Issues Surrounding the 2.6GHz UK Auction

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Issues Surrounding the 2.6GHz UK Auction

Cintia Garza, Market Analyst
Contact info@maravedis-bwa.com

Regulatory Overview

In the next few months, UK telecom regulator Ofcom is planning to auction a huge portion of spectrum suitable for high speed mobile broadband, including 190MHz in the 2.6GHz band and 15MHz in the 2010MHz band. According to Peter Phillips, Partner Strategy at Ofcom, about 40% of UK households still do not have broadband. Three quarters of those don’t have any Internet access at home. Spectrum in the 2.6GHz and 2010MHz bands in the UK will play an important role in the development of advanced mobile data; operators looking to adopt technologies such as LTE and WiMAX have shown great interest in this auction. The 2.6GHz band is the only spectrum likely to be made available in the near term, which will provide sufficient spectrum to cater to the larger bandwidths likely to be supported by LTE and WiMAX in 10MHz and 20MHz blocks.

Since 2006, Ofcom has set out proposals to auction this spectrum. Due to a number of comments from interested parties on a wide variety of issues, the auction has been delayed several times. In April 2008, Ofcom launched a consultation for the allocation of the 2.6GHz to take place in June of that year. However T-Mobile and O2, two of the largest UK mobile operators, submitted litigations arguing that the 2.6GHz auction should not take place before the liberalization of the 2GHz spectrum in the 900MHz and 1800MHz ranges. Although this spectrum is restricted to 2G services, mobile operators want Ofcom to allow deployment of 3G services in these frequencies. This among other reasons including changes on the auction’s rules and procedures, were submitted as responses to the consultation. Ofcom made public another consultation that took place in October 2008, responding to various issues raised by parties interested in the spectrum, but nothing was mentioned regarding the 2GHz liberalization.

Last month, ZDNet UK reported that mobile operator O2 stated: “until there is clarity around the future of 2G spectrum, it is impossible for operators to determine how much of the 2.6GHz spectrum they need to bid for and its value.” Mobile operators believe that Ofcom shouldn’t decide on the timing for the 2.6GHz auction until the 2GHz issue comes to a conclusion. However, the regulator previously stated that the 2.6GHz award is not likely to have a material impact, as this spectrum is unlikely to substitute the 900MHz spectrum in practice.

The 900MHz and 1800MHz spectrum have advantages relative to other spectrums, such as 2010MHz and 2.6GHz, for deploying 3G services because this is a lower frequency range, providing better coverage characteristics, and therefore requiring fewer base stations. Advantages are even more significant for 900MHz spectrum than for 1800MHz spectrum. All 900MHz spectrum is licensed to two operators: Vodafone and O2; the 1800MHz spectrum is licensed to four operators: Vodafone, O2, T-Mobile and Orange, but most is held by T-Mobile and Orange.

2.1GHz and 2.6GHz Spectrum Details

The spectrum available in the 2.6GHz band comprises 190 MHz, and in the 2010 MHz band comprises 15 MHz. There are 38 blocks available in the 2.6GHz band, which will be awarded as paired (FDD) or unpaired (TDD) spectrum blocks. The spectrum is made available in blocks of 5MHz as paired lots (2x5MHz), 120MHz duplex spacing, and unpaired lots (5MHz for each lot); a maximum of 14 paired lots will be awarded and a minimum of 9 unpaired lots. The 2010 MHz band will be available as a single 15MHz lot (2010-2025 MHz lot).

Each license awarded will have an initial duration period of 20 years. The award process will determine the fee payable for each license. The licenses will be awarded on a UK-wide basis, and spectrum trading or transfer will be permissible.

Ofcom has decided to link the award of 2.6GHz and the 2010MHz. In its Information Memorandum, the regulator stated that the 2010MHz spectrum may be substituted for 2.6GHz for some uses, although this band is not currently used.

Source: Auction of spectrum: 2500-2690MHz, 2010-2025MHz. Information Memorandum, Ofcom.
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What is Next?

An official announcement has yet to be made regarding when the 2.6GHz auction will take place. There is speculation that the application process is likely to occur by the end of Q1 2009, however with all the issues surrounding the 2GHz spectrum, this is yet uncertain.

The 2.6GHz spectrum is well suited for 3G extension, WiMAX and LTE. If Ofcom does not allow 3G services in the 2G spectrum then mobile operators’ only option will be to bid for the 2.6GHz to expand their 3G networks

For more information you can contact the author. info@maravedis-bwa.com