The telecoms watchdog will this week kick off a multibillion-pound auction of mobile airwaves that is viewed as a crucial step on the path towards next-generation 5G internet access.
The contentious sale is also expected to lay the ground for an £11bn return to the stock market later this year for the mobile operator O2.
Its owner, the Spanish telecoms giant Telefonica, is planning to bid aggressively for a bigger share of the airwaves ahead of the float to ease capacity and speed constraints on the O2 network.
Ofcom will set out the final rules for the auction this week in the face of calls from O2 and Three for tighter bidding restrictions to be imposed on EE and Vodafone, which currently control the biggest shares of mobile radio spectrum.
The regulator has been running a consultation on proposals that would effectively prevent EE from bidding on rights to spectrum in the 2.3GHz frequency band, which is immediately usable for 4G handsets.
Ofcom is selling a bigger chunk of spectrum in the 3.4GHz band, which is not currently used by smartphones but is expected to play a major role in 5G technical standards by the time networks begin to be upgraded around 2020.
Three, owned by Li Ka-shing’s Hong Kong conglomerate CK Hutchison, has demanded rules to prevent any operator owning more than 30pc of the airwaves, regardless of their frequency.
O2 has called for a 35pc cap on total ownership, which unlike Three’s proposal would allow EE to bid for some of the 5G airwaves.
Following its £12.5bn merger with BT, EE currently controls around 45pc of mobile spectrum. That figure will drop below 35pc when the new licences are made available.
Marc Allera, chief executive of EE, rejected both proposals last night, and called on Ofcom to drop its own plans for restrictions in the 2.3GHz band.
He said: “We have invested in our network, relentlessly deployed our spectrum, and launched new technologies to deliver the very best experience for our customers.
The UK mobile market is thriving – it is one of the world’s most competitive markets, and customers get the world’s fastest 4G speeds and great value.
“We’re continuing to roll out 4G to even more of the UK, and developing 5G to ensure the UK remains a global leader in mobile technology. In such a healthy, competitive market, we believe this auction should remain open to all bidders on equal terms.”
Regulators are managing competing interests in the auction.
The Government wants both top prices for spectrum licences and no delay to the auction so Britain can be in the vanguard of the shift to 5G. EE is seen as most likely to be an early investor in the new, faster and more reliable technology.
However, O2 and Three claim that to compete and maintain a market of four strong players they need a greater share of the airwaves. Meanwhile, restrictions on the ability of EE and Vodafone to bid risk triggering a legal challenge that could slow the process down.
Vodafone, which currently has a 28pc share of the airwaves, has told Ofcom it supports the auction rules as proposed. It added that a “safeguard cap” should be considered in the 3.4GHz band to ensure EE does not completely dominate and there are at least two early investors in 5G.
Vodafone dismissed claims by O2 and Three it could use its financial firepower to engage in “strategic bidding”, buying more spectrum than it needs. It said there was “no value” in such manoeuvres.
Ofcom’s calculations will also have to take into account Three’s recent £250m acquisition of UK Broadband, the owner of the London-only Relish wireless broadband brand. It owns rights to swathes of 5G spectrum across the country, potentially softening its opposition to the regulator’s proposals.
Senior sources across the industry say they do not expect significant changes when the final auction plans are published this week.
Source: http://www.telegraph.co.uk/business/2017/07/09/ofcom-kicks-fresh-battle-airwaves-5g-auction/