Ofcom unveils plans for 4G auction of the airwaves that will be a spectrum sale 80% bigger than 3G
The largest ever auction of spectrum for mobile services in the UK is set to get under way by the end of 2012 Ofcom announced today, laying the path for next generation 4G networks to be rolled out next year.
The auction will offer the equivalent of three quarters of the mobile spectrum in use today; some 80% more than released in the 3G auction which took place in 2000 and that raised a hefty £22.5 billion. The plans should see mobile broadband rolled out to at least 98% of people in villages, towns and cities across the UK.
To ensure that UK consumers continue to benefit from a competitive market, Ofcom has also decided to reserve some of the available spectrum for a fourth national wholesaler other than the three largest mobile operators. Ofcom decided that UK consumers are likely to benefit from better services at lower prices if there are at least four credible national wholesalers of 4G mobile services. In the interests of competition, Ofcom has decided to reserve a minimum amount of spectrum in the auction for a fourth operator, which could be Hutchinson 3G or a new entrant altogether.
Ofcom said of the reserved piece of spectrum in a statement: 'Bidders for the reserved spectrum have to compete with each other, but provided that there is at least one such bidder that is willing to pay the reserve price for this spectrum, that bidder is guaranteed to win it.'
Matthew Howett, practice leader for regulation and policy at Ovum, stated: 'Ofcom remains of the view that a market with four players will bring the most benefit to customers and so continues to effectively reserve spectrum for Three (or a new entrant which we consider unlikely). In its first set of proposals, similar protection was also given to Everything Everywhere but was dropped by Ofcom in its second consultation. Many believed that permitting Everything Everywhere to launch 4G early in its existing spectrum holding at 1800MHz was the consolation prize, however this has faced its own set of problems and isn't dealt with in this consolation, but remains something which everyone is eagerly awaiting to learn the outcome of.'
However, this announcement could not come soon enough for the UK, which is seen as a European 'laggard' in the 4G stakes, according to Thomas Wehmeier, principal analyst for telco strategy at Informa Telecoms & Media. Wehmeier commented on Ofcom's plans: 'The UK is already seen as Europe's most complex and fragmented telecoms market and it now looks set to add another unwanted title to its repertoire as a European 4G laggard. Europe's telecoms markets are already dividing into two camps of 4G 'haves' and 'have-nots' and the UK lies firmly stuck in the latter.
'The auction proposal set out today by Ofcom means that the UK will not see 4G LTE services go live until later in 2013 at the earliest, putting UK mobile consumers almost four years behind the world's leading 4G markets. Four years may not seem a significantly long period of time, but it is the equivalent of light years in the fast paced mobile market. To put things in context, 4G adoption in Korea has already reached 17% of mobile users today; by the time the UK takes its first baby steps forward in 2013, it's reasonable to expect that Korea will have taken a giant leap towards 50% adoption,' Wehmeier said.
Wehmeier added that being late to market with 4G is not necessarily all bad news. 'UK mobile operators and consumers alike will benefit from the fact that 4G in late 2013 will be a more mature technology, providing major benefits in the shape of a more stable technology, a greater range of devices and significantly lower equipment costs due to increasing economies of scale.'
Ed Richards, Ofcom chief executive, said: 'The 4G auction has been designed to deliver the maximum possible benefit to consumers and citizens across the UK. As a direct result of the measures Ofcom is introducing, consumers will be able to surf the web, stream videos and download email attachments on their mobile device from almost every home in the UK.'
The 4G auction will offer at least two spectrum bands: 800 MHz and 2.6 GHz. The lower frequency 800 MHz band is part of the digital dividend, which is ideal for widespread mobile coverage. The higher frequency 2.6 GHz band is ideal for delivering the capacity needed to deliver faster speeds. These two bands add up to 250 MHz of additional mobile spectrum, compared to 333 MHz in use today.
This combination of low and high frequency spectrum creates the potential for 4G mobile broadband services to be widely available across the UK, while offering capacity to cope with significant demand in urban centres.
The spectrum bands will be auctioned to bidders as a series of lots. One of the 800 MHz lots of spectrum will carry an obligation to provide a mobile broadband service for indoor reception to at least 98% of the UK population by the end of 2017 at the latest. The 800 MHz spectrum is well suited to providing high levels of coverage, and we anticipate that imposing the obligation on one operator will drive other operators to extend their own coverage in response. Given that it is easier to provide coverage outdoors than indoors, a network meeting this obligation is likely to cover more than 99% of the UK by population when outdoors.
In addition to this UK-wide coverage obligation, Ofcom has decided to require that the same operator provides the same indoor service to at least 95% of the population of each of the UK nations: England, Northern Ireland, Scotland and Wales. Outdoor coverage for a network meeting this obligation is likely to be 98-99% of the population of each nation.
Howett noted: 'We have also seen an increased overage obligation for one of the 800MHz licence holders which is set to bring at least 2Mbps mobile broadband to virtually all of the UK population by the end of 2017. By focusing on indoor coverage it has the added benefit of improving outdoor coverage. However consumers in some parts of the country may for a time only have the choice of the one provider, since no access obligation has been imposed on the winner of this licence.'
Ofcom expects the auction process to start before the end of this year, with prospective bidders required formally to apply to take part. Those applications will then be assessed by Ofcom before the bidding phase starts, likely to be in early 2013.
Mobile operators are expected to start rolling out 4G networks using the auctioned spectrum from the middle of 2013, and to start offering 4G services to consumers later that year.