The main players in the complicated UK mobile market are engaged in talks to create a string of alliances that could maximize their spectrum holdings. Incumbent wireline telco BT is said to be close to a mobile alliance with Telefonica O2, while the largest and smallest cellcos, EE and 3UK, may pool their 800MHz LTE spectrum.
While EE launched LTE services last fall, leaping ahead of its rivals by refarming its 1.8GHz GSM spectrum (which the others do not have), O2, Vodafone and EE should follow suit this summer. Vodafone, however, is likely to push back its commercial launch from early until late summer, not because of network problems, but because it wants to maximize its impact by synchronizing with a new iPhone. According to reports in UK newspaper the Daily Telegraph, Vodafone believes simultaneous launch of a new Apple product with 4G speeds would create more of a splash than merely advertising 4G data rates (which EE already has, with plans to upgrade to 150Mbps peak downlink this year).
Also gearing up for LTE, 3UK’s CEO Dave Dyson has revealed that his firm has met with EE over combining their respective 800MHz spectrum holdings. The two carriers each acquired 2x5MHz in the 800MHz band in the February auction, but this amount will only support basic coverage, not full LTE data speeds, which require at least 2x10MHz. Dyson told TotalTelecom he had given his network engineers ‘a blank sheet of paper’ to propose the most efficient way to use 3UK’s limited sub-1GHz holdings, with sharing being one option. ‘We have had conversations with EE’ about pooling spectrum, he said; though a full spectrum sharing alliance would require regulatory approval.
The two operators already have relationships on various levels. They both participate in MBNL, the joint venture which runs their shared 3G network. And 3UK bought 2x15MHz of 1.8GHz spectrum from EE ‘ about one-quarter of its total ‘ when the larger firm was required to offload some frequencies, as a condition of its merger (it was formed as a venture between Orange and T-Mobile). That 1.8GHz windfall is the heart of 3UK’s LTE plan, Dyson says, taking a similar line to EE itself.
Both carriers are insisting 800MHz is a secondary frequency in their strategy ‘ ‘another useful tool in the kit bag’, as Dyson put it. For Vodafone and O2, which lack 1.8GHz spectrum, 800MHz will be far more central since it supports cost effective wide area coverage with its long range propagation and indoor penetration. These two operators have their GSM networks in 900MHz, and in the tortured run-up to the auction, EE and 3UK argued that they should be restricted in their ability to purchase 800MHz licences, because they already had sub-1GHz holdings. However, the 900MHz band is mainly being refarmed for 3G expansion at this stage, and is not developing the same ecosystem or roaming capabilities as the more popular 4G option of 1.8GHz.
BT, of course, has not had its own mobile business since it sold off its Cellnet arm as O2, later acquired by Telefonica. It is widely expected to announce its own spectrum sharing and mobile services venture with its former subsidiary soon, since it acquired holdings in the high capacity 2.6GHz band during the auction, while O2 did not. To add further weight to the speculation, Vodafone is reported to have pulled out of the bidding to operate BT’s cellular network.
According to newspapers, Vodafone acknowledged it would not be able to match the terms being offered by O2, and EE is expected to drop out for the same reason. BT has used Vodafone’s network to run a mobile service for its business customers ‘ as well as its own 90,000 staff – for the past nine years, but under the terms of that contract, it was able to review this deal as a result of Vodafone’s purchase of BT competitor Cable & Wireless Worldwide. O2 is understood to be undercutting rivals because it is keen to get the spectrum deal too, having come out of the auction with fewer frequencies than EE or Vodafone. Regulator Ofcom is currently working on allowing cellcos to trade spectrum.
Also in the UK, the government has awarded Arqiva, which provides towers and other telco infrastructure, a deal to supply mobile services in rural areas, as part of the Mobile Infrastructure Project (MIP). About €177m has been set aside to fund MIP, which aims to connect rural communities where there is no commercial business case for the cellcos and where cellular coverage is poor or non-existent. This is in addition to the Rural Broadband Project, funded to the tune of €413m and being rolled out by BT, and a further €177m for a Super Connected Cities programme. All these are part of a wider national broadband scheme. MIP is not a broadband initiative however, since it only specifies voice and SMS coverage as its base point.
Arqiva will provide mobile network roll-out in the remote areas, including network planning, site acquisition, deployment of site infrastructure and installation of equipment. The resulting system will cover up to 60,000 premises and sections of 10 major roads, and will require 500 cell sites. Arqiva’s managing director for government mobile and enterprise, Nicolas Ott, said: ‘Finding the sites and acquiring them will be the greatest challenges. In some cases, we’re going to have to build a road to be able to build those sites as they’re in very remote locations. We’ve been given two years to make all the sites commercially available to the operators but nothing gets built in Scotland in the winter so it’s effectively fewer than 24 months.’
The infrastructure will then be available to operators, which can decide whether it should support just 2G ‘ which would meet MIP basic requirements ‘ or 3G/4G broadband.