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October 11, 2011

4G Spectrum auction in Q4 2012: Ofcom

Regulator plans to have another round of consultations after the first received 'strongly argued' responses

By CBR Staff Writer

Communications regulator Ofcom has delayed the auction of 4G mobile licences in the UK by at least six months.

The regulator cited complexity of the process and possible legal action over the timetable from the main operators as the reasons behind the move.

"Between March and May of this year we consulted on our assessment of likely future competition in mobile markets and proposals for award of the 800MHz and 2.6GHz spectrum bands. We received a number of substantial and strongly argued responses to this consultation," Ofcom said.

Ofcom said it intends to invite a second round of submissions.

"We have been reviewing these responses over the summer, and refining our analysis as a result. In light of these responses, and the significance of the decisions that we need to take – decisions that are likely to shape the future of the mobile sector in the UK for the next decade or more – we have decided to undertake a further round of consultation on these issues," Ofcom added.

Ofcom originally planned to conduct the auction in the first half of next year. With the delay, it is likely to move to the end of 2012.

Major operators including Vodafone have opposed an early auction of the 4G spectrum. Ofcom said that in the new round of consultations companies can respond to its analysis and proposals.

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Ofcom said, "We plan to publish a further consultation document around the end of this year. We will then give stakeholders an appropriate period of time in which to comment on our refined analysis and respond to our revised proposals – likely to be at least 8 weeks. Our aim will then be to make our decision and publish a statement in the summer of 2012. The auction itself would then follow a few months later – perhaps starting in Q4 2012."

However, the regulator added that the delay was unlikely to have any impact on the availability of 4G.

Ofcom said, "It is important to remember that the 800MHz and 2.6GHz spectrum bands will not be available for new use until 2013 in any case – and will likely not be available in all areas of the UK until later in 2013 – and so this step is unlikely to have a material impact on the timeline for the availability of new services to consumers.

"Nevertheless it continues to be our aim to award this spectrum as quickly as possible, in a manner that best promotes the interests of citizens and consumers, in line with our statutory duties and the Government’s direction to Ofcom."

Ofcom’s 4G auction is expected to be carried out in five parts and is expected to be the largest ever, equal to 75% of the mobile spectrum in use today. The 3G auction had raised a record £22.5bn for the Treasury in 2000.

Ofcom chief executive Ed Richards has said the auction is not only critical to the future of the UK mobile telecommunications market but it is also of significant importance to the wider economy.

Richards said, "It will support a wide range of data services that are fast becoming essential features of the modern world."

The auction will be for two spectrum bands – 800 MHz and 2.6 GHz. The lower frequency 800 MHz band is part of the digital dividend, which is being freed-up as the UK switches from analogue to digital TV. This spectrum is ideal for widespread mobile coverage. The 2.6 GHz band is at a higher frequency, and is ideal for delivering the capacity needed to deliver higher speeds, said Ofcom.

Last month, the culture secretary Jeremy Hunt had pleaded with operators to avoid delaying the auction process any further.

Among the operators, UK 3 has said that early auctions are important. The company has expressed concerns that further delay could benefit its rivals.

On Sunday, Vodafone attacked UK 3’s concerns.

Vodafone UK chief executive Guy Lawrence told the Sunday Telegraph that despite the fact that UK 3 sold more Apple iPhones than Vodafone, O2 , or Everything, Everywhere, the company was "running around the playground complaining that they’re being bullied by the older boys."

UK 3 is opposed to a delay in the process because it is at risk of running out of capacity on its 3G network.

Last month, the company had pleaded the government to ensure that the auctions take place on time, saying that it fears competitors may delay the process to exploit’s Three’s vulnerability.

"There is a huge financial incentive for rival operators to delay the auction. We are worried that the other three will attempt to squeeze us out of the market," said Three chief executive David Dyson.

UK 3 currently has the poorest coverage of all the operators, and the growing demand for data has been putting the squeeze on Three.

Dyson added that capacity in large urban areas such as London would begin to run out by the end of next year, but he added that such a thing may not happen.

Dyson had warned that the timetable for the auction process was already slipping.

"Ofcom originally planed to come back to industry with its plans in September or October but that is now likely to be the end of the year or the beginning of the next," he had said last month, adding, "It is a hugely ambitious timetable, trying to do in 18 months what took three years for 3G, but most are optimistic it can still be met."

The UK was one of the first countries to auction off 3G spectrum in 2000. However, it has since fallen behind other countries such as the US, Germany and Japan, where 4G is already in use.

Recently, research firm ABI Research said that though provisioning 4G services and spectrum re-farming will come as a welcome boost to the wireless industry, 4G spectrum will not be allocated in the same generous manner in which 3G was.

The research firm said that operators across the world are starting to move out of 4G trials and switching to commercial services.

It added that while the 4G spectrum allocation will be selective, the re-farming of spectrum and its re-allocation from alternative applications such as broadcast TV and military communications will be necessary.

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