On 11 July 2017, Ofcom, the UK Communications regulator, issued a statement relating to the forthcoming mobile spectrum auction for 2.3 and 3.4 GHz bands. The auction is to make available additional spectrum to facilitate the provision of 4G/5G connectivity and is driven by the increased popularity of band hungry mobile data services.
Ofcom’s concerns centre on the possible adverse effect to competition on the mobile market which may result if restrictions are not placed upon which operators can bid for the spectrum available at the auction. Its statement therefore sets out its analysis of the competition situation and its justification for placing restrictions on the allocation of spectrum in the 2.3 and 3.4 GHz bands.
The regulator believes that, without intervention, this auction could rise to a significant risk to competition as a result of one network being allocated most or all of the available spectrum. Ofcom found that BT/EE held 45% of all the mobile spectrum that was currently useable; Vodafone held 28%; O2 held 15%; and H3G held 12%. The objectives behind the auction are to balance the desire to obtain as higher price as possible for the spectrum being offered. However this must be balanced against the need to maintain effective competition in this industry for the benefit of consumers. Therefore it is concerned that the very asymmetric distribution of immediately useable spectrum in the hands of EE/BT would have highly detrimental effects for effective competition on the market. Even though all the mobile network operators are likely to remain credible competitors after the auction, those with smaller spectrum holdings may not be able to compete so strongly in future as those with much larger spectrum holdings.
Ofcom has therefore decided to intervene and place restrictions on the auction to address these competition concerns. It has decided to place a cap of 255 MHz on the “immediately useable” spectrum that any one operator can hold as a result of the auction. This cap means BT/EE will not be able to bid for spectrum in the 2.3GHz band.
It has also decided to introduce an additional cap of 340 MHz on the overall amount of mobile spectrum a single operator can hold as a result of the auction. This cap amounts to 37% of all of the mobile spectrum expected to be useable in 2020. Taken together, the effect of these restrictions will be to reduce BT/EE’s overall share of mobile spectrum. Based upon the present spectrum holdings of each of the mobile operators there will be no restriction on the amount of spectrum that any other bidder could win.
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