Ofcom announcement

On 11 July 2017, Ofcom published the rules under which a new mobile spectrum range in the UK is to be sold at auction later this year. The announcement comes as Ofcom recognises that extra spectrum (airwaves that form the basis of communications services) is required to allow mobile operators to increase their network capacity and respond to increased customer demand for mobile data. Increased spectrum availability is a critical component of wireless networks and the increase in available spectrum should assist in the development of 5G and other new wireless technologies.

Ofcom has identified two main policy objectives for the launch of the auction: (1) to ensure that the spectrum availability is as timely as possible to meet consumer demand; and (2) to ensure that consumers are benefitting from a competitive mobile services market.

Spectrum auction

In a bid to increase the airwaves available for mobile devices by almost a third, Ofcom is set to auction licences to use 190MHz of spectrum in two frequency bands:

  1. 40 MHz of spectrum will be auctioned in the 2.3GHz frequency band. This band is already supported by mobile devices from manufacturers such as Apple and Samsung. These airwaves could be used immediately after release to provide extra capacity, meaning faster downloads and internet browsing for mobile users; and
  2. 150 MHz of spectrum will be auctioned in the 3.4GHz frequency band. These frequencies are not compatible with most current mobile devices, but are expected to be usable by future phones and tablets. The 3.4GHz band has been identified as central to the rollout of 5G mobile across Europe.

Promoting Competition?

As part of the auction Ofcom will impose two restrictions on bidders to limit the amount of spectrum available to some of the largest bidders. These limitations seek to address competition concerns which emerged from Ofcom’s consultation on competition issues and auction regulation held in November 2016. The two restrictions placed on bidders are:

  1. A cap of 255 MHz on the amount of mobile spectrum that is immediately useable after the auction; and
  2. A cap of 340 MHz on the overall amount of mobile spectrum a single operator may hold as a result of the auction. This cap amounts to 37% of all the mobile spectrum expected to be usable in 2020, and covers not only the spectrum made available in this auction but also the 700MHz frequency band.

The result of the first limitation will be to cap the amount EE (owned by BT)* and Vodafone can win under the auction. EE will not be able to bid for the 2.3GHz frequency band and will be restricted to winning a maximum of 85MGz of the 3.4GHz band. If EE is successful, Ofcom will also restrict Vodafone’s bidding, to a maximum of 160 MHz of the spectrum across both the 2.3GHz and 3.4GHz bands. Without these restrictions if EE were to win all of the 2.3GHz spectrum available then it would hold nearly half of the UK’s immediately usable mobile spectrum.

Under the current proposals, no other bidders will be restricted in the amount of spectrum they may win. This is intended to encourage other operators with lower current shares of spectrum to deliver more based on spectrum rather than relying on less reliable approaches such as masts.

While Ofcom describes this move as promoting competition, other mobile operators have called the restrictive proposals anti-competitive. Dave Dyson, chief executive of Three UK, commented: "By making decisions that increase the dominance of the largest operators, Ofcom is damaging competition, restricting choice and pushing prices up for the very consumers that it is meant to protect.

Auction Regulations

As part of the auction Ofcom has also set out changes in response to the November 2016 consultation on the draft auction regulations. In particular, Ofcom has decided to proceed with revised proposals for bid withdrawals.

5G Developments

When consulted in November 2016 Ofcom had originally thought that an additional frequency band for future mobile services including 5G (the 3.6GHz to 3.8GHz band) would be available at the time when the 3.4GHz band becomes usable for 5G services. Ofcom now believes that the 5G band will not be available at the time of the 3.4GHz launch and or will publish an update on the prospective availability of 5G spectrum. When available, the new 5G (3.6GHz to 3.8GHz) spectrum is likely to be used by 5G mobile technologies which can be grouped into three types:

  • Improved mobile broadband: 5G is expected to provide greater capacity for wireless networks and deliver faster data speeds, a larger capacity and increased reliability of connection.
  • Massive Machine Type Communications: 5G is expected to encourage the development of the Internet of Things and the evolution of the increased wireless connection between objects and the internet. 5G should assist the development of the Internet of Things services, applications and interaction between different connected platforms.
  • Ultra-Reliable and Low Latency Communications. 5G networks are designed to be more reliable and to have low latencies (network delays). If such developments are realised, 5G networks could be used for more complex technologies such as driverless cars and smart manufacturing processes.

Next Steps

As part of the announcement Ofcom has outlined an approximate timetable for the spectrum auction:

  • 14 August 2017. Ofcom’s consultation on the auction regulations closes. Ofcom will begin to consider the responses to the consultation.
  • Late August to early September 2017. Ofcom to publish its final statement on the making of the auction regulations.
  • Mid to late September 2017. The auction regulation will come into force.
  • Late September to early October 2017. Ofcom will invite potential bidders to make applications for the spectrum.
  • Late October to November 2017. Spectrum bidding begins.

The auction follows on from the 4G auction held in February 2013, to read our full article on the consultation for the 4G spectrum award see here.