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Ofcom spectrum auction deemed illegal by O2
Friday 10 June 2011 14:45:13 by John Hunt

Ofcom have released the responses to it's spectrum auction which will be used for next-generation mobile technologies such as 'Long Term Evolution' (LTE) (commonly called 4G), and some providers have bitten back with O2 accusing Ofcom of running an illegal auction. The issue in question lies around 'spectrum floors' which Ofcom is proposing to ensure a minimum number of operators are present. These would restrict O2 and Vodafone in bidding for the more favoured 800MHz spectrum.

"We believe that the proposed spectrum floors are a state aid and are therefore illegal under EU law. The spectrum floors would distort the auction process, allowing all bidders, except Vodafone and O2, to potentially acquire spectrum at discounted prices. Ofcom's own figures suggest this effect could cost taxpayers £1bn.

The proposed floors, and the argument that Vodafone and ourselves already have enough sub-1GHz spectrum, are based on the mistaken belief that 800 MHz and 900 MHz are directly comparable spectrums. They are not. Our response to Ofcom clearly explains why.

O2 Statement

O2 along with Vodafone already operate services in the 900MHz spectrum which until recently was only usable for GSM services. Ofcom recently allowed the companies to start using this for 3G in response to EU rules requiring this. The EU are currently proposing that this spectrum as well as the 1800MHz frequencies, used mostly by Orange and T-Mobile, should be available for use by the next-generation of services.

BT have also taken issue with the auction but over a different point. They believe that the requirement to force a holder of 800MHz spectrum to offer 2meg mobile broadband in rural areas may reduce the price of the auction which would amount to a public subsidy. BT believe this would be anti-competitive against other technologies as any subsidy should be technology-agnostic.

Any arguments over the auction process may introduce delays, although Ofcom perhaps foresaw this by setting the auction date to be in 2012. Some argue that the mobile networks themselves are keen to see the auction pushed back as they would need to spend a large amount on both the auction licenses and equipment to deploy the next-generation network.


Posted by dustofnations over 6 years ago
This is really rather disingenuous. Bandwidth auctions are effectively a taxation, because big-corp that wins the bid passes the cost onto the consumer.

So you can thank the Government for obscenely high mobile phone bills (consider how much data you are transferring, even given the infrastructure requirements).
Posted by timmay over 6 years ago
As always Ofcom simply don't have a clue and the likes of O2 and BT will always argue unfair play whatever happens.
Posted by craigbrass over 6 years ago
I don't understand the Gov's requirement for a number of separate networks to be honest discussed elsewhere. If O2 and Vodafone were encouraged by the Gov to join MBNL (network 3, T-Mobile and Orange run on), they would save fortunes and close to a 100% network would be possible. Large chunks of spectrum increase speeds and capacity, too...
Posted by craigbrass over 6 years ago
(ie effectively given spectrum with the condition of creating a near-100% land coverage network so we get roads covered as well and the Gov has a lot of rural broadband problems solved or at least a better stop gap than bodging about with FTTC)

If say the vehicle for delivery was MBNL, there would not need to be competition as this is run simply at-cost funded in proportion to number of subscribers of each network who own it. Competition is only needed if it was a totally sep company.
Posted by otester over 6 years ago
O2 has a point.

BT is playing monopoly man, they don't want any competition to their copper cash cow.


They should use a goal system, short licenses with check-ups at the end of each one, if goals are met they keep the license.

To qualify in the first place the supposed network must prove they have the cash to invest and must have a viable network by x date.
Posted by dustofnations over 6 years ago
@otester: I rather prefer the idea of a shared infrastructure (albeit with redundancy for failures), where you don't waste reams of bandwidth in certain areas because a given operator isn't there. This is somewhat similar to the idea that craigbrass is mentioning.

Instead of the govt pass an enormous indirect levy to mobile users, they should insist on investment and coverage via a shared network. It could be managed/run by a not-for-profit that each mobile operator must contribute towards.
Posted by dustofnations over 6 years ago
Just a rough idea, I'm sure there'd be drawbacks, but better than the current absurd situation where big corp throws billions at the government, and then in turn squeezes the packages they offer, the infrastructure, and inflates prices in order to recoup their 'bids'
Posted by herdwick over 6 years ago
O2 can't deem anything illegal, that requires a Court. Should put the deployment of services back a year or two.
Posted by otester over 6 years ago

Actually yeah you're right, as soon as I saw MBNL, BTW came to mind and hid under chair shaking in fear.

MBNL sounds like C&W LLU, that would be pretty cool.

I doubt the government will promote the idea since they stand to loose billions otherwise.
Posted by chrysalis over 6 years ago
Probably not illegal but clearly a hidden taxation. Effectively consumption tax as cost will trickle down to consumer.
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