Fight

I also think Ofcom should have done more to ensure broadband coverage for the country with this auction design -- like Germany did with its LTE auction.

Ofcom added an indoor coverage obligation for one of the 800MHz licenses, but it stops short of mandating that everyone should get a 2Mbit/s broadband service (at least).

User Rank: Light Beer
12/5/2012 | 5:26:33 PM
re: Britain Braced for 4G Fight

Lease, (don't sell) the spectrum and (I agree) charge the operators based on revenue

User Rank: Light Sabre
12/5/2012 | 5:26:25 PM
re: Britain Braced for 4G Fight

Ray, you've been spending too much time listening to Vittorio Colao @ VF.

All the operators have made a stackload off of 3G services! Anyone telling you anything else is lying - simple as.

All the operators are run by greedy sharks who have a "never enough" mentality and thats the reason why they have never stopped bleating. The original UK auction was a fiasco, for sure, but the financial model worked.

An annual payment may make sense. But you forget. This is politicians. They are only interested in there 4/5 years in office and how many brown envelopes they can collect during that time.

Against that backdrop, do you really think any of them give a figleaf about the next administration or the countries long-term interests?? Why would they.....


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