Ofcom may face legal challenge to its new spectrum caps

In the UK, regulator Ofcom has announced rules for auctions in the 2.3 GHz and 3.4 GHz bands, but will wait before licensing 3.6-3.8 GHz, as these are currently used for fixed wireless in some regions, and it wants to release the airwaves on a national basis. Meanwhile, fourth MNO Three is contemplating a legal challenge to a new spectrum cap of 37%, which it claims is too high to even out the UK competitive landscape.

It will offer 40 MHz in the lower band and 150 MHz in the higher one. The decision to release 3.4 GHz and 3.6 GHz at different times increased the pressure for Ofcom to introduce new caps on how much spectrum each MNO can hold. That might have been less necessary if 3.6 GHz was available immediately, adding to the amount on offer and relieving competitive pressures.

As it is, Ofcom will impose a cap of 255 MHz on the “immediately usable” spectrum that any one operator can hold as a result of the auction, which excludes BT/EE from the 2.3 GHz sale. An additional cap of 340 MHz will be imposed on the overall amount of mobile spectrum a single operator can hold as a result of the auction. This amounts to 37% of the spectrum expected to be usable in 2020, which also includes the 700 MHz band.

Three UK had argued that, if 3.4 GHz were auctioned before 3.6 GHz, the winning MNOs would be motivated to delay the follow-on sale in order to get a time advantage in their 3.4 GHz holdings. It called for a cap on total spectrum holdings – it wanted 30%, and may mount a legal challenge against the 37% limit.

The effect of the caps will be to reduce BT/EE’s overall share of spectrum; the company can win up to 85 MHz in the 3.4GHz band. The overall cap also means that Vodafone could gain a maximum 160 MHz of spectrum across the 2.3 GHz and 3.4 GHz bands. Three and O2 think this does not go far enough, while EE argues the caps are unnecessary.