UK: Ofcom Consultation On The Award Of 4G Spectrum – Largest Ever Single UK Award

Last Updated: 11 April 2011
Article by Chris Watson and Joanne Wheeler

Ofcom has published1 the first in a series of consultations long-awaited by the industry on the forthcoming auction (Auction) of mobile spectrum in the UK (Consultation), which has as its aim an assessment of future competition in the mobile services market and its proposals on the award of the 800 MHz and 2.6 GHz spectrum (New Spectrum).

Access to the New Spectrum is vital to the commercial success of existing and new entrant mobile operators.

The four UK mobile operators: Everything Everywhere; O2; Vodafone; and Hutchison 3G (3), are the key stakeholders in the outcome of the Consultation, each struggling to cope with the vast increase in UK consumer demand for mobile data. 3 was particularly concerned following Ofcom's decision in January 2011 to allow operators to offer 3G services using their spectrum previously licensed for 2G services only (3 having invested heavily – and exclusively – in the 3G spectrum auction in 2000 (3G Auction). Other parties with a vested interest in the Consultation outcome include the emergency services and Program Making and Special Events (PMSE) users, who currently operate in or adjacent to the New Spectrum. The London Organising Committee for the Olympic Games and Paralympic Games (LOCOG) has expressed the importance of the New Spectrum for the use of wireless cameras during the Olympic Games (see below).

The Auction is the largest ever in the UK, equivalent to three quarters of mobile spectrum in use today. It is 80% larger than the 3G Auction which raised £22.5 billion for the UK Government. The New Spectrum will be used by mobile operators to deliver 4G mobile technologies such as Long-Term Evolution (LTE) and Worldwide Interoperability for Microwave Access Technology (WiMAX) but is likely to raise far smaller revenues than the 3G auction.

The New Spectrum comes from two sources: the lower-frequency 800 MHz and (part of the digital dividend from the switch from analogue to digital TV in the UK and well-suited to providing wide coverage, which will benefit rural areas); and the higher-frequency 2.6 GHz band (currently used for PMSE and well-suited for delivering high capacity and high speeds to urban areas).

Competition

At the heart of the Consultation is the issue of competition in the market for the provision of mobile communications services. The Consultation considers the likely evolution of the market and highlights the importance of safeguarding the efficient use of mobile spectrum (taking into account the current distribution of spectrum between the four UK mobile operators). In particular, Ofcom attaches value to the sub-1GHz spectrum for operators to be able to offer higher quality data services, particularly indoors.

Overall, Ofcom identifies a material risk that only two or three mobile operators capable of providing higher-quality data services in a profitable way may emerge from the Auction, and plans to restrict the nature of the Auction to allay this risk by way of 'spectrum flows' and 'spectrum caps'. Spectrum flows will operate to ensure that there are a minimum number of licensees, each with a minimum amount of spectrum, and spectrum caps will operate to calculate the amount the spectrum licensee can hold.
Ofcom considers that the market will likely evolve in three areas:

(1) high quality data with reliable annual coverage;

(2) a separate market with higher data speeds and better latency (delivered by LTE) which is distinct from the market associated with lower data speeds (delivered by 2G and 3G);

(3) priority of service markets; for example, highly reliable business services versus standard consumer services. 
 
Services existing in and adjacent to the New Spectrum

Ofcom has previously identified the potential for interference to networks already operating adjacent to or near the New Spectrum2 and this is considered in the Consultation.  It plans to publish a separate consultation in the next few months, addressing the issue and potential restrictions in more detail.

In relation to emergency services (whose systems currently operate around the 800 MHz band), Ofcom has been working with the Home Office and the Department for Communities and Local Government to assess the risk and plan for mitigation against interference.  Ofcom proposes that the Government will meet any justifiable costs that emergency services incur as a result of any such mitigation. The need to avoid disruption to the operation of emergency services at the Olympic Games between June and September 2012 is a key consideration for Ofcom.

In relation to cable TV systems (which, although not wireless, operate near the 800 MHz band and are susceptible to interference), Ofcom worked with the Department for Business, Innovation and Skills (BIS), Virgin Media and technical consultants during 2010 to assess the scale of potential interference.  The main conclusions were that the potential impact is manageable and that there is time to contend with the issue.  Virgin Media and other cable operators will be encouraged to review their frequency plans and replace hardware where necessary before mid-2013.  They are also advised to make an effort to educate their customers on how to avoid interference.  

The use of the 2.6 GHz band by mobile operators will likely interfere with radar, which commonly operates in the 2.7 to 3.1 GHz band.  Ofcom proposes that mobile network operators in the 2.6 GHz band will need to coordinate with radar operators, and radar operators will likely be required to modify and upgrade their equipment.  Ofcom has advised air traffic control radar operators of the likely impact and proposes to amend Wireless Telegraphy Act3 licences to ensure that necessary modifications are made to mitigate potential interference due to mobile operators operating in the 2.6 GHz band.

In respect of the Olympic Games, Ofcom has elected to reserve the whole 2.6 GHz band for wireless cameras between 28 June and 23 September 2012.  The result will be that licences issued in the Auction to mobile operators for the 2.6 GHz band may temporarily exclude use for operating new services, depending on demand at the time of the Olympic Games.

At present, the 2.6 GHz band is currently licensed for PMSE use.  Ofcom proposes that access to these frequencies for PMSE will cease with three months' notice, which will begin on the date of the announcement of the provisional application date to participate in the Auction. Ofcom is also considering allocating part of the currently unassigned 3.1 GHz band to PMSE on a temporary basis.

New Spectrum Licences

Ofcom has proposed that licences in the New Spectrum shall have an indefinite duration, subject to revocation. It considers that such a structure would promote optimal use of the spectrum as a whole and promote competition. To provide certainty, Ofcom has proposed that during an initial term of twenty years, New Spectrum licences could only be revoked for very limited reasons, such as non-payment of the relevant licence fee and national security. After the initial term, additional licence fees would be payable and the licence subject to revocation on spectrum management grounds on five years' notice.

Licences will be subject to a condition of extension of coverage to 95% of the UK population.

The deadline for responses to the consultation is 31 May 2011.  The Auction is timetabled for the first quarter of 2012 and Ofcom's anticipated start date for granting licences in the New Spectrum is 1 January 2013.  

Footnotes

1. Consultation published on 22 March 2011, click here. The announcement is pursuant to the direction to Ofcom by the UK Government in December 2010 (Wireless Telegraphy Act 2006 (Directions to Ofcom) Order 2010 (click here),  click here. for Law-Now article.  This follows previous consultations in 2008, 2007 and 2006 through which Ofcom developed and refined proposals for the award and the technical and non-technical licence conditions and award rules.
2.  Click here for statement
3. Wireless Telegraphy Act 2006, click here.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 06/04/2011.

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