UK: a Way out of the Spectrum Re-farm Deadlock?

Opinion by Matthew Howett, senior analyst at Ovum

900MHz to be liberalised in the hands of the existing holders, but access to other spectrum would initially be capped.

Kip Meek's solution to the deadlock is to introduce a spectrum cap. Under these proposals for Vodafone and O2 to gain access to the digital dividend (at 800MHz) they must first give up some 900MHz. The 800MHz band would then become available with a basic national broadband coverage obligation at a speed to be determined through the final Digital Britain report – most likely 2Mbps.

For those holding 3G spectrum, an incentive to extend coverage and share their infrastructure would be offered in the form of indefinite licence terms. Operators are likely to respond positively to this given the high amounts paid for the licences back in 2000 and the increasingly common practice of sharing network elements to save costs.

Structuring access to the digital dividend in this way will provide an interesting example for other countries in Europe. The positive benefits associated with this band have been talked up considerably over the past year but without any real proof that operators are interested in acquiring it. Certainly the availability of equipment, network devices and handsets capable of operating in the 800MHz band seem yet to have materialised.

Successful lobbying on behalf of the operators has resulted in a change in policy

The dispute arose in 2007 when Ofcom consulted on how to implement an EU decision to allow 3G services to be deployed at 900MHz – so called ‘spectrum re-farming'. Although only required to liberalise the 2G band, Ofcom was concerned that the advantages associated with re-farming would mostly be enjoyed by Vodafone and O2, since between them they hold all of the 900MHz. To allow the remaining operators to participate their preferred approach was to take back some from both operators and make it available to the other MNOs and new entrants by way of auction. Vodafone and O2 reacted badly to this and threatened Ofcom with legal action. The process was halted. The uncertainty also halted the award of the 2.6GHz band (also attractive for mobile broadband).

Ofcom responded by proposing to take back less spectrum from Vodafone and 02 but this wasn't accepted either. At this point it looked like no amount of trying could find a way through. The government rightly became worried that by delaying the award of this valuable resource, the future competitiveness of the UK could be at risk and so declared that if a voluntary solution couldn't be found then it would impose one, and so the appointment of Kip Meek.

The way out that he identified is remarkably forward looking. The proposal argues for some joined up thinking and to consider all spectrum bands together – keeping in mind the objectives of Digital Britain. Could this approach be a defining moment in the history of regulation in the UK?

Time for a more holistic approach to regulation in the UK?

At the moment almost all proposals from Ofcom are marred by legal challenges which result in costly delays for both operators and consumers. Whilst it is seen as leading the way in the some respects, Ofcom has become slow in evolving its overall approach to regulation. Despite being a converged regulator it seems that issues are still treated in their traditional silos.

It is undeniable that the issues being dealt with are far reaching and complex; however, Ofcom's current speed and disparate approach threatens to undermine the future competitiveness of the UK. In this instance focusing on the end goal has resulted in a much more palatable solution and Ofcom would do well to extend this approach elsewhere – particularly towards next-generation access and where telecoms and other forms of media converge.

The proposals outlined will now be developed and finalised by the Department for Business, Enterprise & Regulatory Reform (BERR), leading to a government direction to Ofcom.

Posted to the site on 21st May 2009