• 700MHz and 3.6GHz–3.8GHz frequencies slated to go under hammer in January 2021.
  • Measures to address O2 UK fears of mid-band fragmentation.
  • Regulator rejects pleas for “administrative allocation” of spectrum to lower capital outlays.
  • Reserve price total just under £1.1bn.

Ofcom plots 5G spectrum auction for early-2021

Ofcom plots 5G spectrum auction for early-2021

Source: Maximalfocus / Unsplash

UK regulator Ofcom seemed to acknowledge concerns raised by Telefónica UK (O2 UK) about the possibility of spectrum ‘fragmentation’ in the long-awaited auction of 3.6GHz–3.8GHz mid‑band frequencies. How far it has addressed them to the operator’s satisfaction is not yet entirely clear.

In a letter sent by Ofcom Chief Executive Melanie Dawes to the UK’s four mobile network operators (MNO), outlining the regulator’s plans for a sale of both 700MHz and 3.6GHz–3.8GHz airwave rights in January 2021, she acknowledged the importance of being able to “facilitate defragmentation” through the auction process.

The initial idea was to allow MNOs to build contiguous blocks of mid‑band spectrum, in the auction’s aftermath, through commercial trades. After apparently listening to industry concerns, Dawes and her team concluded that sole reliance on market trading mechanisms to counter fragmentation was not sufficient.

“We have heard and acted upon responses from some operators who told us that we should go further and take active steps to facilitate defragmentation. We have made a number of changes, including introducing a negotiation period within the assignment stage of the auction, to enable winning bidders to agree with each other to receive adjacent spectrum. This will make post‑auction trading to defragment the spectrum more straightforward.

— Dawes.

O2 UK previously claimed that Ofcom’s policies placed smaller rival Three UK in a “kingmaker” position — where it can attempt to extract windfall gains from rivals in exchange for shifting spectrum, or charge anti‑competitive rents as competitors fight to acquire larger contiguous blocks (Telefónicawatch, #136 and #137). Three holds two contiguous blocks of 40MHz and 80MHz in the 3.4GHz–3.6GHz band, gained via earlier M&A, and has a network-sharing partnership with EE that faces off with O2 UK and Vodafone’s Cornerstone Telecommunications Infrastructure joint venture.

Auction format stays

Ofcom was not so accommodating to demands made by Three and Vodafone UK that a traditional ‘open’ auction format should be shelved in favour of an “administrative allocation”. Ostensibly, the two operators argued this would be a much safer approach in light of the coronavirus pandemic.

Financial considerations are clearly at play, however. The two operators, according to TheTelegraph, went so far as to ask Ofcom to cancel the auction in favour of awarding licences at reserve prices (see table), or at fees agreed by MNOs. Their thinking (surely wishful) was this would compensate for extra expenditure incurred by removing equipment supplied by Huawei Technologies from their mobile networks. (For its part, O2 UK has limited reliance on Huawei equipment.)

If Three and Vodafone thought this a “balanced approach”, as reported by TheTelegraph, it was evidently seen as unbalanced by Ofcom. The regulator is steaming ahead with a ‘simultaneous multiple round ascending’ auction format.

“When we allocate new spectrum rights, we are required by law to do so through an open process, and in a way that meets this duty. Where the demand for the spectrum is high and availability is limited, we have powers to hold a competitive auction process to determine its allocation, and the price to be paid for it. We have no duties either to maximise or to minimise revenue, and indeed we are not able to pursue such objectives. Our duties focus on efficient allocation, to ensure that this scarce national resource is used as effectively as possible in the interests of UK consumers.”  

— Dawes.

Dawes added in her letter there was “evidence” that spectrum demand may well outstrip supply, and that any allocation process would need to be “genuinely open to any interested party, not just the current mobile network operators”.

There are no coverage obligations attached to the licences, as originally intended, in the wake of the MNOs’ agreement on a Shared Rural Network (SRN) plan earlier in 2020 (Telefónicawatch, #138 and passim). The idea behind SRN is to bring 4G coverage to additional rural and/or transport ‘not‑spots’ through coordinated network expansion and sharing of existing and new sites.

What’s up for grabs in the January 2021 auction
Frequency bandAmount releasedBlocksReserve price per lot
Note: Ofcom imposed a 37% cap (416MHz) on overall spectrum holdings, which means BT is restricted in the auction to acquiring 120MHz; Three to 185MHz; and Vodafone 190MHz. Owing to its current spectrum holdings, O2 UK is not restricted by the 37% cap.
Sources: Ofcom, Telefónicawatch.



Six lots of 2×5MHz (60MHz)


Four lots of 5MHz (20MHz)




24 lots of 5MHz (120MHz)