UK’s Ofcom launches its second consultation on 800MHz/2.6GHz spectrum award

On 12 January, UK telecoms regulator Ofcom published its second consultation on the award by auction of spectrum in the 800MHz and 2.6GHz bands. This document reflects Ofcom’s views and proposals, some of which have been modified in response to stakeholder views expressed in response to its first consultation in March 2011.

Having revised its competition assessment, Ofcom remains of the view that it should ensure that four entities should hold sufficient spectrum so as to be credible national wholesalers of mobile services.
Regarding the spectrum floors that would ensure that four entities would have sufficient spectrum to compete effectively in the mobile market, Ofcom has changed its view on the benefit of 2x5MHz of 800MHz spectrum, taking the position that:

  • With enough 1800MHz spectrum, an operator could be a credible national wholesaler without 2x5MHz of 800MHz spectrum.
  • If 800MHz were to be included in spectrum portfolios, to ensure spectrum efficiency, it should be included in quantities of 2x10MHz or more.

As such, it has modified its proposed minimum spectrum portfolios to reflect its refined viewpoint. Ofcom’s proposals for spectrum caps of 2 x 105MHz overall and a sub-1GHz spectrum cap of 2 x 27.5 MHz remain unchanged relative to those proposed in its previous consultation.

In light of responses by stakeholders, a recommendation by the House of Commons Culture, Media and Sport Select Committee and the Government’s decision to invest £150m in a mobile infrastructure programme to improve mobile coverage in rural areas, Ofcom proposes to increase the coverage requirements placed on an 800MHz licence from 95% to 98% of population, and to impose this on one 800MHz licensee.

In the current consultation, Ofcom proposes alternative spectrum packaging for the 2.6GHz band, with unpaired spectrum divided into lots of 5MHz each and paired spectrum divided into lots of 2x5MHz each with a reservation of 2x10MHz for concurrent low-power use.

Notwithstanding the fact that further work needs to be done on establishing the level of interference that will endure in parts of the 800MHz band, Ofcom has left open the break-down of 2x5MHz lots into lot categories, save to express its desire to have as few lot categories as possible taking into account interference, in order to keep bidding decisions for bidders as simple as possible.
Having received considerable support from stakeholders on its general proposal to use the combinatorial clock auction (CCA) format, Ofcom has proposed to retain the use of this format in its current proposals. It does, however, propose a number of modifications to the detailed auction rules, including:

  • proposals to improve demand and price information in the clock phase, including to ensure that bidders have information about demand from opted-in bidders in the case where the auction includes spectrum floors;
  • proposals to provide further incentives for truthful bidding through activity rules, allowing bidders more flexibility to bid on their most preferred package in the Primary Bid Rounds and more tightly capping bids for packages larger than those bid on in the last Primary Bid Round in the Supplementary Bids Round; and
  • auction proposals discussing the two pricing rules still being considered, Vickrey-nearest and linear reference, with the conclusion that they are both valid options.

DotEcon is advising Ofcom on the design of the UK 4G auction, which includes a number of novel features to implement UK policy objectives, and was contracted to provide a pilot version of software to implement this auction. Ofcom’s consultation document and the accompanying annexes can be found here.

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