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Market Insight

UK regulator launches second 4G consultancy

January 13, 2012

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UK telecoms regulator Ofcom has published a second consultation into the dispersal of 800MHz and 2.6GHz spectrum bands. This spectrum will be used to provide high speed 4G LTE mobile broadband. After the initial consultation last year, Ofcom has refined its proposals and remains insistent that the auction of this spectrum will take place in the fourth quarter of 2012. This new consultation contains several changes including:

  • Spectrum will be reserved to ensure that there is a fourth viable national wholesale mobile operator. Vodafone, Telefonica O2, and Everything Everywhere (the joint venture between Orange and T-Mobile) are considered to have enough spectrum already to remain viable.  The reservation is explicitly only applies to 3 or a new entrant. However this reservation might be voided if 3 or a new entrant purchases the 1800MHz spectrum that Everything Everywhere is divesting as part of the conditions on its merger.
  • A single 800MHz licensee will be required to provide coverage to 98% of the UK population. This licensee will have access to the UK government's £150m mobile infrastructure programme and would not be required to provide wholesale access to other operators.
  • The proposed spectrum cap for each operator is 2x105MHz with a maximum of 2x27.5MHz of sub-1GHz spectrum.
  • Ofcom is also considering reserving 2x10MHz of 2.6GHz spectrum for sub-national operators.
  • Ofcom plan on opening up 900MHz and 1800MHz for LTE use in the first quarter of 2012.

Winning additional spectrum is vital for an operator to be able to provide a next generation, fast mobile broadband service. The uptake in smartphone ownership has led a huge upsurge in data traffic. IHS Screen Digest is forecasting that mobile data traffic in the UK set to grow nearly five times from 2011 to 2015. With four incumbents battling for a limited amount of highly valued 800MHz spectrum, the precise rules will go a long way to determining the results of the auction.

The UK is behind most major world markets in releasing spectrum for 4G LTE. LTE is already live in 28 countries worldwide including the US, Canada, Germany, Sweden, Japan, and South Korea. With the spectrum not likely to be released to the operators until mid-to-late 2013, it could be 2014 before UK has a commercial LTE network. Even with Ofcom allowing LTE to be deployed on other bands, the odds of a launch in these bands before the 800MHz and 2.6GHz bands become available are slim.

The current state of mobile spectrum in the UK is lopsided with only Vodafone and Telefonica O2 owning sub-1GHz spectrum. Nearly all the 1800MHz band was licensed to Everything Everywhere, the joint venture between Orange and T-Mobile, but it has to sell on a quarter of its spectrum assets as a condition of its merger. The 3G 2.1GHz spectrum is more evenly split between the four operators; meaning the smallest operator 3 has only a single 2x15MHz channel in this band.  Everything Everywhere are poised to sell its divestment prior to the auction which IHS Screen Digest estimates could bring in up to £425m.

Following the merger of T-Mobile and Orange in 2011, Ofcom is keen to maintain at least four "credible" wholesale operators. As a result it is planning to reserve 800MHz spectrum for either 3 or a new entrant in the auction.  In a change from its previous stance, the regulator no longer believes that Everything Everywhere needs guaranteed sub-1GHz spectrum to be able to compete nationally with the other operators. This should make it much easier for 3 to capture the valuable 800MHz spectrum, but it is not a foregone conclusion. Fixed line operator BT started LTE trials in 2011. Everything Everywhere on the other hand will look to its 1800MHz sale to give it enough cash to also secure 800MHz spectrum.

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