CMA slams Ofcom's 4G auction process; Ofcom responds

Ofcom's proposed auction of so-called 4G spectrum ignores crucial consumer interests in price, quality of service (QoS), timescale and coverage in favour of revenue...

Ofcom's proposed auction of so-called 4G spectrum ignores crucial consumer interests in price, quality of service (QoS), timescale and coverage in favour of revenue, the Communications Management Association (CMA) says.

In a sharply critical opinion, written for Computer Weekly, the CMA's leader for regulatory affairs, David Harrington, said the proposed auction repeated the flaws the CMA identified with the "infamous" 3G auction, which raised £22.4bn for the government.

"Ofcom has repeatedly said that generation of cash for Mr Osborne's coffers is not an issue," said Harrington.

He said a spectrum auction could be wholly successful only if it paid "proper heed" to consumer-orientated issues such as price, quality of service (QoS), timescale and coverage. "If such impositions depress the price paid at auction, then so be it," he said.

Instead, Ofcom should give thought to the creation of a "utility access infrastructure, with competitive services running across it" in the mobile sector, he said. "At least we'd get some efficiency in spectrum use and non-duplication of cell sites."

However, this appears to be implicit in Ofcom's proposal to reserve one licence in the 800MHz band for a company that promises to cover 95% of the country by 2017. Ofcom indicated it would accept that the five year deadline could lead to a lower price for the licence.

Harrington said the fixed network sector was moving quite quickly to separate services from infrastructure provision. "Yet the mobile sector, touted by many as the only possible solution to the provision of broadband to rural areas, sticks firmly to its vertical model," he said.

Harrington said the proposed auction did nothing to encourage the emergence of a mobile infrastructure that is fully open, on a fair and equitable basis, to all content and service providers. "Indeed, Ofcom's design could well turn out to foster the opposite effect," he said.

He referred to a similar auction in France, where four licences are available. In theory, one operator could buy them all, but only if it agreed to cover the cover the entire country.

"Ofcom has consistently set its face against mandating national roaming in the UK, yet this is the one act that would massively leverage national coverage in pursuit of the universal service commitment (USC) (currently considered to be a minimum of 2Mbps)," he said.

Graham Louth, director of spectrum markets at Ofcom, said: "Auctions are the most transparent, fair and efficient way of allocating scarce radio spectrum."

Spectrum suitable for mobile broadband was scare, he said. It was also essential for providing the higher speed data services that consumers want, such as web browsing and video streaming.

"Where spectrum is scarce and in high demand, the use of 'beauty contests' means that we would have to choose between competing would be service providers," he said.

Ofcom had used a beauty contest in 1982 when the original cellular licences were issued. This was because there were few contenders, he said.

"However, by the time the 3G licences were auctioned in 2000, there was an international field of 13 applicants. A fair and transparent beauty contest would have been virtually impossible in these circumstances," he said.

Louth said the market was better positioned than Ofcom to make these decisions. "But we are clear we will intervene where we believe this is in the interests of citizens and consumers," he said.

He said an example was Ofcom's proposal to require an 800MHz licensee to cover 95% of the UK population by no later than 2017, and potentially to provide a certain minimum level of coverage across less densely populated areas of the UK.

"We recognise that it may not be appropriate to rely on the market to deliver such outcomes," he said. "In instances we recognise that regulatory intervention can play a role."

Referring to national roaming, he said Ofcom had no evidence that mobile service providers were unable to negotiate commercial deals to buy wholesale services from the four existing mobile network operators.

"We would expect similar deals to also be possible in future, if the wholesale market remains competitive as a result of the proposals we have made to promote a four player wholesale market. If that proves to be untrue then we retain all of our existing Competition Act and Communications Act powers to investigate the reasons why and take action if necessary," he said.

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