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Three and Ofcom clash over spectrum auction proposals

Three boss brands Ofcom’s spectrum auction proposals a ‘kick in the teeth’ but Ofcom says the operator is already in a much better competitive position

Dave Dyson, chief executive of the Hutchison-owned mobile network operator (MNO), has branded Ofcom’s proposal for the auction of spectrum in the 2.3GHz and 3.4GHz – which have just been released – as a “kick in the teeth” for British consumers and over 200,000 people who backed the operator’s ‘Make the Air Fair’ campaign.

After many delays, the regulator is currently preparing to flog 190MHz of spectrum, 40Mhz in the 2.3GHz and 150MHz in the 3.4GHz band. The 2.3GHz band spectrum will be immediately useable and allow operators to improve 4G network capacity as data usage skyrockets, while the 3.4GHz band spectrum is intended to be set aside for use in future 5G networks.

Three’s position is that because it controls far less spectrum at present than BT-EE and Vodafone, it wanted Ofcom to impose a cap on the amount of spectrum that any one MNO could hold following the auction.

However, while Ofcom’s final proposal does contain a spectrum cap, and BT-EE will – as expected – be forbidden to bid for any of the 2.3GHz spectrum, it amounts to 37% of all the mobile spectrum expected to be useable in 2020. Three’s campaign had called for a tighter restriction of 30% to be imposed.

“By making decisions that increase the dominance of the largest operators, Ofcom is damaging competition, restricting choice and pushing prices up for the very consumers that it is meant to protect,” said Dyson in response. “The mobile market is imbalanced and failing customers. Ofcom has shown little interest in tackling the problem. We will consider our response as a matter of urgency.”

However, Ofcom said its decision reflected a number of recent changes in the competitive landscape, and said that Three had already acquired 40MHz of mobile spectrum in the 3.4GHz band and 84MHz in the 3.6 to 3.8GHz band in its February 2017 acquisition of UK Broadband, as well as 20MHz of spectrum in the 1,400MHz band back in 2015.

“These airwaves could be used by Three to improve its capacity in the near term, around 2018, before it can put its other spectrum to work,” said Ofcom in a statement.

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Philip Marnick, Ofcom’s spectrum group director, said: “Spectrum is a vital resource that fuels the UK’s economy. We’ve designed this auction to ensure people and businesses continue to benefit from strong competition for mobile services.

“We want to see this spectrum in use as soon as possible. With smartphones and tablets using even more data, people need a choice of fast and reliable mobile networks. These new airwaves will support better services for mobile users, and allow operators to innovate and build for the future.”

CCS Insight principal analyst Kester Mann said Ofcom would have been attacked by somebody whatever it had proposed, and described Three’s immediate response as “stinging”.

Mann urged Three to back away from its threatened legal challenge because this would delay the availability of new spectrum and act against the interests of the consumers it wants to protect.

“Spectrum is vital to Three turning around its precarious position in the UK and re-energising a disruptive strategy. However, it now needs to push ahead with a bold strategy for the auction and invest strongly to counter criticism from rivals that say it has shied away from previous opportunities,” said Mann.

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