Mobile network owners will get indefinite 3G licences in return for giving mobile broadband access to more people, but they face caps on how much spectrum they can own.
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The proposal came in a consultation on the reallocation and auction of spectrum in the 800MHz and 2.6GHz frequency bands.
These are seen as essential to providing rural areas with broadband and filling in "not spots" in urban areas, the cornerstone of the government's Digital Britain plan to redevelop the economy.
Digital Britain minister Stephen Timms said it was vital to make the best use of the digital spectrum and ensure that users had enough bandwidth to enjoy sophisticated next generation services, and not just calls and texts.
"This package will free up the airwaves for the expansion of wireless and 3G services, increasing their reach to consumers and businesses across as much as 90% of the country, including rural communities," he said.
The consultation follows
recommendations by Kip Meek, whom the government asked to get Vodafone and O2 to give up spectrum they own for the Digital Britain plan to move ahead.
• To make the 3G licence term indefinite but charge an annual fee that reflects its full market value, from 2021
• Government to work with Ofcom to free-up the 800MHz spectrum as soon as possible
• To auction 2.6Ghz and 800Mhz spectrum as soon as possible
• To use short-term spectrum caps at auction to allow all operators to bid for different bands of spectrum and encourage a better competitive environment. This is to ensure no operator can monopolise spectrum holdings in a particular band and it avoids an imbalance in lower or higher frequencies
• To apply coverage conditions to operators that acquire 800MHz or hold re-awarded 900MHz spectrum to deliver mobile broadband to rural areas and hard-to-reach areas
• To allow a separate auction of part of the 2.6GHz spectrum early in 2010 if Ofcom delays the combined auction to allow the use of TDD (Time Division Duplex) for Wimax technologies
• To make existing 2G (900MHz and 1800MHz) spectrum held by current mobile operators indefinite and tradable to let them reallocate their use of these frequencies for 3G technologies. The annual fee for using this spectrum will be revised to reflect its market value.