Ofcom warns O2 over slow 3G rollout

Ofcom has warned O2 that it must increase its 3G coverage by June or pay a penalty equivalent to £40 million, but O2 claims it will meet the regulator's target.

When five operators bought 3G licences in 2000 for a total of £22.5bn, Ofcom required them to deliver services to 80 percent of the population before the end of 2007. Four operators — T-Mobile, Orange, 3 and Vodafone — have met that obligation. However, O2, which paid £4bn for its licence, is still only at 76 percent: about 2.5 million people short of the Ofcom target.

O2 has six months' grace to reach its 80 percent target, or Ofcom will take the licence back four months early. Ofcom says this is equivalent to a £40m fine, but that figure is arguable, since the £4bn O2 paid for its licence is seen by many as having been partly the result of the telecoms bubble that still existed in 2000. Also, with the licence currently running till the end of 2021, O2 would not be affected for some time.

O2 has said it will meet the new deadline of June, and defended its 3G coverage in a statement on Wednesday. "Our strategy has been to roll out our 3G network in areas where there is the most demand, providing high quality, in-building coverage in those areas," the statement read.

O2 told ZDNet.co.uk that it only needed to add 100 more 3G sites to meet Ofcom's demand.

"Where we do have coverage, it has consistently provided the best quality," O2's statement continued. "We also have one of the larger 3G customer bases. We accept that Ofcom is enforcing the terms of our licence."

The mention of in-building coverage is significant, as 3G networks tend to perform less well indoors because of the particular radio spectrum allocated to them. O2 is due to start trials of femtocells, which are indoor base stations that could provide indoor 3G coverage to anyone with broadband, regardless of whether they are in a 3G coverage area.