When a consumer benefit is not a competitive advantage
Ofcom has announced that operators who wish to refarm existing 2G spectrum for 3G services can go ahead from today, following advice it gave to the Government in October 2010 recommending that the 900MHz operators be allowed to refarm their spectrum without having to release blocks of spectrum to other operators. But it appears to have forgetten one of its own recommendations, so eager is it to proclaim the benefits of spectrum liberalisation.
Back in October, Ofcom said that the T-Mobile/Orange merger that created EverythingEverywhere’s (EE) shared network had considerably reduced the competitive impact of allowing the two 900MHz operators to open up that spectrum for 3G. EE now has enough sites and spectrum to offset the advantage Vodafone and O2 would have from 900MHz coverage, Ofcom found. EE will also be allowed to use its 1800MHz spectrum for 3G, by the way.
But as Mobile Europe noted at the time, Ofcom also discounted the idea that allowing Vodafone and O2 to re-use 900MHz spectrum would give them a competitive advantage by being able to offer improved in-building 3G coverage.
Ofcom said then “the extent of the improved quality of coverage is relatively small”. The regulator found that the extent of this advantage will be dependent on the construction of buildings and the location of the user within the building. “Little or no advantage would exist in many easier to serve indoor locations. In addition, other ways of dealing with poor indoor coverage, such as in-building repeaters and femtocells have become a more plausible strategy for EE/H3G to address residual areas of coverage disadvantage since our February 2009 consultation,” the regulator’s statement said.
Yet today’s release listed “improved in-building coverage” as a “significant consumer benefit”.
That sets up a slight opposition. Ofcom’s position is that consumers will benefit (significantly) from improved in-building coverage, but at the same time this will bring no competitive advantage to those operators able to provide that improved coverage. After all, it’s not as if operators ever compete in terms of who’s got the best network. What, sorry?
An Ofcom spokesperson said that Ofcom had not claimed there would be no benefits in terms of in-building coverage. No, it had not. But it had, as we know, said that “the extent of the improved quality of coverage is relatively small”. Yet now it is listed as a “significant consumer benefit”.
Mobile Europe: “So it is a consumer benefit, yet not a competitive advantage for the operators?”
Ofcom spokesperson: “Yes”
In one respect, of course, refarming both 900 and 1800MHz means that 3G service provision will in time mirror 2G service provision. There will be 3G users on 900MHz and 3G users on 1800MHz and few will be likely to notice the difference in terms of in-building coverage, lessening any competitive disadvantage for operators without 900MHz spectrum. 3 UK, currently with a 2100MHz network through its MBNL JV with T-Mobile, however, could be at more of a disadvantage.
But what we’re left with is the likelihood that Ofcom was casting around for as many “consumer benefits” of spectrum liberalisation as it could, and decided to chuck in improved in-building coverage, even though by its own reckoning that improvement is likely to be “relatively small”.