On 20 December 2010, the Minister for Culture, Communications and Creative Industries made The Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010 (SI 2010/3024) (Order), setting out a number of mandates for the Office of Communications (Ofcom) on the liberalisation of electromagnetic spectrum for wireless mobile broadband services.
The Order, which came into effect on 30 December 2010, seeks to:
- ensure the release of additional spectrum for next generation wireless mobile broadband providers, including by mandating that Ofcom conducts auctions of licences in the 800 MHz and 2.6 GHz bands and implements a regime for the “trading” of spectrum rights by holders of licences in the 900 MHz, 1800 MHz or 2100 MHz bands;
- implement certain EU level instruments on the liberalisation of frequencies in the 900 MHz and 1800 MHz bands (bands traditionally reserved for 2G services) for 3G services – a mandate which Ofcom implemented on 6 January 2011 in its Statement on variation of 900 MHz and 1800 MHz Wireless Telegraphy Act licences (Ofcom Statement); and
- create greater investment certainty for providers – including by lengthening the notice period that Ofcom must give in order to revoke a 900 MHz and 1800 MHz licence for spectrum management reasons.
Ofcom’s mandates under the Order
Under the Order, Ofcom is mandated by the Secretary of State to:
- designate the 900 MHz and 1800 MHz bands for use for both GSM and UMTS systems (article 4) – as noted above, this mandate has already been implemented by the Ofcom Statement;
- vary each 900 MHz and 1800 MHz licence to extend the notice period which Ofcom must give in order to revoke the licence for “spectrum management reasons” from 1 year to 5 years (article 5);
- amend the Wireless Telegraphy (Spectrum Trading) Regulations 2004 to permit the holder of a licence in one of several spectrum bands (namely, 900 MHz, 1800 MHz or 2100 MHz) to transfer or “trade” its rights and obligations under the licence to another person (article 7);
- as soon as reasonably practicable, assess the “likely future competition” in markets for the provision of mobile electronic communication services (article 8);
- as soon as reasonable practicable following such a competition assessment, exercise its powers under the Wireless Telegraphy Act 2006 to provide for an auction of licences for frequencies in the 800 MHz and 2.6 GHz bands and any other bands as Ofcom thinks fit (article 9); and
- following the auction of the frequencies in the 800 MHz and 2.6 GHz bands, revise the licence fees for 900 MHz and 1800 MHz licences so that they reflect the “full market value” of the frequencies in those bands (article 6).
Implications for the UK communications sector
In a news release on the Ofcom Statement, Ofcom noted the “surge in smartphone popularity in recent years” and lauded the “significant benefits to consumers” that is likely to arise from the variation of 900 MHz and 1800 MHz licences, which enables their use for 3G services (using the UMTS system) as well as traditional 2G services (using the GSM system).
The Order and the Ofcom Statement also have important implications for the UK communications sector.
- A key commercial advantage to holders of 900 MHz and 1800 MHz licences is that they may now use the licensed frequencies to provide wireless mobile broadband and other 3G services, as well as traditional 2G voice calls and text messaging services, without facing an immediate increase in licence fees.
- In the recent Ofcom Statement, Ofcom has stated that it will not revise the fees for 900 MHz and 1800 MHz licences until after the auction of licences in the 800 MHz and 2.6 GHz bands, which is not expected to occur until the first half of 2012. Ofcom has stated that not varying the fees for 900 MHz and 1800 MHz licences in the interim is “unlikely to have a significant impact on efficiency”.
- The longer notice period of 5 years which Ofcom must now give in order to revoke 900 MHz and 1800 MHz licences for “spectrum management reasons” will provide greater regulatory certainty for licence holders, and thereby likely to incentivise investment in their use for “next generation” services. Whether a similar revocation notice period will be adopted for other licence classes – including for the 800 MHz and 2.6 GHz bands – remains to be seen.
- While the Ofcom Statement deals with the variation of the 900 MHz and 1800 MHz licences to allow UMTS use at this stage, Ofcom has stated its intention to liberalise these bands for other systems such as LTE and WiMAX when the European work on defining appropriate technical conditions has completed. Ofcom envisages making these changes over the course of 2011.
- Ofcom is currently preparing a consultation document to implement its mandate under the Order to amend the Wireless Telegraphy (Spectrum Trading) Regulation 2004 in order to make licences for various frequency bands “tradable”. Ofcom plans to publish this in the next few months.
It remains to be seen how Ofcom will implement many of its mandates under the Order. It is clear though that the Order has established a significant programme of work for Ofcom over the next couple of years, which should greatly influence the further development of wireless mobile broadband and other next generation communications services in the UK.