WIREDGOV

Ofcom has published its long awaited consultation on the auction of 800 MHz and 2.6 GHz mobile spectrum.

Commenting on these proposals, Simon Harris, a senior manager in the telecoms team at PwC, said:

"The process proposed by Ofcom for the release of 4G spectrum should result in a competitive auction - the outcome could still be £3bn - £4bn of licence fees in line with PwC’s previous expectations. The spectrum caps proposed are quite generous and should not constrain bidding to a significant extent and we could have quite significant competitive tension in the auction."

Adding to this, Brian Potterill, a director in PwC’s telecoms team, said:

"Ofcom recognises that spectrum allocation is important. It notes that the proposals set out in this consultation are likely to shape the future competitiveness of the mobile sector for at least the next decade. Ofcom will also recognise that many of its previous attempts to intervene on the allocation of spectrum have resulted in a legal challenge, and will therefore be very keen to ensure that it reaches the right conclusion, and that it is seen to have followed due process in reaching that conclusion. There will therefore be fierce representations from the industry, and rigorous analysis from Ofcom.

"Spectrum is a strategic asset for mobile operators. Ofcom recognises this by making it a requirement of the auction that at least four bidders come away with a credible portfolio of spectrum. In a market with four operators this will provide some comfort to those that feared the auction would result in a reduction in competition, and a disappointment to those who saw the auction as an opportunity to introduce more competition into the sector, however, the definition of the credible portfolio will be a particular focus of debate.

"Ofcom also proposes to introduce a minimum coverage requirement for one of the licenses, although this is unlikely to have much impact. The proposal is to require coverage in one of the 800 MHz licenses to reach 95% of the UK population by 2017. With mobile coverage already at 99%, and the recent liberalisation of 900 MHz spectrum likely to lead to 3G reaching similar levels, the market will most likely have gone beyond that requirement some time before 2017.

"It also does little to solve the issue of rural broadband. Many of the UK’s notspots will be in that last 5%, and unconstrained by any service obligation it is unlikely that operators will offer mobile service packages at a price level that are genuine replacements for fixed broadband. Ofcom also considers retaining the power to partially revoke licenses in order to redeploy spectrum for rural broadband. The challenge will be that any separation of licenses for rural broadband coverage will create interference issues for the nearby mobile services. The industry will want clarity of what is proposed ahead of the auction so they can value the spectrum appropriately.

"Another proposal of Ofcom is to use the auction to determine the charges that Vodafone, O2 and Everything Everywhere should pay for the continued use of their existing spectrum. Bids in the auction will therefore have a multiplier effect on these operators, and may act as a deterrent to bids but could also result in strategic bidding.

"These are all interesting proposals that Ofcom set out in the consultation and we look forward to seeing what comes of them. We welcome Ofcom’s valiant efforts for a fair spectrum auction and also to shape the future competitiveness of the mobile sector."