Yesterday was the deadline for submissions to Ofcom’s second consultation on the LTE/4G auction. There is also another deadline arriving, 13 April, for interested parties to respond to Ofcom’s consultation on its proposal to allow Everything Everywhere to use part of its 1800MHz spectrum for LTE.
However, the two issues are of course related, and Vodafone and O2’s submissions on the former consultation seem to have made mention of the situation relating to the EE refarming deal. This is because in their view, one of the guiding principles of the original LTE auction rules was to foster a competitive, four operator strong, market. They can’t see how giving EE up to a year’s head start conforms with this desire.
But despite this bellyaching from the 900MHz operators (Voda and O2), there’s a chance that the real loser in the auction is set to be the fourth player, aka Three UK.
Read full article >>
Â
Three already sits on by far the least spectrum. It has 2×14.6 paired spectrum at 2100MHz, and no spectrum at all at 900 and 1800MHz. EE has no 900MHz spectrum (hence it’s pretty keen to get hold of 800MHz spectrum on favourable terms) but it has 2x45MHz at 1800MHz and 2×20 MHz at 2100MHz. Vodafone has 2×17.4 at 900MHz, 2×5.8 at 1800 and 2×14.8M at 2100MHz. O2 has 2×17.4 at 900MHz, and 2×10 at 2100MHz.
That wasn’t so bad for Three when all the operators had to run 3G at 2100MHz, where Three was just about their spectrum equal. But when, in late 2010, Ofcom said it would allow 2G spectrum to be refarmed for 3G, Three wasn’t so pleased. 2G spectrum was, to all intents and purposes, free, so O2 and Vodafone had potentially a lot more 3G spectrum than Three. What is more, with its better in-building penetration, it was pretty good spectrum to have. Indeed, O2 was not shy about proclaiming the benefits of its 900MHz 3G, and Ofcom itself hailed the increased in-building coverage as a “significant consumer benefit”.
Â
So Ofcom said that to make up for this, the operators would, at the time of the 4G licence auction, be asked to pay market rates for their existing 2G spectrum licences (rather than the peppercorn rents they currently pay). That market rate would be determined by the price of spectrum arrived at through the 800MHz auction.
In short, although the big operators were being aided by being able to use cheap/free spectrum for 3G, Ofcom said it would level the playing field come the 4G auction. Yet there are worries that that determination to make the operators pay market prices for existing spectrum has wavered.
Never mind that, Ofcom has potentially seen another of its levelling tool blunted – this being the mechanism that would ensure that the fourth entrant, effectively Three, and probably EE as well, would both be guaranteed spectrum blocks that included 800MHz spectrum. 800MHz spectrum is important for Three because it offers much better in-building penetration than its current spectrum block up at 2100MHz, as well as much wider coverage, of course. The same goes for EE, to a slightly lesser extent.
Now, Three is clearly worried that it is going to be cut out both ways, as Ofcom’s determination to impose market rates and reserve 800MHz spectrum has weakened in the face of fierce opposition from Vodafone and O2, who felt that determining the value of their 900MHz licenses by the amount paid for 800MHz spectrum is illogical, and potentially punishing. Every bid they made for 800MHz spectrum would, in effect, push up the price of their 900Mhz licenses. If a block of 800MHz is cordoned off, then that makes the remaining 800MHz spectrum likely to fetch a higher price. That, in turn, raises the price of the 900MHz licenses. You can see the reason for their objection, even if you do think they’ve had a “free ride” on 2G spectrum to date.
So…there’s now a suspicion in some corners that Ofcom just wants this “out the door”, as it is becoming politically embarrassing to the UK to be dropping behind the LTE rollout schedules of other countries. There’s a danger, though, that the major operators will use this deadline to game the process to their maximum long term advantage, baking in structural weakness to the UK mobile market, to the detriment of competition and consumers.
One source told us that the current rules look like an auction drawn up by O2 and Vodafone lawyers, with the added extra that it also allows Everything Everywhere to determine the outcome. It is not, currently, a happy scene.
Meanwhile, other large markets move on. Orange announced it would have widespread LTE across Europe by 2015, but also that its first Orange 4G City, Marseilles, would be up and running with LTE by June this year, albeit on an experimental business. Not all mobile broadband is about LTE, of course. Orange France has launched a new H+ package of tariffs, offering access to its HSPA+ 42Mbps network, which it says now covers half of the French population. I thought it was interesting that although it’s industry mantra that consumers don’t care about technology, Orange has gone for a technically-aligned brand in H+, clearly referencing what is in fact a fairly esoteric technical upgrade.
And if mobile broadband is not just about LTE, then it’s also not just about cellular. This week saw further moves to integrate WiFi with cellular networks from an operational perspective – with the GSMA and WBA saying they would work together to align roaming standards for WiFi and GSM. Although this was reported in some quarters as “GSMA and WiFi groups allow SIM-based authentication to WiFi networks” there is actually more to it than that. SIM-based authentication was an existing item that the WiFi bodies had already specced out, along with mobile operator input, and there is already some compatible equipment already in the market. This work is much more about defining roaming interconnect agreements between what have been two separate blocks. Easier WiFi-cellular roaming could be a double edged sword for mobile operators, especially mobile-only operators with small or little WiFi assets of their own. Certainly the WiFi service providers we talked to see this as just as much an opportunity as the mobile operators – especially as they are not “encumbered by being wedded to the SIM”, as one provider put it.
With that, and the sun shining, we’ll leave you to it. Pausing only to nod in the direction of NetCracker, a company that has now achieved giant status in the OSS-BSS market, claiming potential revenues of $2.5 billion in 2012, as a result of its $449 acquisition of assets from Convergys. That’s a lot of software. But then, operators have a lot of real time data needs, and this is what NetCracker is gunning for.
Keith Dyer
Editor
Mobile Europe