Ofcom proposes spectrum cap for upcoming auction

UK regulator Ofcom has set out new rules for an upcoming £70 million spectrum auction that includes a cap on “immediately usable” spectrum any operator can buy, which will prevent BT/EE from bidding on some bands.

Next year, the regulator will auction 190MHz of spectrum across the 2.3GHz and 3.4GHz bands, adding around a third to the mobile spectrum currently available in the UK.

Under the proposals released today (21 November), Ofcom will introduce a spectrum cap of 255MHz that any one operator can buy. 

Philip Marnick, Ofcom spectrum group director, said: “Spectrum is the essential resource that fuels the UK’s economy. This auction can help ensure that UK consumers can access the mobile data services they need, and that operators can continue to innovate and build for the future.

“The UK has long benefitted from strong mobile competition. We are designing the auction to ensure everyone benefits from a market that continues to innovate and serve them well.”

Based on current spectrum holders, only BT/EE would be restricted from bidding on any spectrum, as it currently holds a 45% share of immediately useable spectrum. Vodafone holds 28%, O2 holds 15% and Three holds 12%.

The cap will only apply to the 2.3GHz band, as the 3.4GHz band is not classed as “immediately useable”, and could play a role in the development of 5G services.

EE CEO Marc Allera said the telco, which was bought by BT in a £12.5 billion deal in January, disagreed with Ofcom’s decision over the cap.

"While we don't agree that competition measures should be introduced for this auction, we will now examine Ofcom’s detailed proposal carefully and respond to the consultation. 

“We are unique in our ambition to expand 4G coverage to 95% of the UK’s landmass by 2020, further than any other UK network has done, and will continue to use our spectrum and network to ensure UK consumers benefit from being at mobile technology’s leading edge.”

With the auction, Ofcom has set a reserve price of £10 million per 10MHz lots of the 2.3GHz band, and £1 million for a 5MHz block of the 3.4GHz band. This means the auction has a total reserve price of £70 million.

Ofcom’s decision has come under fire from Three, who campaigned for the regulator to impose a cap, but claims it does not go far.

Three CEO Dave Dyson, who saw a merger of his company with O2 UK blocked by Brussels earlier this year following opposition from Ofcom, argued that the current spectrum holding in the UK “puts consumers at risk”. He has repeatedly called for Ofcom to impose a 30% cap on total spectrum ownership.

“Ofcom exists to promote competition and protect consumers but it has once again shown it is not willing to make the big decisions needed to deliver the best outcome for the UK,” he said.

“It has allowed BT and Vodafone to stockpile valuable mobile airwaves and put genuine choice for consumers at risk. It made empty promises to the European Commission that it would tackle this issue but it doesn’t have the courage to do so.

“The mobile industry is failing customers and Ofcom has showed it has no interest in addressing that. A 30% cap on total spectrum ownership and a spectrum reservation for smaller operators are the only measures that will preserve competition for the benefit of UK mobile consumers.”