New 4G auction plan could clear deadlock

The telecoms regulator Ofcom has issued revised proposals for the upcoming 4G spectrum auction, in a move that may end delays to the rollout of fast mobile broadband.

Ofcom has presented new proposals that could clear the way for the UK's much-delayed 4G spectrum auction.

A key change in the new proposals, published on Thursday, is the scrapping of previous plans to reserve a chunk of 800MHz spectrum for Everything Everywhere — something that had irked rivals O2 and Vodafone. The auction, set to take place at the end of this year, will contain spectrum in both the 800MHz and 2.6GHz bands.

Everything Everywhere has responded to Ofcom's new move by saying the regulator is "missing a huge opportunity for the UK".

Ofcom has also made new suggestions for ensuring that mobile broadband coverage extends to more of the UK population, particularly in rural areas. The regulator previously suggested obliging one of the 800MHz spectrum recipients to build a network that serves 95 percent of the population. However, it now wants to link this obligation to a separate government funding scheme, which aims to reach as much as 99-percent coverage.

"This is a crucial step in preparing for the most significant spectrum release in the UK for many years," Ofcom chief Ed Richards said in a statement. "The proposals published today will influence the provision of services to consumers for the next decade and beyond."

Sticking points

The distribution of sub-1GHz spectrum, which includes both the soon-to-be-licensed 800MHz spectrum and the 900MHz spectrum that Vodafone and O2 already use for 2G or GSM services, has been a crucial sticking point in negotiations between the regulator and operators.

Threats of litigation from unspecified operators led Richards to decry in November what he called a "gaming of the system". These wranglings have caused repeated delays in the auction process, leaving the UK behind as the rest of the world rolls out 4G services, as well as infuriating the government, MPs and businesses.

As 2G or GSM spectrum can be 'refarmed' to deliver mobile broadband services, much of this argument has to do with which kinds of spectrum the different operators already hold. There are two types: 1800MHz spectrum, which is better at carrying high-bandwidth services, and 900MHz spectrum, which is better at travelling over long distances and providing indoor coverage.

Everything Everywhere, which operates the T-Mobile UK and Orange UK brands, has its 2G spectrum in the 1800MHz band, while rivals O2 and Vodafone have 900MHz spectrum.

The 2.6GHz spectrum in the 4G auction is even worse at propagating over long distances and penetrating buildings than the 1800MHz spectrum. Because of this, Ofcom's previous proposals in March included the setting-aside of 2 x 5MHz of sub-1GHz spectrum for Everything Everywhere.

The point was to make sure there would be at least four major operators capable of wholesaling viable, long-range 4G connectivity to smaller providers such as Virgin Mobile; Three or another new entrant would also have to be allocated sub-1GHz spectrum. However, rivals may have seen this as Ofcom favouring Everything Everywhere, making it likely that this was a key sticking point in last year's negotiations.

Ofcom's change of heart

Ofcom has now had a change of heart, following further analysis and the responses it received to the March proposals. Due to the merger of T-Mobile and Orange, Everything Everywhere has a huge amount of 1800MHz spectrum, and Ofcom has decided that this type of spectrum is not so limiting after all.

The proposals published today will influence the provision of services to consumers for the next decade and beyond.

– Ed Richards, Ofcom

"We now believe that the technical advantages of sub-1GHz spectrum are less clear and that the large quantity (2 x 45MHz) of 1800MHz spectrum which Everything Everywhere holds is likely to mean that there is only a fairly small gap between what Everything Everywhere and the holders of 800MHz spectrum could deliver," Ofcom said in its new proposal summary.

"In many locations, a network with a sufficiently large amount of 1800MHz spectrum coupled with a large network of base stations could match or even better the quality of a network with a smaller amount of 800MHz spectrum, even if it is unlikely to be able to do this in the hardest-to-serve locations," the regulator explained.

Clearing the way at auction

According to Ovum analyst Matthew Howett, this reversal should clear some of the way towards holding the 4G auction.

"The feeling was that Ofcom's March position was too favourable to Everything Everywhere. Ofcom has tried to redress that balance and has made it slightly less favourable for some operators and more so for others," Howett told ZDNet UK.

Howett added that the assurances Ofcom made this week, saying it remains open to suggestions on the issue of annual 4G spectrum licence fees, will also allay some of O2 and Vodafone's concerns.

Ofcom said on Thursday that, although O2 and Vodafone had been unhappy at Everything Everywhere's reserved spectrum, the regulator had not changed its mind just to clear the deadlock.

"We've come up with a set of refined proposals based on the new analysis we've carried out. I wouldn't say it's just because of the threat of pending litigation that we've done that," an Ofcom spokesman told ZDNet UK.

Everything Everywhere response 

As for Everything Everywhere itself, the operator reacted critically to Ofcom's announcement.

"Everything Everywhere is very disappointed to see...