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August 22, 2012

Reaction: Everything Everywhere to launch 4G in 2012

The industry reaction to Ofcom's shock decision to let Everything Everywhere launch 4G mobile services in the UK in 2012.

By Allan Swann

To read CBRs coverage of the original story, click here. For Allan’s blog on the decision, click here.

Andrew Ferguson,

"The move by Ofcom to allow deployment of 4G before the auction process completes will be welcomed by the consumer. The question now is what level of coverage will be available, it is not clear how much of the Orange/T-Mobile mast network will be upgraded to 4G and in what time scale.

"The auction has a requirement that 4G will provide 98% of UK homes with indoor coverage, though there is no speed floor to this requirement, so until we have actual network deployment it will not be clear how useful this basic requirement will be in helping to meet the UK 2 Mbps Universal Service Commitment.

"For mobile road warriors, the choice of 4G which particularly in its first year of deployment will be free of congestion, will be snapped up, many of these people already travel with two or three mobile dongles to ensure some internet access in most of the UK. If the iPhone 5 launches with support for 1800 MHz LTE, then this will give Everything Everywhere a competitive edge, but Apple has not released firm information on what LTE frequencies the iPhone 5 will support, it may not work with any planned 4G network in the UK.

"Some claim that 4G will replace fixed line broadband, and in areas where fixed line services only barely meet a 2 Mbps minimum requirement we would expect this to happen, but in the much larger part of the UK which will have access to 40 Meg, 80 Meg and 120 Meg services in the next 12 months, 4G is unlikely to win many away from fixed line services."

Matthew Howett, principal analyst, Ovum

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"Ofcom has decided that allowing a temporary head start for one operator is a better option for consumers than not having any 4G at all. This has certainly taken the industry by surprise.

"Perhaps understandably, the reaction of EE’s competitors has not been friendly. In addition to complaining that the decision is unjust, at least one operator has raised the concern that EE (and now possibly also Three given that it has acquired EE’s divested spectrum) is incentivized to delay the joint award of the auction planned for later this year, and to further extend its period of advantage. This is something we have warned against before, and comments from Culture Secretary Jeremy Hunt suggest that the issue is finally on the government’s radar. However, with Ofcom having made considerable concessions in EE’s favor, it is less plausible that the operator would carry out such action. A legal challenge to the auction rules from O2 or Vodafone also seems a lot less likely now that the auction is the only way for them to launch 4G services of their own.

"The advantage that EE will get from the head start will ultimately depend on the availability of devices and the readiness of its network. If – and this is a big if – Apple launches the new iPhone with LTE1800MHz capability, it would be a massive boost for EE. Such an outcome would only intensify the reaction of the other players, and would increase the possibility of litigation.

"The early arrival of 4G is likely to be especially welcomed by residents of rural and remote Britain, many of whom lack even the most basic broadband services. For what is widely defined as the final third of the UK that will not be passed with fiber broadband, mobile remains the most likely solution. Unfortunately the UK government has so far failed to pay enough attention to how 4G could help. The government wants the UK to have "the best superfast broadband in Europe by 2015" (a vague commitment that will probably be assessed against a combination of speed and availability), and if this is to be achieved then mobile is going to play a crucial role.

Stephanie Liston, Senior Council at Charles Russell

"Seeing the Ofcom Everything Everywhere decision, one wonders whether the pro-investment (i.e. helping the economy) has outweighed independent consumer choice issues. The decision is of particular interest in the context of the upcoming auctions. We now await the reactions of competitors.

"It is rare for a regulator to give head starts or handicaps to competitive operators. It may have been more tactical for Ofcom to have delayed its decision until sometime in the Autumn. The head start would then have been diminished and the competitive disadvantage to other operators limited.

"Having said that, being a first mover in telecoms is not always an advantage."

Kester Mann, CCS Insight

"Today’s announcement was undoubtedly a brave move by Ofcom in the face of expected strong backlash from mobile operators. However, Ofcom believes that the benefits of allowing the launch outweigh the potential risk of distorting competition. The UK has lagged its European counterparts on this for too long which has led to questions about its technological leadership in recent months. With over 80 LTE networks already commercially live according to the GSA, the announcement is a great boost for the UK and makes up for lost ground in LTE deployment.

"The main rationale for Everything Everywhere to launch at 1800MHz is the marketing and educational benefits it will gain. It’s a great opportunity for the operator to differentiate itself against competing rivals. While improved network speed and quality provide distinct opportunities, it is unlikely smartphones capable of offering LTE using Everything Everywhere’s 1800 MHz spectrum will be available in 2012. Initially we expect it to offer USB dongles with compatible smartphones following in 2013. Coverage is likely to be initially restricted to an ‘island’ approach.

"We expect rival operators to vehemently oppose the move on the basis that it gives Everything Everywhere an unfair head-start. While legal challenges against the decision would only act to delay the process at this stage, it is important that those players who have lost out have a commercial Plan B to react to Everything Everywhere’s move."

Patrick Clark, Head of Telecoms, Taylor Wessing

"This is a brave move on the part of Ofcom, which will give Everything Everywhere an effective monopoly on 4G/LTE services for at least a year until the completion of the 4G spectrum auctions which are due to be held early next year (with expected roll-out of new 4G/LTE services by the end of 2013). Vodafone and Telefonica O2 have both already issued statements indicating that they are disappointed with this decision.

"We have seen a number of challenges to the regulator in recent times, which are made simpler by the current regulatory environment, so one would assume that in order to make such a potentially market-changing decision Ofcom must be pretty sure of their legal grounds here or at least be confident enough that there are currently not sufficient grounds for challenge.

"Even if there is no reason for challenge today, the other operators will be presumably be keeping the situation under review and will be looking for any possible action on the part of Everything Everywhere with their newly acquired monopoly status that could justify a complaint under UK or EU competition law.

"Allowing the use of spectrum in this range for 4G/LTE use is not the end of the story, as handsets or other devices also need to be available to enable customers to use such new services. Rumours circulating today suggest that the new Apple iPhone 5 (?) will/may support use of LTE in the 1800Mhz range (the range that Everything Everywhere have been sanctioned to use), although this is not yet confirmed. This would be a powerful boost to Everything Everywhere if the new iPhone was capable of being used on their network, and could well entice many customers to swap networks which coupled with a two year contract (now standard in the UK market) would see customers locked-up well into 2014."

Dan Wagner, CEO of mPowa

"The introduction of 4G in the UK is long overdue because for far too long, the internet speeds we have had – both on mobile and to fixed locations – have been inferior to other parts of Europe and further afield. This will really enhance competitiveness in this ‘always on, always connected’ business landscape and will help companies offer much more comprehensive mobile services that are quicker and more flexible.

"We are now entering a new paradigm in business whereby we can now take advantage of these developments in technology and offer a service that reflects the needs of customers. Today’s consumers want faster and more convenient ways of interacting with businesses and paying for products. Faster, more robust connectivity will take this forward massively. I’m very much looking forward to the possibilities that 4G will bring about."

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