Out-Law News 2 min. read

Vodafone, Three and Telefónica among winners of spectrum in Ofcom 4G auction

Ofcom has predicted that "strong competition" will drive down the cost of 4G mobile broadband usage after it announced which five major telecoms operators were successful in auction bids for 4G spectrum.

The telecoms regulator said that Vodafone, Everything Everywhere (EE), Telefónica (O2), Hutchison 3G (Three) and Niche Spectrum Ventures (a BT subsidiary) had spent more than £2.3 billion between them in acquiring the spectrum for the purposes of delivering 4G services. The spectrum purchased by the telecoms firms is in the 800 MHz and 2.6 GHz frequency bands.

"The auction has achieved Ofcom’s purpose of promoting strong competition in the 4G mobile market," an Ofcom statement said. "This is expected to lead to faster mobile broadband speeds, lower prices, greater innovation, new investment and better coverage. Almost the whole UK population will be able to receive 4G mobile services by the end of 2017 at the latest."

The term '4G' is generally used to refer to mobile broadband services delivered using the next generation of mobile broadband technologies; including Long Term Evolution (LTE) and WiMAX. LTE technical standards make more efficient use of radio spectrum, which makes them ideally suited for the high bandwidth data services including video streaming, social networking and GPS and mapping services used by smartphones and laptops.

Mobile phone companies were first awarded varying amounts of spectrum at 900MHz and 1,800MHz in the 1990s on the condition that this could only be used for 2G services, mainly voice calls and text messages. In 2011, Ofcom ruled that this could also be used for 3G services as part of its plans to "liberalise" spectrum use for the benefit of consumers.

Last year Ofcom granted EE the right to use the 1,800 MHz spectrum the company owns for the purposes of providing 4G services. The move prompted initial opposition from rival providers, but the threat of legal action was eased after the regulator brought forward its auctioning off of spectrum in the 800 MHz and 2.6 GHz bands to enable rival 4G services to EE's to emerge sooner.

Ofcom chief executive Ed Richards said he was pleased with the outcome of that auction.

"This is a positive outcome for competition in the UK, which will lead to faster and more widespread mobile broadband, and substantial benefits for consumers and businesses across the country," Richards said. "We are confident that the UK will be among the most competitive markets in the world for 4G services."

"4G coverage will extend far beyond that of existing 3G services, covering 98% of the UK population indoors – and even more when outdoors – which is good news for parts of the country currently underserved by mobile broadband. We also want consumers to be well informed about 4G, so we will be conducting research at the end of this year to show who is deploying services, in which areas and at what speeds. This will help consumers and businesses to choose their most suitable provider," he added.

Of the approximate total of £2.34bn that will be raised from the auction, more than £790 million will stem from the sale of spectrum to Vodafone, whilst EE, in pledging more than £580m for spectrum, was the second biggest bidder. O2, Three and BT bid £550m, £225m and approximately £186m respectively to win their share of spectrum that has been auctioned off. The companies have until the end of the day on Thursday to pay the sums owed.

Ofcom said that a final round of bidding between the five companies will take place to determine where "each winning bidder’s new spectrum will be located". After that issue is determined and following the payment of licence fees by the companies, the regulator will grant licenses to the five companies enabling them to provide 4G services. It said that new 4G services, to rival EE's existing offering, will be available to businesses and consumers as early as this spring.

Ofcom said it is already looking to release further spectrum for auction in order to enable companies in future to deliver new '5G' services. This, it said, will help satisfy increasing "demand for mobile data" and "avert a possible 'capacity crunch'".

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