Out-Law Analysis | 29 Nov 2019 | 11:13 am | 5 min. read
The deal reached by Vodafone and mobile signal specialists StrattoOpencell is underpinned by a new spectrum sharing framework introduced by Ofcom in July. It is also in line with UK government expectations on making the most of available radio frequencies in the digital age.
On 2 October mobile network operator Vodafone and mobile signal specialist StrattoOpencell (Stratto) announced a three year agreement which will enable Stratto to share access to spectrum that Vodafone has licensed for the purposes of offering "high-speed mobile broadband in remote areas without fibre connectivity".
According to the companies Stratto will initially use the 2600 Mhz spectrum to deliver 4G connectivity to a holiday site in Devon. Vodafone will continue to use spectrum in the 2600 MHz band to deliver mobile connectivity to its own customers "in busy areas such as stadiums and city centres".
The agreement was described as a "UK industry first" by the companies.
Out-Law understands that a number of other organisations have expressed interest in setting up similar local spectrum sharing arrangements.
The Vodafone-Stratto deal, like similar agreements that could follow, is underpinned by a new policy Ofcom developed in the summer on sharing spectrum and local licensing.
The policy provided for the immediate introduction of 'local access licenses'. Using these licenses, businesses can use spectrum that is licensed to mobile network operators but not used by them in a local area. A one-off £950 is payable to Ofcom to obtain a local access licence. That licence will last for a default three-year period, although it is open to the businesses involved to seek licences covering a shorter or longer period.
The policy also provides for the future introduction of 'shared access licences' in four specific frequency bands, including the 3.8-4.2 GHz band already used for delivering 5G connectivity and the 26 GHz band which is earmarked for the same purpose in future. Ofcom said it will consider requests for shared access to the four frequency bands by the end of 2019.
Ofcom said that while it believes licensing spectrum suitable for mobile services on a national basis remains the "most efficient way" to meet demand for new wireless applications, its new spectrum sharing framework can complement that approach.
"We consider that access to spectrum in bands where mobile technology is supported could offer important benefits to citizens and consumers, complementing the benefits from the award of national licences," Ofcom said in its policy statement. "Specifically, we consider that this could unlock opportunities for innovation and facilitate new investment models."
With the age of the 'internet of things' upon us, where billions of everyday items double as connected devices, the opportunities that local and shared spectrum licensing offers are hard to quantify.
There may, for example, be a role for localised spectrum sharing to support the use of connected and autonomous vehicles across the whole of the UK, and not just in busy urban areas where 5G technology has already begun to emerge.
Ofcom used its policy statement and accompanying press release to outline some of the benefits it has identified that its new approach to spectrum sharing will offer businesses.
"Manufacturers could establish connected factories – using a reliable, high-speed wireless networks to connect, control and monitor machinery," Ofcom said. "Farmers could also set up their own local network across large sites, improving communications between people and connected agricultural devices – used for monitoring livestock and crops, irrigation systems and smart tractors."
"Business parks could set up their own bespoke, secure communications networks – without needing to rely on existing mobile and broadband coverage. Holiday parks could help their visitors stay connected during their break, by setting up local mobile broadband networks. Shopping centres, transport hubs such as ports and companies in the logistics industry may also be interested in setting up their own local networks, using the spectrum we’re making available," it said.
Parties looking at whether to apply for spectrum under the new sharing arrangements will need to consider whether they want to access unused licensed spectrum under the local access licence, which may potentially only be available in more remote areas, or apply for a licence in the shared access bands.
This will have a major impact on the financing of such arrangements. The sponsors and lenders will need to have a better comprehension of those transactions in order for the financing conditions to remain competitive.
The fact that spectrum is a finite resource and in increased demand in the digital age has long been recognised by policymakers. It is a factor that continues to shape market intervention at both UK and EU level.
The UK government published its statement of strategic priorities for telecommunications at the end of last month – a document Ofcom is not bound by, but which it must have regard to, when exercising its regulatory functions.
In that statement the government described spectrum as a "valuable national asset", and set out its "key objectives" for spectrum. They include:
The government reflected on its Future Telecoms Infrastructure Review (FTIR) last year, and reiterated that it "regards the introduction of flexible, shared spectrum models and the release of additional public sector spectrum as strategic priorities". It said spectrum sharing models could "enable new players, alongside existing mobile operators, to access spectrum and invest in new business models", and further "help increase the availability of services and unlock opportunities for innovative new applications".
The government went on to say that it wants Ofcom to "report on the utilisation … of spectrum in mobile bands" so as to "identify the parts of the UK where spectrum in each mobile band is and is not being fully utilised", and further outlined its thoughts on an aspect of EU law that concerns the efficient use of spectrum.
The European Electronic Communications Code (EEEC) promotes the concept of spectrum sharing and includes specific provisions that will empower national telecoms regulators, such as Ofcom, to apply 'use it or lose it' clauses to spectrum licensing agreements. The EU directive that established the EEEC, however, does not have to be implemented into national law until 21 December 2020.
The government has indicated it will implement the EEEC into UK law despite Brexit, and said on the topic of 'use it or lose it' clauses specifically that they will "form an important incentive for mobile network operators to utilise, share or lease spectrum".
It added that it expects Ofcom, in anticipation of the express 'use it or lose it' clause powers being implemented, to "include appropriate provisions when granting rights of use for spectrum".
Out-Law understands that Ofcom, which has yet to respond to the statement of strategic priorities, has no plans currently to impose 'use it or lose it' licensing conditions on the winners of the upcoming 5G spectrum auction due to take place in spring 2020.
In a December 2018 paper concerning the award of spectrum in the 700 MHz and 3.6-3.8 GHz bands, Ofcom said: "We understand that the Government is considering legislating to require the inclusion of ‘use-it-or-lose-it’ conditions in new spectrum licences, as part of its proposed implementation of the European Electronic Communications Code (the Code). We will keep this under review and to the extent we are required to include such a condition in the licences we auction when we make our final decisions, we will do so."
It is clear, however, that the direction of travel is a future of increased wireless connectivity based on maximised use of available spectrum. This is a future of possibility for business and, as the Vodafone-Stratto deal highlights, it is a future that is already here.
Diane Mullenex and Nick Hutton are a telecoms experts at Pinsent Masons, the law firm behind Out-Law.
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