Three hits out at Ofcom's flip-flop on 4G spectrum

Three has described Ofcom's change of heart on sub-1GHz spectrum, which removed the operator's guarantee of a place in that spectrum, as "irrational" and "questionable".

Three has criticised Ofcom for its change of heart on how it doles out sought-after sub-1GHz spectrum for 4G services. Image credit: Jon Yeomans

The mobile operator's chief executive David Dyson on Tuesday called on the telecoms regulator to rethink its position on that spectrum, which he said has been accepted across Europe as the most suitable for 4G — the lower-frequency spectrum is, the further the services that use it can travel.

"Ofcom did appear to have a solid position with respect to the natural competitive advantages that low frequency enjoys, but now they appear to have changed their view," Dyson told a Westminster eForum in London. "It remains to be seen whether they will reconvene with a decision that is more consistent with their European peers."

"A conclusion to the contrary would be irrational and questionable, and unnecessarily risks future competition in the UK mobile market," he later added.

Sub-1GHz spectrum

Initially, the telecoms regulator viewed the sub-1GHz spectrum as essential to any operator that wanted a fair chance of delivering 4G services, as this kind of spectrum travels further and penetrates deeper into buildings than higher frequencies can. Ofcom earmarked a section for a 'fourth player' — which would almost certainly be Three — after major operators Everything Everywhere, Vodafone and O2.

However, Ofcom then carried out a technical assessment and had a change of heart about how well other bands are suited to 4G usage. In particular, it said that having a "large quantity" of 1800MHz spectrum, along with a "large number of base stations", could match the use of 800MHz in terms of delivering 4G services.

As the merged operations of T-Mobile UK and Orange UK, Everything Everywhere has a very large amount of 1800MHz spectrum. This was originally set aside for 2G, but Ofcom is now open to it being used, or 'refarmed', for 4G as well.

However, as part of the European Commission's approval of the Everything Everywhere merger, the company has to sell off some of its 1800MHz spectrum. That chunk of spectrum is likely to go into the same auction pot as the 2.6GHz and 800MHz spectrum due to be sold off at the end of this year.

If that happens, Three will lose its guarantee of gaining sub-1GHz spectrum in the auction, as Ofcom reckons the operator will be able to make do with some 1800MHz spectrum instead.

"Prior to 2G spectrum liberalisation, there was a healthy competitive landscape for data, and all players in the market had roughly equal access to 3G spectrum," Dyson said. "Post-liberalisation, the landscape is very different in terms of total spectrum and quality of spectrum held. It is clear to me that a distortion of the competitive landscape has occurred."

"Every other regulator in Europe has recognised [the technological benefits of low-frequency spectrum]. In Austria, Ireland and the Netherlands, low-frequency spectrum was withdrawn and re-auctioned through a proper competitive process. In other European countries, 2G spectrum has been re-allocated to ensure a more even balance across the market. The UK remains undecided," Dyson added.

Refarming plans

The UK's spectrum auction is set to take place later in 2012. Ofcom had previously given a deadline of 17 March for interested parties to lodge concerns about Everything Everywhere's refarming plans, but on Tuesday extended the deadline until 8 May.

It is clear to me that a distortion of the competitive landscape has occurred.

– David Dyson, Three

Three is one of a number of operators opposing Everything Everywhere's plans to use its vast amount of existing 2G spectrum to deliver 4G services. Opponents argue that it is anti-competitive to allow one company to bring a product to market at least a year before any competitor would be able to launch rival services.

Vodafone and O2 also own some 1800MHz spectrum, but not nearly enough as Everything Everywhere does. This means that, while they could probably also get approval to refarm that spectrum for 4G use, they already use all the 1800MHz spectrum they have for providing 2G services.

In March, Vodafone said Ofcom had "taken leave of its senses" in its decision to let Everything Everywhere forge ahead with its 4G rollout before 2013.

Ofcom declined to offer comment on Dyson's speech, as the regulator is still formulating its reply to the consultation responses it received around the updated auction rules.