Ofcom has launched a consultation for the auction of the 4G mobile spectrum, with proposals aimed to ensure widespread coverage of mobile broadband.
Depending on the outcome of the consultation, the telecommunications industry regulator aims to hold the auction for two spectrum bands, 800 MHz and 2.6 GHz, totalling 250 MHz of new mobile spectrum, early next year.
The lower frequency band (800 MHz) is being freed-up as the UK switches from analogue to digital TV. It is this band that is intended for the widespread mobile coverage.
Ofcom wants to enable mobile broadband services to reach 95 percent of the UK population by the end of 2017. It has therefore proposed to include a coverage obligation in one licence for the 800 MHz spectrum that requires the licensee to meet this target.
The higher frequency band (2.6 GHz), meanwhile, is intended to be used to deliver faster mobile broadband speeds.
Ofcom said that the additional mobile spectrum was key to meeting rapidly increasing mobile traffic, which is being driven by the surge in smartphones and mobile broadband services such as video streaming, email, mapping services and social networking sites.
In order to ensure healthy competition in the market, Ofcom has proposed to set a minimum and maximum level (known as floors and caps) on the amount of spectrum that the wholesale mobile operators can bid on, so that amounts below are disregarded, and amounts above are not allowed so as to prevent future monopolies of the spectrum.
The regulator wants to ensure that all four of the UK’s national wholesale mobile operators (namely Vodafone, O2, Three and Everything Everywhere) can take part, as it believes that there would be a ‘significant risk’ to competition if there were fewer than four competitors were in the market.
Ed Richards, Ofcom chief executive, said: “It [the spectrum] will support a wide range of data services that are fast becoming essential features of the modern world.
“Our role as the independent regulator is to award this spectrum in a way that secures the best use of the spectrum for the benefit of citizens and consumers in the UK. That is why we are proposing to design the auction in a way that not only encourages investment but also promotes competition and delivers wide coverage of services.”
However, Ovum analyst Matthew Howett, believes that the spectrum cap is controversial.
“They [the caps] effectively distort what is otherwise a market mechanism designed to allocate spectrum to those who value it most. However, f they were to leave the auction open they risk a player leaving the market and further consolidation; possibly to the detriment of consumers.”
He added that the auction is unlikely to attract the high revenues as witnessed in the last spectrum auctions 11 years ago.
“Whilst it will be the most significant auction for at least a decade, with 80% more spectrum available than during the 3G auctions of 2000, we are unlikely to see anything like the £22.5 billion bid during that time. A lot has moved on since then including the industry’s expectations of revenues from such data services.”