22nd Jun 11
Mobile companies can trade spectrum
by Natasha Redman
Rules of engagement: Ofcoms allows spectrum sharing for mobile firms
Rules of engagement: Ofcoms allows spectrum sharing for mobile firms
UK regulator Ofcom has granted permission to phone operators to trade spectrum in an initiative intended to increase the network capacity of mobiles.
Available bandwidth is developing into a massive issue as smartphones put further demand on mobile networks. The trading of airwaves arrives ahead of a critical spectrum auction in 2012 which will bring in 4G data services. Both the decision to allow phone companies to trade existing spectrum and the auction have caused a strong debate.
Spectrum trading grants operators the option of selling off the airwaves which they own in the 2100MHz, 1800MHz and 900MHz frequency bands. In the past the 900MHz share of the spectrum belonged exclusively to Vodafone and O2 due to the fact that they were the only mobile companies on the market at the time it was handed out.
Other countries have reallocated this spectrum in order to provide a more level playing field before the 4G auctions, but this had not been the case in the UK. Ofcom originally intended to redistribute the spectrum which O2 and Vodafone were allocated, but was faced with a legal action that the two operators had initiated.
Ofcom dropped its plans after the merger of Orange and T-Mobile. Everything Everywhere (EE), Orange and T-Mobile’s parent company, is set to be the biggest beneficiary of the spectrum trading. It was obligated to sell off around 19 per cent of its spectrum frequencies under the conditions of the merger.
However, mobile operator Three is unhappy because it has the least amount of spectrum to trade. In a statement it described spectrum as the lifeblood of the mobile internet and smartphones, and said that for operators with surplus holdings it is a strategic asset, making voluntary trading the exception.
Research firm Ovum analyst Matthew Howett said that Vodafone and O2 are unlikely to sell any of their assets because it is too valuable to them. He added that the only way they would trade was if they were made to.
A factor which may force them to sell is the imminent 4G auction where Ofcom has placed caps on the amount which can be purchased. It will mean the companies with more existing spectrum are not able to purchase as many of the 4G airwaves, which are more valuable.
In addition, Ofcom has ring-fenced part of the spectrum for entrants such as Three because it realised that the operator might be unable to survive. However, O2 said that it was the equivalent to receiving “state aid” and has warned it may take legal action. Mr Howett said that any more delays to the auction may leave the UK lagging behind other European nations in the launching of 4G services.
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