UK: Delivery of Next Generation Wireless Services in the UK

Last Updated: 22 April 2010
Article by Gillian Sproul, Peter Dickinson and Stephen Smith

Originally published 16 April 2010

Keywords: Wireless, next generation, UK, switchover, television, analogue, digital, BIS, OFCOM, GSM Directive, license terms, low frequency

Background

The "digital dividend" of electromagnetic spectrum made available as a result of the switchover from analogue to digital television – and suitable for use for 3G and next generation ("4G") mobile services – has presented a number of challenges to regulators throughout the European Union. In the UK, the Department for Business, Innovation and Skills ("BIS") addressed its plans for exploiting the digital dividend and spectrum liberalisation in its June 2009 Digital Britain Report1 and October 2009 Consultation2. In March 2010, BIS laid before Parliament draft Directions to OFCOM3 (the "draft Directions") to ensure implementation of its plans consistent with the requirements of the GSM Directive, which the UK must implement by 9 May 20104. However, the draft Directions failed to gain approval by Parliament prior to its dissolution in advance of the General Election scheduled for 6 May 20105, casting doubt on the UK's spectrum liberalisation programme.

Spectrum liberalisation

OFCOM initially proposed auctioning additional spectrum at 2600MHz, suitable for 3G services, at the earliest available opportunity in 2009. However, this plan was postponed because O2 and T-Mobile challenged (for different reasons) an auction of this spectrum band before resolution of various legacy issues surrounding the use and potential redistribution of the 900MHz band. The auction was further delayed by the Digital Britain Report, which recommended that part of the 2600MHz band be auctioned together with the 800MHz band –both are suitable for 3G and 4G services.

These challenges threatened to hinder deployment of next generation mobile broadband services in the UK. An Independent Spectrum Broker was appointed to broker an industry compromise, and the draft Directions aimed to realise the compromise that was reached. The Directions set out the ground rules for the award both of vital low frequency spectrum (in the 800MHz band) and of a large amount of bandwidth at 2600MHz and the variations to be made to existing licences (both 2G at 1800MHz and 900MHz and 3G at 2100MHz) to ensure technology neutrality going forward.

Draft directions to OFCOM

The purpose of the draft Directions was to ensure:

  • the release of additional electromagnetic spectrum for next generation wireless broadband; and
  • the implementation of the GSM Directive and the Commission Decision6 on the liberalization of frequencies in the 900MHz and 1800MHz bands.

In short, the draft Directions required OFCOM to make variations to the existing 2G licences (at 900MHz and 1800MHz frequencies) and 3G licences (at 2100MHz) to:

  • liberalise those licences, enabling the roll-out of 3G and next generation (long term evolution or "LTE" services7) at all existing frequencies;
  • introduce spectrum trading, permitting the transfer of existing licences; and
  • extend licence terms to indefinite terms (subject to termination by OFCOM for spectrum management reasons) - however, in light of the JCSI's comments, this particular provision may now be in doubt.

In addition, the draft Directions confirmed the key parameters that would govern participation in the forthcoming spectrum award auctions for the 800MHz and 2600MHz bands. In particular they would:

  • cap total low frequency spectrum holdings for any entity at 40MHz;
  • cap total spectrum holding for any entity at 180MHz overall;
  • impose certain retail and wholesale access obligations on operators holding low frequency spectrum; and
  • impose minimum reserve prices (to be set subsequently by HM Treasury).

Failure of the draft Directions

Unfortunately, the draft Directions were not debated in Parliament and consequently did not gain the requisite approval of both Houses in the "wash up" period prior to the dissolution of Parliament. Even before this, they had encountered difficulties in navigating the parliamentary process. The committee tasked with reviewing the draft Directions (the Joint Committee on Statutory Instruments ("JCSI")) had raised numerous issues with them in its report of 30 March 2010, most notably expressing doubt that the provisions allowing for indefinite licence terms were within the powers granted to OFCOM by the Wireless Telegraphy Act 20068.

The future

The issue of spectrum allocation resulting from the digital dividend has proved to be controversial throughout the EU, with litigation most recently seen in Germany.9 In the UK, the focus has centred on how to address historical asymmetry in spectrum allocations. Low frequency spectrum, seen as a crucial element in the design and roll out of next generation mobile services due to its potential to deliver lower cost coverage in rural areas and better in-building coverage in urban areas, is currently in the hands of only two of the existing five UK mobile network operators. The European Commission's 1 March 2010 conditional clearance of the proposed merger of the UK operations of T-Mobile and Orange by way of a joint venture10 will lead to consolidation in the market in the UK, and the conditions of clearance require the parties to make available to others an additional 15MHz of spectrum at 1800MHz. The existing holdings of the 900MHz operators, Vodafone and O2, are not affected.

The draft Directions were intended to mark the first stage in implementation of the compromise reached by the Independent Spectrum Broker, seeking to ensure delivery of next generation services without introducing (or entrenching) potential distortions of competition arising from historical and asymmetrical spectrum holdings.

The failure of the draft Directions, after a long process of consultation and compromise, creates substantial uncertainty. The doubts expressed by the JCSI regarding OFCOM's powers to grant indefinite licences cast a shadow over the number of indefinite licences already in existence. More generally, any future Conservative government would be likely to reassess not only the spectrum liberalisation plans embodied in the draft Directions, but also the role and scope of OFCOM. Whichever party wins the election it is very unclear how and when the UK will auction the spectrum concerned and how it will achieve compliance with the GSM Directive by the fast approaching 9 May deadline11. And a hung parliament, which many think likely, is likely to add to the delay and uncertainty. Ultimately, it seems that the future of spectrum liberalisation will now not be decided until well after the results of the General Election are known.

Footnotes

1. Digital Britain Final Report, June 2009, available at http://www.culture.gov.uk/images/publications/digitalbritain-finalreport-jun09.pdf.

2. BIS Consultation on a Direction to OFCOM to Implement the Wireless Radio Spectrum Modernisation Programme, October 2009, available at http://www.bis.gov.uk/assets/biscore/corporate/docs/migrated-consultations/digital%20britain%20report-%20a%20consultation%20on%20a%20direction%20to%20ofcom%20to%20implement%20the%20wireless%20radio%20spectrum%20modernisation%20programme.pdf.

3. The Wireless Telegraphy Act 2006 (Directions to OFCOM) Order 2010. These draft directions were published on 25 March 2010.

4. Directive 2009/114/EC amending Council Directive 87/372/EEC on the frequency bands to be reserved for the coordinated introduction of public pan-European cellular digital land-based mobile communications in the Community.

5. See The Guardian, 7 April 2010, available at the following link: http://www.guardian.co.uk/technology/2010/apr/07/mobile-networks-capacity-crunch.

6. Commission Decision 2009/766/EC.

7. Also referred to as 4G.

8. Thirteenth Report of Session 2009-2010, published on 31 March 2010, available at the following link: http://www.publications.parliament.uk/pa/jt200910/jtselect/jtstatin/111/111.pdf.

9. See E-Plus and O2 Germany v. Bundesnetzagentur Cologne Administrative Court, 18 March 2010.

10. http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/208

11. The GSM Directive must be implemented by Member States by 9 May 2010.

Learn more about our Telecommunications practice.

Visit us at www.mayerbrown.com.

Mayer Brown is a global legal services organization comprising legal practices that are separate entities ("Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP, a limited liability partnership established in the United States; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales; and JSM, a Hong Kong partnership, and its associated entities in Asia. The Mayer Brown Practices are known as Mayer Brown JSM in Asia.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Copyright 2010. Mayer Brown LLP, Mayer Brown International LLP, and/or JSM. All rights reserved.

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