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Ofcom plans to bar BT/EE from bidding in next '4G' spectrum auction


The UK's telecoms regulator has outlined plans to prevent BT/EE from bidding for a share of spectrum that will be made available to support the delivery of '4G' services.

Ofcom has opened a consultation (171-page / 2.62MB PDF) on draft regulations that would underpin a future auction of spectrum in the 2.3 GHz and 3.4 GHz frequency bands. The 40 MHz of spectrum being made available within the 2.3 GHz band is immediately useable and is likely to support 4G services, while the remaining 150 MHz that will be auctioned is not immediately useable but is expected to support 5G connectivity in future.

Ofcom said it intends to impose a cap to limit any one mobile network operator from owning more than 42% of spectrum that is available for immediate use. At the moment BT/EE own 45% of spectrum available for immediate use, and this share would fall to 42% once the spectrum being made available in the 2.3 GHz band is auctioned off to other operators.

At the moment Vodafone holds 28% of immediately useable spectrum, while the other major MNOs in the UK – O2 and Three – hold 15% and 12% respectively.

"We propose to set the cap on immediately useable spectrum at 255 MHz, which represents 42% of such spectrum and is at the level of BT/EE’s current mobile spectrum holdings," Ofcom said. "This cap will prevent a worsening of the current extent of asymmetry in immediately useable spectrum."

"We have considered a range of other options. If we were to impose no cap, then there is an immediate and significant risk to competition. At the same time, if we were to go further and impose more restrictive competition measures we believe this would be disproportionate," it said.

Ofcom said it does not intend to place a cap on the amount of spectrum that any one MNO can obtain in the auctioning off of spectrum within the 3.4 GHz band.

In a statement, EE chief executive Marc Allera said: "While we don't agree that competition measures should be introduced for this auction, we will now examine Ofcom’s detailed proposal carefully and respond to the consultation. We are unique in our ambition to expand 4G coverage to 95% of the UK’s landmass by 2020, further than any other UK network has done, and will continue to use our spectrum and network to ensure UK consumers benefit from being at mobile technology’s leading edge."

In its consultation paper, Ofcom admitted that "an uneven distribution of spectrum is not necessarily a barrier to strong competition among operators". This is because it is open to operators to "add capacity through network investment rather than deploying additional spectrum". In any case, operators "do not need to have the same capacity [as one another] for competition to be strong", Ofcom said.

However, the regulator said "a very asymmetric distribution may give rise to competition concerns".

"For example, having a relatively large spectrum portfolio may enable an operator to offer a range of services – or a quality of service – that cannot be matched by credible competitors with smaller holdings," Ofcom said. "Conversely, an operator that is a credible competitor but has a small spectrum holding relative to others may struggle to compete in some segments of the market or in the provision of some services."

"If BT/EE was to win all the 2.3 GHz spectrum that is available in this auction, that would increase its share of spectrum which is immediately useable from 45% to nearly half (49%). In other words, this one operator would have the almost same amount of spectrum as all the other operators put together. Our judgement is that this would create a significant risk to competition," it said.

To avoid "strategic investment" in spectrum that could "weaken" competition, Ofcom said it will impose a cap in relation to the 2.3 GHz auction.

Ofcom said it is "less concerned about the risks associated with the 3.4 GHz spectrum".

"This spectrum is not immediately useable, and by the time it is we believe there are a variety of means by which operators will be able to adapt their strategies to meet consumer demand," Ofcom said. "Over these longer timescales, we expect other spectrum to become available – and operators also have the option of adopting different approaches to network deployment, including those based on ‘small cells’."

Ofcom's proposals are open to consultation until 30 January 2017.

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