- Ofcom confirms intention to offer frequencies in the 700MHz and 3.6GHz-3.8GHz bands in spring 2020, but with a change in auction structure.
- Industry commitments on rural coverage said to have enabled regulatory rethink.
- Degree of uncertainty remains due to UK elections and Brexit developments.
Ofcom has launched a new consultation on revised proposals for the design of an anticipated auction of spectrum in spring 2020, with a deadline for submissions of 9 December 2019.
Plans for the sale of access to 200MHz in spectrum across 700MHz and 3.6GHz–3.8GHz bands have been amended in the light of operator proposals on the expansion of full geographic network coverage in the UK that were accepted by the Conservative government ahead of the calling of a General Election.
Fewer obligations and more cooperation
A key change is that the regulator no longer intends to issue licences with coverage obligations, and will instead run an auction based on the Simultaneous Multiple Round Ascending format that it used in 2018 (Telefónicawatch, #125).
Ofcom plans to issue the following spectrum:
- Six lots of 2×5MHz (60MHz in total) in the 700MHz band with a proposed reserve price of £100m–£240m per-lot.
- Four lots of 5MHz (20MHz in total) of 700MHz downlink‑only spectrum, with a proposed reserve of £1m per-lot
- 24 lots of 5MHz (120MHz in total) of 3.6GHz–3.8GHz spectrum, with a reserve proposed of £15m–£25m per lot.
700MHz spectrum (currently used for digital television and wireless microphones) is expected to be available for use by mid‑2020, as will most of the 3.6GHz–3.8GHz spectrum (currently used for fixed-link and satellite purposes). However, Ofcom noted that there may be “some localised constraints” on the use of the latter until end‑2022, while the spectrum is cleared of legacy use.
Once successful bidders for spectrum are declared, there will be an assignment phase, during which the winners of 3.6GHz–3.8GHz spectrum licences will have an opportunity to negotiate their placements within the band among themselves.
“This will make it more straightforward for bidders to join together the new spectrum they win with their existing holdings, and potentially reduce the level of ‘fragmentation’ in the wider 3.4 GHz‑3.8 GHz band. ”
Telefónica UK (O2 UK) had been particularly critical of the fact that Three UK has been able to build two contiguous blocks of 40MHz and 120MHz in the spectrum range, but previously indicated that it would support the proposal for a negotiation phase as part of the assignment stage for the spectrum award (Telefónicawatch, #137).
The regulator intends to retain a 37% cap on the overall spectrum that any one mobile network operator (MNO) can hold following the auction, and noted that O2 UK will not be restricted by the cap “due to its current spectrum holdings”.
Sharing is caring
The change in tack by the regulator on the forthcoming auction has been triggered by the UK Department for Digital, Culture, Media & Sport (DCMS) giving provisional support to the Shared Rural Network (SRN) proposed by the four MNOs to eliminate partial and complete 4G ‘not spots’ across the UK. Indeed, it appears that the implementation of the SRN is subject to the removal of these coverage obligations from the upcoming auction, although Ofcom will instead introduce new, legally-binding licence conditions to ensure the SRN is delivered.
According to the official DCMS statement on the agreement in principal of the SRN, all‑operator 4G mobile coverage would stretch to 95% of the UK landmass by the end of 2025. This would be achieved by commitments from each operator to expand their individual network coverage to reach 92% of landmass by end‑2025, with a degree of coordination that would ensure that the government goal is achieved. Obligations to meet SRN goals would be integrated into operator licences from 2026.
In return, the government has said (again) that it will overhaul planning rules for network infrastructure, and will provide funding of up to £500m over 20 years to support the shared-access arrangements. This will almost match the £532m investment promised by the four MNOs to enable the opening-up and sharing of rural sites over the same period.
The DCMS also flagged intention to make government‑owned infrastructure built as part of the Emergency Services Network (ESN) available to all MNOs, which is expected to add two percentage points of coverage to each operators’ footprint. This was already on the cards in order to ensure government investment did not amount to illegal state aid supporting the EE network (BTwatch, passim). Provision of ESN‑based access is, though, now being accounted within the £500m budget for government spending on supporting SRN.
Broad welcome but uncertainty remains
While Ofcom is moving forward with a revised auction based on the assumption that SRN will become legally‑binding in early‑2020, there may be changes to the agreement as fine details are nailed down.
In a blogpost welcoming the broad acceptance of SRN, Derek McManus, Chief Operating Officer at O2 UK, appeared to have a slightly different understanding of the expectations of the agreement. According to McManus, under the terms of the SRN, O2 UK and its rivals intend to increase the all‑operator 4G coverage of the UK landmass from current levels of 67% to 92% by 2026, and ensure that coverage by at least one operator reaches 97% from current levels of 93%.
The calling of a December 2019 General Election in the UK also cast a pall of uncertainty over the plans, and further obstacles to the implementation of any agreed plan may be created by competition watchdogs.
The government has acknowledged that its contribution to funding for the SRN could be classified as state aid and will be subject to the approval of the European Commission or the Competition and Markets Authority, depending on the status of Britain’s exit from the European Union when it is applied.
SRN not unanimously welcomed
Not all responses to the SRN announcement were positive. As the four MNOs and the DCMS heaped praise on themselves for reaching a “world-first deal”, pressure group Rural Services Network complained that the 2025 target for 95% coverage is “notably slower than the government’s previously stated ambition of 2022”.