The proposals include new measures to boost 4G coverage to at least 98% of the UK, and to promote competition by limiting the amount of radio spectrum available to single parties.
Ofcom announced late last year that it was again pushing back the 4G spectrum auction. It will now take place in fourth quarter 2012, meaning the earliest British consumers will get access to the new generation of mobiles is 2015.
The US, South Korea and some Scandinavian countries are already offering 4G/LTE services, and new 4G mobile phones are the stars of the Consumer Electronics Show 2012 currently on in Las Vegas.
Ofcom says that demand for mobile data in Western Europe is estimated to increase by more than 500% over the next five years, fuelled by smartphones, tablets and other devices that require video streaming, email, messenger services, online mapping and social networking.
"This is a crucial step in preparing for the most significant spectrum release in the UK for many years. The proposals published today will influence the provision of services to consumers for the next decade and beyond," said Ofcom’s CEO Ed Richards.
"The UK benefits from being one of the most competitive mobile phone markets in Europe. This means that consumers pay less for mobile communications services and have the choice to shop around for packages that suit them best. As the UK enters a new generation of mobile communications, Ofcom’s objective is to promote effective competition and to stimulate both investment and innovation."
The 4G spectrum auction was originally meant to occur in 2009, but has been constantly delayed due to issues finalising technology standards, legal threats from rival networks and the UK’s analogue TV switch off (which shares the same spectrum).
The first round of consultation, which concluded in May 2011 saw a huge responses from both the public and network operators. Vodafone and O2, which have already purchased valuable sub-1GHz spectrum space, objected to proposals by Ofcom to limit their access to the upcoming auction, allowing competitors Hutchinson-Whampoa (Three Network), Everything Everywhere (Orange and T-Mobile) to get their foot in the door.
Ofcom has said that it wants to ensure at least 4 mobile network operators have a 4G presence, while O2 and Vodafone claim the proposals amount to unwanted, and unfair state aid to its competitors. Hutchinson has said it is fearful of being squeezed out of the market by its larger competitors.
Ovum analyst Matthew Howett believes that Ofcom’s approach, while controversial, may be the best option.
"Ofcom has essentially been stuck between a rock and a hard place. It wants to award these frequencies as quickly as possible to the benefit of consumers, but also wants to ensure that they do so in a competitive way. The decisions they take now are likely to affect the level of competition in the sector for at least a decade. Striking a balance was never going to be easy. The set of proposals now on the table appear to leave everyone with something to be optimistic about, but at the same time requires compromises to be made. Perhaps Ofcom have got it right?"
Ofcom is also proposing to reserve some spectrum in the 2.6GHz band to be shared by a group of companies to deliver innovative new mobile services for consumers. Potential applications include local mobile networks for student campuses, hospitals or commercial offices, which operate on short-range frequencies serving a small area.
Ofcom is also considering attaching special conditions to the 800Mhz licenses, forcing license holders to provide coverage to atleast 95% of the population.
Ofcom now wants to adjust that special condition in one of two ways.
"We are proposing a significant enhancement of mobile broadband, extending 4G coverage beyond levels of existing 2G coverage – helping to serve many areas of the UK that have traditionally been underserved by network coverage," said Richards.
In October, the Government announced plans to invest £150m to boost mobile coverage in those areas with poor or no mobile service. A significant part of this money is likely to be spent on building new mobile infrastructure in areas of the UK where there is little or no commercial incentive for operators to do so.
The first option is to increase the obligation to 98% of the UK by population. The second, is to require that one 800MHz operator provides 4G coverage that matches existing 2G coverage, but also utilises the aforementioned £150m of government infrastructure in rural areas. This may extend 4G coverage even further than the 98%.
Communications Minister Ed Vaizey said the goal for the government is to eliminate voice ‘not-spots’ – areas without the coverage to make a mobile phone call.
"Mobile phones have changed our lives. In just a couple of years they have developed into a device we use to shop, watch films, access the Internet and spawned an entirely new industry dedicated to developing apps," he said.
"But for as many as one in ten people a mobile is little more than an expensive paperweight in their own home. The Government is determined to provide the UK with the communications infrastructure we need to live, work and drive economic growth in the digital age.The views of industry experts will be invaluable in ensuring we use this £150million to bring mobile coverage to as many people as possible."
The digital dividend is the payment from providers to the government for the right to use these radio spectrums. Ofcom has stated in the past that it estimates to deliver benefits with a value of £2bn-£3bn. By comparison, the 3G auctions in 2000 saw telcos pay £22.5bn in the UK and around £30bn in Germany, which many analysts believe led to the telecoms crash of 2001. Some of the companies involved were so burdened they couldn’t afford to actually build the infrastructure following their bids.
Stakeholders will have 10 weeks to comment on Ofcom’s revised proposals. A final decision on the auction design will be made in the summer of 2012. The auction itself will follow a few months later, starting in Q4 2012.
A detailed outline of Ofcoms proposals can be found here.
Our 4G Auction: What Are The Benefits?
– Faster mobile internet services. Use of smartphones and tablets for services such as video, social networking, email and internet browsing is growing fast. It will help mobile operators meet these demands and offer faster service.
– Continuation of a competitive mobile market. Access to the spectrum is access to the market. Access to 4G can mean the difference between success and failure for new market entrants. More competition means better choice and price for consumers, both enterprise and retail.
– Broadband in rural areas. The 800MHz band is key to the delivery of next generation mobile broadband services in less densely populated areas, where physical infrastructure such as fibre may not be financially viable.
