Everything Everywhere promises to reinvest 2G windfall

Everything Everywhere plans to use money it makes from selling some of its 2G spectrum to invest in its own network.

Everything Everywhere has said it will reinvest the money it makes from selling some of its 2G spectrum into its own network. Photo credit: Karen Friar

The mobile operator, which runs the T-Mobile and Orange brands in the UK, made the promise on Friday in response to a call by MPs for the reinvestment. The call came in a report on Thursday from the Culture, Media and Sport select committee, which also made a wider set of recommendations to do with spectrum.

The 2G spectrum sale is a condition of the merger of the UK operations of Deutsche Telekom and France Telecom, which took place last year. The European Commission insisted that Everything Everywhere would have to give up a quarter of the 60MHz of 1800MHz spectrum it holds, to make sure the combined company would not be overly dominant.

In its report, the select committee said the government and Ofcom should investigate ways to ensure the proceeds of the spectrum sale "be used to the benefit of consumers", given that the government gave operators the spectrum — a public asset — for next to nothing back in the 1990s.

"Ofcom should explore whether it could compel Everything Everywhere to ring-fence a proportion of this windfall for investment in its network," the MPs recommended.

In response, Everything Everywhere said that it planned to do that anyway, and that it would even go so far as to reinvest all the money, not just some of it.

"It is our intention that all proceeds from the sale of this spectrum will be invested into our UK network to benefit our customers across the country," the operator said in a statement.

Recent changes could affect how much Everything Everywhere makes from the sale. Right now, it pays £33m in licence fees to the government each year for its 1800MHz spectrum. However, as 2G spectrum can now be 'refarmed' for 3G use, Ofcom is likely to increase those licence fees once the upcoming '4G' spectrum auction has taken place. This could lead prospective 2G buyers to offer less.

4G auction delays

The 4G auction, which was initially scheduled to take place in September 2008, is now likely to start in the fourth quarter of 2012. The latest delay, caused as usual by operator squabbling, was announced in early October. In that announcement, Ofcom said it will have to run yet another consultation on the matter, following "a number of substantial and strongly argued responses" to the last one.

The basic rules for the auction which Ofcom has laid down are sensible and fair, and that further delays will result in the UK falling further behind in this vital area.

– John Whittingdale MP

Culture secretary Jeremy Hunt pleaded with the operators in September to settle their differences and let the auction go ahead. The select committee echoed Hunt's call in its report.

"Ofcom has had a very difficult job adjudicating between competing and polarised interests, and we are concerned that constant disagreement and special pleading from the four mobile network operators appears to have further delayed the spectrum auction," committee chair John Whittingdale MP said in a statement.

"We believe that the basic rules for the auction which Ofcom has laid down are sensible and fair, and that further delays will result in the UK falling further behind in this vital area. The auction needs to proceed as soon as possible," Whittingdale continued.

Everything Everywhere responded by saying: "We fully support industry collaboration to ensure that the forthcoming spectrum auctions are held as soon as possible so the benefits of faster data speeds reach consumers quickly, but understand that the complexity of the issues involved has meant that further consultation about the auction rules by Ofcom has been necessary."

The committee also reiterated a call from Penrith and The Border MP Rory Stewart in May for Ofcom to make sure that at least one of the operators extends mobile broadband coverage to 98 percent of the country, to help deliver broadband to connectivity-starved rural areas. Ofcom's existing recommendation is for that level to be set at 95 percent.

According to operator testimony cited in the report, taking coverage beyond 95 percent can be done, and the main concern is cost.

"The evidence that we have heard suggests that a 99-percent coverage obligation, although achievable, would cost up to £230 million, and we are concerned that that cost could be transferred to consumers," the report stated. "Therefore we support the unanimous decision made by the House in May 2011 and recommend that Ofcom imposes a coverage obligation of 98 percent on one or more of the 800 MHz licences being auctioned."