New 4G auction plan could clear deadlock

The telecoms regulator Ofcom has issued revised proposals for the upcoming 4G spectrum auction, in a move that may end delays to the rollout of fast mobile broadband.

Ofcom has presented new proposals that could clear the way for the UK's much-delayed 4G spectrum auction.

A key change in the new proposals, published on Thursday, is the scrapping of previous plans to reserve a chunk of 800MHz spectrum for Everything Everywhere — something that had irked rivals O2 and Vodafone. The auction, set to take place at the end of this year, will contain spectrum in both the 800MHz and 2.6GHz bands.

Everything Everywhere has responded to Ofcom's new move by saying the regulator is "missing a huge opportunity for the UK".

Ofcom has also made new suggestions for ensuring that mobile broadband coverage extends to more of the UK population, particularly in rural areas. The regulator previously suggested obliging one of the 800MHz spectrum recipients to build a network that serves 95 percent of the population. However, it now wants to link this obligation to a separate government funding scheme, which aims to reach as much as 99-percent coverage.

"This is a crucial step in preparing for the most significant spectrum release in the UK for many years," Ofcom chief Ed Richards said in a statement. "The proposals published today will influence the provision of services to consumers for the next decade and beyond."

Sticking points

The distribution of sub-1GHz spectrum, which includes both the soon-to-be-licensed 800MHz spectrum and the 900MHz spectrum that Vodafone and O2 already use for 2G or GSM services, has been a crucial sticking point in negotiations between the regulator and operators.

Threats of litigation from unspecified operators led Richards to decry in November what he called a "gaming of the system". These wranglings have caused repeated delays in the auction process, leaving the UK behind as the rest of the world rolls out 4G services, as well as infuriating the government, MPs and businesses.

As 2G or GSM spectrum can be 'refarmed' to deliver mobile broadband services, much of this argument has to do with which kinds of spectrum the different operators already hold. There are two types: 1800MHz spectrum, which is better at carrying high-bandwidth services, and 900MHz spectrum, which is better at travelling over long distances and providing indoor coverage.

Everything Everywhere, which operates the T-Mobile UK and Orange UK brands, has its 2G spectrum in the 1800MHz band, while rivals O2 and Vodafone have 900MHz spectrum.

The 2.6GHz spectrum in the 4G auction is even worse at propagating over long distances and penetrating buildings than the 1800MHz spectrum. Because of this, Ofcom's previous proposals in March included the setting-aside of 2 x 5MHz of sub-1GHz spectrum for Everything Everywhere.

The point was to make sure there would be at least four major operators capable of wholesaling viable, long-range 4G connectivity to smaller providers such as Virgin Mobile; Three or another new entrant would also have to be allocated sub-1GHz spectrum. However, rivals may have seen this as Ofcom favouring Everything Everywhere, making it likely that this was a key sticking point in last year's negotiations.

Ofcom's change of heart

Ofcom has now had a change of heart, following further analysis and the responses it received to the March proposals. Due to the merger of T-Mobile and Orange, Everything Everywhere has a huge amount of 1800MHz spectrum, and Ofcom has decided that this type of spectrum is not so limiting after all.

The proposals published today will influence the provision of services to consumers for the next decade and beyond.

– Ed Richards, Ofcom

"We now believe that the technical advantages of sub-1GHz spectrum are less clear and that the large quantity (2 x 45MHz) of 1800MHz spectrum which Everything Everywhere holds is likely to mean that there is only a fairly small gap between what Everything Everywhere and the holders of 800MHz spectrum could deliver," Ofcom said in its new proposal summary.

"In many locations, a network with a sufficiently large amount of 1800MHz spectrum coupled with a large network of base stations could match or even better the quality of a network with a smaller amount of 800MHz spectrum, even if it is unlikely to be able to do this in the hardest-to-serve locations," the regulator explained.

Clearing the way at auction

According to Ovum analyst Matthew Howett, this reversal should clear some of the way towards holding the 4G auction.

"The feeling was that Ofcom's March position was too favourable to Everything Everywhere. Ofcom has tried to redress that balance and has made it slightly less favourable for some operators and more so for others," Howett told ZDNet UK.

Howett added that the assurances Ofcom made this week, saying it remains open to suggestions on the issue of annual 4G spectrum licence fees, will also allay some of O2 and Vodafone's concerns.

Ofcom said on Thursday that, although O2 and Vodafone had been unhappy at Everything Everywhere's reserved spectrum, the regulator had not changed its mind just to clear the deadlock.

"We've come up with a set of refined proposals based on the new analysis we've carried out. I wouldn't say it's just because of the threat of pending litigation that we've done that," an Ofcom spokesman told ZDNet UK.

Everything Everywhere response 

As for Everything Everywhere itself, the operator reacted critically to Ofcom's announcement.

"Everything Everywhere is very disappointed to see...

...that Ofcom has again reversed its proposal to ensure all mobile operators hold a minimum amount of sub-1GHz spectrum," the operator said. "Ofcom is missing a huge opportunity for the UK to address the imbalance in sub-1GHz spectrum holdings, which has damaged consumer interests for the last 20 years — and is a situation which is now threatening to continue."

The 2 x 45MHz spectrum measurement quoted by Ofcom represents what Everything Everywhere will hold in 1800MHz once it has sold off a further 2 x 15MHz — a condition of the European Commission's approval of the T-Mobile-Orange merger. Given that the UK more-or-less gave that spectrum to Everything Everywhere in the first place, the operator has promised to reinvest the proceeds of the sale into its UK network.

The Financial Times reported on Tuesday that Everything Everywhere's sale will kick off within the next month, with the proceeds expected to total up to £400m.

Three currently has no 2G spectrum at all, as it only began operations in the era of 3G. According to Howett, if Three picked up some of Everything Everywhere's 1800MHz spectrum at auction, that might remove the need for Ofcom to reserve any sub-1GHz spectrum at all.

"If Three recognise the nice balance 1800MHz offers [between bandwidth and range] and tries to acquire some from Everything Everywhere's divestiture, then Ofcom may think again," Howett suggested.

Ofcom's spokesman confirmed to ZDNet UK that this would indeed be the case.

Mobile coverage in rural areas

Regarding the issue of mobile coverage in rural areas, Ofcom's proposal in March to have one of the 800MHz buyers serve 95 percent of the population drew criticism from MPs, who wanted the mobile broadband coverage to reach 98 percent.

   

Ofcom is missing a huge opportunity for the UK to address the imbalance in sub-1GHz spectrum holdings, which has damaged consumer interests for the last 20 years.

   – Everything Everywhere

Ofcom has now decided the 98-percent target is is a good idea. However, its proposal for reaching this goal means people in hard-to-reach places who end up getting mobile broadband coverage for the first time will most likely have no choice of operator.

The regulator's decision to extend the coverage obligation is closely tied to the government's announcement in October of a £150m fund for new mobile masts in areas that currently lack even mobile voice services. This government plan aims to provide around 99 percent of viable voice coverage across the UK. This level of coverage already exists, but only if areas of very poor reception are counted.

According to Ofcom, the revised obligation will have the broadband provider match the expanded voice coverage. There are two ways to achieve this: the operator could itself participate in the government voice rollout, or it could install its own 4G kit on new masts rolled out by other operators as part of that scheme.

It is not clear whether the operators participating in the voice coverage scheme would have to allow this sort of piggy-backing. This could be clarified, however, as the Department for Culture, Media and Sport (DCMS) launched a consultation on Thursday that asks the mobile industry what it would like the specifics of the scheme to be.

Ofcom acknowledged that, either way, the operator with the mobile broadband coverage obligation would probably be the only choice of operator for people receiving such coverage for the first time.

The regulator considered and rejected two options that could have changed this. It looked at forcing every 800MHz licence holder to match the newly-expanded voice coverage footprint. However, it decided this would probably lead to wasteful duplication of masts, unless the new infrastructure is capable of accommodating every licence holder, which is far from guaranteed.

Ofcom also considered forcing the one operator under the obligation to offer wholesale 4G access to its rivals. However, it said this would be overly complicated and costly, and might make operators less like to bid for that licence.