- Ofcom changes structure for spring 2020 auction.
- Industry’s rural commitments said to have enabled a re‑think.
- Degree of uncertainty remains due to UK elections and Brexit.
UK regulator Ofcom launched a 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 the 700MHz and 3.6GHz–3.8GHz bands were amended in the light of operator proposals on the expansion of full geographic network coverage in the UK, which were accepted by the current 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 it used in 3.4GHz auctions in 2018 (Vodafonewatch, #164).
Ofcom plans to issue the following spectrum:
- Six 2×5MHz lots in the 700MHz band (60MHz in total) with a reserve price in the proposed range of £100m (€116m)–£240m per lot.
- Four 5MHz lots of 700MHz downlink‑only spectrum, with a proposed reserve price of £1m per lot.
- 24 5MHz lots of 3.6GHz–3.8GHz spectrum, with a reserve price in the proposed range of £15m–£25m per lot.
700MHz frequency (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 frequency 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 3.4GHz–3.8GHz band. ”
The post-auction re-jigging process appears designed to relieve ill‑feeling among rival operators, including Vodafone UK (VfUK), over fourth player Three UK’s sizeable existing 3.6GHz rights, gained through acquisitions. Ofcom recently allowed Three to de‑fragment those holdings despite claims from VfUK that the move could complicate preparations for the coming auction (Vodafonewatch, #171).
The regulator still intends to place a 37% cap on the overall spectrum that any one mobile operator can hold following the auction.
Sharing is caring
The change in tack by the regulator on the forthcoming auction was triggered by the UK Department for Digital, Culture, Media & Sport (DCMS) giving provisional support to a Shared Rural Network (SRN) proposed by the four mobile network operators (MNO) to eliminate partial and complete 4G ‘not spots’ across the UK. It appears that the implementation of the SRN is subject to the removal of these coverage obligations from the upcoming auction, and Ofcom plans to introduce new, legally binding licence conditions to make sure the SRN is delivered.
According to the official DCMS statement on the agreement in principal of the SRN, all‑operator 4G mobile coverage will stretch to 95% of the UK landmass by the end of 2025. This will be achieved by commitments from each MNO to expand their individual network coverage to reach 92% of landmass by end‑2025, with a degree of coordination to ensure that the government goal is achieved. Obligations to meet SRN goals will 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 also 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 intent to make government‑owned infrastructure built as part of the Emergency Services Network available to all MNOs, which is expected to add two percentage points of coverage to each operator’s footprint. This opening up of access was already on the cards in order to ensure government investment did not amount to illegal state aid supporting the EE network (Vodafonewatch and BTwatch, passim). The provision of ESN‑based access is, though, now being counted within the £500m budget for government spending on supporting the SRN.
Broad welcome but uncertainty remains
While Ofcom is moving forward with a revised auction set‑up, based on the assumption that the SRN will become legally binding in early‑2020, there may be changes to the form of the agreement as fine details are nailed down.
In a blog welcoming the broad acceptance of the SRN, Derek McManus, Chief Operating Officer of Telefónica UK (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 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 casts 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 approval of the European Commission or the Competition & 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 the Rural Services Network complained that the 2025 target for 95% coverage is “notably slower than the government’s previously stated ambition of 2022