Ofcom: Operators 'gaming the system' over 4G auction

The head of the UK's telecoms regulator has accused operators of 'gaming the system' in the run-up to the 4G spectrum auction, and warned their perpetual threats of litigation over the auction could lead the government to take back regulatory powers.

Ofcom chief executive Ed Richards, pictured in March, has said UK operators are 'gaming the system' in the run-up to the 4G spectrum auction. Photo credit: David Meyer

The auction, which will allow fast mobile broadband services to be rolled out in the UK on the 800MHz and 2.6GHz bands, was supposed to have happened three years ago. However, constant legal threats by various operators, all of whom feel aggrieved by the auction mechanism in one way or another, have caused multiple delays.

It is "very disappointing to witness the extent to which the incumbent mobile operators have chosen to entangle this process in litigation or threats of litigation", Ofcom chief Ed Richards said in a speech given on Tuesday at a European Competitive Telecommunication Association (Ecta) regulatory conference.

"We recognise, of course, the need for companies to defend their commercial interests and to have recourse to the law in order to do so," Richards said. "But when litigation becomes essentially strategic rather than based on objective grounds, and when it has the effect of holding back innovation and hampering growth, it is legitimate to ask whether the overall legislative framework fully supports the public interest in this increasingly vital area."

Richards pointed to a Culture, Media and Sport select committee report earlier this month, in which committee chair John Whittingdale MP said "constant disagreement and special pleading from the four mobile network operators appears to have further delayed the spectrum auction".

The committee said the auction had to proceed as soon as possible, as did culture secretary Jeremy Hunt, who said in September that "mobile phone operators must put aside competitive differences and work together in their common — and our national — interest".

Communications bill

Richards warned in his speech that the situation could push authorities into taking regulatory powers in the sector out of Ofcom's hands. "This may well be a consideration as British lawmakers consider their approach to a promised new communications bill for the UK," he said.

"I think some major companies will have to reflect upon whether they have inadvertently jeopardised the benefits of objective, independent regulation in this area by virtue of their willingness to game the system."

The Ofcom chief suggested that "legislators would be all too willing to accept an argument which returns power in such matters to politicians, in light of the apparent inability of the current model to make timely decisions where the national interest is at stake".

Richards said Ofcom still intended to hold the spectrum auction in the second half of next year. The slow pace of the 4G auction process in the UK has had some positive effects, namely in letting operators here learn from rollouts elsewhere in the world. However, more than a dozen countries from Kenya to South Korea are all now deep into their deployments, and the UK is still only at the testing stage.

A study published in October estimated that the UK was losing out on £730m a year in improved productivity due to the auction delay.

O2, which is one of the operators that has in the past launched litigation against the auction process, said the current stage of debating Ofcom's auction rules was intended to "highlight any substantive flaws in Ofcom's proposals".

"We have taken the opportunity to contribute to this process," an O2 spokesperson told ZDNet UK. "Ofcom's decision to re-consult reflects the very real concerns we and other stakeholders have about the March consultation."