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eBulletin | Next generation mobile spectrum auction: the BIS announcement

Next generation mobile spectrum auction: the BIS announcement

In a nutshell

Spectrum will shortly become available for the development of next generation mobile services in the UK. It will include some of the spectrum which was previously used for television broadcasting and which is being released as a result of digital switchover and also the so-called 3G expansion band. Following the Digital Britain proposals, Ofcom and the government are keen to see these new services deployed in these bands.

Some of the existing mobile network operators (MNOs) have bitterly opposed the release of this spectrum and, among other things, threats of legal challenges against Ofcom have led the government to intervene by giving directions under the Wireless Telegraphy Act.

The directions will require Ofcom to make an assessment of the competitiveness of the mobile markets including the potential for new entry and to hold an auction of the available spectrum as soon as practicable after making that assessment. They will also lead to the existing MNOs' licences being varied to enable them to use their 2G spectrum for 3G, to give them longer terms and to make their licences tradeable.

This is a much simplified version of earlier proposals and in some respects is likely to be less controversial. Previously there were to have been caps on operators' spectrum holdings, coverage conditions and wholesale access obligations in rural areas. Some measures of that kind may still emerge if Ofcom, in the light of its competition assessment, thinks that they would promote competition or would otherwise contribute to the attainment of regulatory objectives but they are not part of the mandatory directions.

The draft Order

On 28 July 2010 the government laid before Parliament a draft Order laying the ground for the auction by giving directions to Ofcom:

to allow the existing 2G mobile network operators (MNOs) to use their existing 2G allocations for 3G as well;
to extend the duration of existing 2G and 3G licences;
to make 2G and 3G licences tradeable;
to assess likely future competition in mobile markets, including the potential for new entry;
as soon as practicable thereafter, to hold an auction of frequencies in the 800 and 2600MHz bands; and
to revise the licence fees payable by the 2G MNOs in light of the auction prices.

What happens next?

The auction is expected to take place at the end of 2011, assuming the Order is approved by Parliament and there are no legal challenges.

What spectrum is being auctioned?

The spectrum is apt for next generation (up to 100mbps) mobile services, although its characteristics vary according to the band. The 800MHz band is suited to wide coverage (the lower frequencies travel further and need fewer base stations) and the 2600MHz band is suited to high capacity (such as in urban areas).

The quantity of spectrum being made available is more than half as much again as that in the 3G auction (250 MHz now against 140 MHz then).

Who might bid for licences?

Some or all of the MNOs can be expected to bid.

It is possible, however, that the 2G MNOs at least will be restrained in their bidding because of the link that the Order will establish between the auction prices and their 2G licence fees, which are to be revised in light of the auction. That could mean lower prices and opportunities for new entrants.

A new entrant could face challenges getting a new network established in competition with the existing operators. Ofcom has a general obligation under the Order to put in place measures to promote competition, which may mean that it will include in the auction terms measures to assist a new entrant.

But opportunities to enter the mobile market have hitherto been limited by the absence of available spectrum. There will be an opportunity here to enter the market on possibly favourable terms.