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Ofcom: 2.6GHz auction process to start in March

Ofcom is pushing ahead with a new spectrum auction, despite legal opposition from established operators
Written by David Meyer, Contributor

Ofcom still hopes to start the auction process for a section of  new mobile-broadband spectrum in March, despite a continuing legal challenge from the operators T-Mobile and O2.

A spokesperson for the regulator told ZDNet UK on Wednesday that Ofcom "should be about to open the application process around the end of March", but an O2 spokesperson said in a statement on Thursday that the mobile operator still believes Ofcom "should not proceed with the auction of the 2.6GHz (Digital Dividend Review) spectrum without first resolving the issue of 2G liberalisation".

T-Mobile and O2 launched their litigation against Ofcom in May last year, stalling the 2.6GHz auction which was meant to take place the following summer. The issue was being handled by the Competition Adjudication Tribunal (CAT) until just before Christmas, when the Court of Appeal decided the case should be heard instead by the High Court, Ofcom's spokesperson said.

"The process in the High Court is speedier than in the CAT," Ofcom's spokesperson said, adding that a date for the hearing had not yet been set.

The argument over 2G liberalisation or spectrum refarming has been running for at least two years. In the UK, 2G services run on two bands, 900MHz — as used by O2 and Vodafone — and 1,800MHz — as used by Orange and T-Mobile. The 900MHz band is better at propagating over long distances and building penetration, but is currently reserved exclusively for 2G services. 3G services in the UK run on spectrum around 2.1GHz, which has a shorter range and therefore requires more base stations.

In 2007, the European Union threw its weight behind the idea of 'refarming' 900MHz spectrum so it could also be used for 3G services; the advantage to operators would be to make it possible to provide 3G services using fewer masts, therefore at less expense. Ofcom, despite a consultation on the matter in 2007, has not yet made a decision as to whether 2G refarming should be allowed in the UK.

If Ofcom did permit the refarming of 2G spectrum, it could open up 900MHz for Orange and T-Mobile. If it did not grant permission, then Orange and T-Mobile's only option for expanding their 3G services might be to bid for the 2.6GHz spectrum that is due to be put up for auction this year.

The 2.6GHz spectrum is a candidate for 4G services, such as the long-term evolution (LTE) of 3G or its rival mobile WiMax, but it could be used for 3G, among other options.

"Until there is clarity around the future of 2G spectrum, it is impossible for operators to determine how much of the [2.6GHz] spectrum they need to bid for and its value," O2's spokesperson said. Ofcom's spokesperson, however, told ZDNet UK that the regulator viewed the issues of 2G liberalisation and the 2.6GHz auction as unrelated.

"We are intending to publish a further consultation document on the 2G mobile spectrum later on in the spring," Ofcom's spokesperson said. "We think they are separate issues and we want to press ahead with the 2.6GHz auction because we know there is interest in the spectrum and demand for it."

Telecoms analyst Dean Bubley, of Disruptive Analysis, told ZDNet UK on Monday that "in the real world", no-one has perfect information before making a judgement call on issues such as the value of spectrum.

"I can see the point of wanting to get the refarming out the way, but the reality is that that is not going to happen quickly," Bubley said. "The operators are never going to have perfect information and the speed [of decision-making] they would like."

Bubley pointed out that, when T-Mobile and O2 launched their litigation against Ofcom in May last year, the economy was still OK and there were several potential new entrants into the UK mobile-broadband market, such as Google, who might have wished to bid for 2.6GHz spectrum. BT has always been seen as the most likely bidder for the spectrum, Bubley added.

"Now, given the economic situation, there is less likelihood of any random new entrants," Bubley said. "The risk is that, if [O2 and T-Mobile] do postpone the 2.6GHz auction, it stops BT getting into the game sooner, but, if [the auction takes place] during an economic recovery, someone else might weigh in. They have to decide, would they rather have BT entering the mobile market soon, or run the risk of Google entering it in two years' time?"

Bubley also suggested that T-Mobile's litigation may be partly motivated by a desire to hold off the 2.6GHz auction until LTE-capable devices are on the market. Vodafone, on the other hand, is currently trialing enhancements to 3G, in the form of HSPA+, that would boost speeds but would not require new base-station equipment.

"T-Mobile looks like it wants to skip HSPA+ and go straight to LTE, in which case it doesn't lose by delaying the auction for a year," Bubley said.

ZDNet UK has repeatedly approached T-Mobile for comment on the issue, but had not received any at the time of writing.

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