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UK LTE auction slated for 2013

In a bid to reassure the U.K. mobile industry that the allocation process for LTE spectrum is going to plan, Ofcom chose its words carefully in its latest status update on Tuesday. However, whether the regulator elects to use the word "delay" or not, one thing is clear: the auction proper will not take place until 2013.

"Ofcom expects the auction process to start before the end of the year," the U.K. regulator said in a statement. It then clarified that the start of the process would involve would-be bidders submitting formal applications to take part in the auction; Ofcom will have to assess the applications before the bidding phase can begin, which is "likely to be in early 2013," it said.

In October last year Ofcom said it would publish a statement on the auction process in summer 2012 and that the auction itself would follow a few months later, "perhaps starting in Q4 2012". Incidentally, that announcement came just weeks after Ofcom had assured Total Telecom that it would sell the spectrum in the first half of 2012.

Given its careful wording on both occasions the regulator can claim the process is running to schedule, but the fact remains that the U.K. expected to see spectrum in the 800 MHz and 2.6 GHz bands - suitable for the rollout of LTE services – sold off this year. That implied deadline means many this week are treating Ofcom's announcement as yet another setback, particularly given that it has not set a definitive date for the spectrum sale.

The regulator remains defiant though.

"Ofcom 4G auction plans on track (reports today of 'delay' are way off the mark)," it claimed on Twitter.

Ovum practice leader, regulation and policy, Matthew Howett noted that Tuesday's announcement constitutes a "slight delay to the original timetable," but added that networks are expected to be up and running by the end of 2013, roughly as originally planned.

"Things could of course still be delayed further if any operator launches a legal challenge - which can now be prepared as we approach the auction," he said.

The operators themselves have thus far also been careful in their choice of words.

Most attention is centred on the market's smallest player 3UK, which potentially has the most to gain from Ofcom's auction plan, but the telco itself has been uncharacteristically coy.

"We are working through the detail of this very substantial [Ofcom] document to evaluate what it means for both consumers and competition in the U.K. mobile market," 3 said in an email to Total Telecom.

The focus is on 3 due to Ofcom's desire to ensure that there will be four LTE network operators in the U.K. after the auction in order to protect competition, and its resulting decision to reserve spectrum for a fourth player, that is, anyone other than Everything Everywhere, Telefonica (O2) or Vodafone.

Ofcom has outlined four possible scenarios for reserved spectrum across both the 800-MHz and 2.6-GHz bands, and the 1800-MHz band where Everything Everywhere is currently in the process of offloading a chunk of spectrum as required by the terms of its formation from the merger of Orange's and T-Mobile's U.K. units.

"Bidders for the reserved spectrum have to compete with each other, but provided that there is at least one such bidder that is willing to pay the reserve price for this spectrum, that bidder is guaranteed to win it," Ofcom said. Without regulatory intervention, "there is a material risk that neither Hutchison 3G UK (3) nor a new entrant would acquire this minimum amount of spectrum [to compete credibly at the wholesale level] in the auction," it added.

It seems unlikely that the auction will attract a greenfield player, making 3 the only realistic candidate for the reserved spectrum.

"There are other wildcard options," said Thomas Wehmeier, principal analyst for telco strategy at Informa Telecoms & Media, listing U.K. fixed broadband providers BT, Virgin Media, BSkyB and TalkTalk. However, 3 remains the most likely.

Meanwhile, Ofcom's move to reserve spectrum for the fourth bidder – likely including 800-Mz spectrum - could push up prices for the other operators, according to PricewaterhouseCoopers.

"This could re-enforce the scarcity of this [800-MHz] spectrum for the three big players, and drive prices much higher than the reserve price," said Brian Potterill, director in PwC's telecoms strategy team. "This will be the focus of bidders' strategies over the coming months," he said.

The reserve prices set by Ofcom mean that the auction will generate a minimum of £1.4 billion for government coffers, but PwC predicts that demand for 800-MHz spectrum will push up the total to £3 billion-£4 billion.

Источник: Total Telecom

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