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.