January 2017 – “Make the Air Fair” Campaign

January 2017 – “Make the Air Fair” Campaign

Thank you for your recent email regarding the auctioning of spectrum.

Ofcom is responsible for the health of the UK mobile market, in line with its statutory duties. These duties include the promotion of competition and efficient use of spectrum.

Ofcom recently launched a consultation on the upcoming spectrum auction. The auction consists of 2.3 GHz spectrum, which is already useable for better 4G services and 3.4 GHz spectrum which is unlikely to be useable for at least two to three years, but could help unlock a new wave of future services such as 5G.

I am inclined to agree with your concern that too great a concentration of spectrum in the hands of one company would reduce competition and be disadvantageous to consumers.  I wrote on 1 December to Sharon White, Ofcom’s Chief Executive, sharing this view.  I received a response from Ms White on 23 December, explaining that Ofcom agrees that there is a competition concern around the 2.3 GHz spectrum available and it has therefore imposed a cap on bidding. The cap prevents any one company holding more than 45 per cent of spectrum that can be used immediately after the auction, meaning that as BT/EE currently holds 45 per cent of the spectrum, it would be excluded from the bidding for additional 2.3GHz spectrum entirely. She also states that as the 3.4GHz band is not currently usable, Ofcom does not currently propose to restrict bidding on this band so as to encourage maximum investment in developing this for use.

Ofcom has been clear that its intervention has been minimal as it does not want to distort the auction by giving the smaller operators a price break through the weakening of competition. Furthermore, there are concerns it would provide a perverse incentive for smaller operators to under-bid in this and future auctions if they always expected intervention in their favour on grounds of lacking spectrum.  I agree that there is also a need to balance between these competing concerns.

I hope this will explain the current state of affairs and reassure you as to Ofcom’s desire to protect the consumer and create a properly-functioning spectrum market, however I also hope that you will take the time to submit your views to the consultation I mentioned above, which is open until 30 January.

Thank you again for taking the time to contact me.