Three and EE threaten to take their UK spectrum battle to court

The UK telecoms and media regulator, Ofcom, is in increasingly hot water over its policies for spectrum caps and the country’s first 5G auctions. EE, the largest mobile operator and owned by incumbent BT, has joined the fourth-ranked MNO, Three UK, in threatening legal action against the moves.

The operators want next month’s planned sale of 40 MHz of 2.3 GHz spectrum, and 150 MHz of 3.4 GHz to be postponed. The 3.4 GHz band is seen as suited to future 5G deployments, while 2.3 GHz is likely to enhance LTE, though both auctions will be technology neutral.

Under the rules proposed for the auction, EE would not be able to bid for any spectrum in 2.3 GHz because of its strong spectrum position, and all four MNOs would be subject to a 37% cap on their share of total UK spectrum holdings.

Three, which wants a 30% cap to help it rebalance its spectrum disadvantage against EE and Vodafone, has already threatened a legal challenge to Ofcom’s plans. Even before that, it was campaigning against Ofcom’s proposals. Last September, Three UK’s CEO David Dyson said that all operators other than EE-BT were below that 30% cap, and that EE and Vodafone were not using all the spectrum they owned, which he said suggested that they bought the airwaves in order to deny Three or O2 capacity. BT/EE has about 42% of available UK spectrum followed by Vodafone on 29%, Three on 15% and O2 on 14%.

Vodafone retorted that Three had had “ample opportunity as well as the financial resources to bid for spectrum when it’s become available”, while EE insisted it was using all its spectrum resources to drive faster, better services. “We are unique in our commitment to expand 4G coverage to 95% of the UK’s landmass by 2020, further than any other UK network has done, and will continue to ensure the UK stays at mobile technology’s leading edge,” said a spokesperson.

Now EE is also resorting to legal threats to drive this spat with Three to the next level, saying in an official statement: “In response to Three’s action, we have made the difficult decision to challenge the proposed structure of the next auction of mobile spectrum. We need to protect our customers’ mobile experience, and help build the platform for the UK to have the highest quality 5G networks.”

It is demanding that the spectrum cap is ditched completely, in which case it would be happy for the 2.3 GHz auction to go ahead next month. It is also asking for the 3.4 GHz auction to take place at a later date, in parallel with sales in other bands that are likely to enable 5G, notably 700 MHz (the ‘second digital dividend’ in broadcast spectrum) and 3.6 GHz. Ofcom has said it will put those frequencies on sale by 2020.

EE says all the 5G-targeted assets should be auctioned in the same timeframe to provide greater certainty about total 5G holdings, helping MNOs to make more informed buying decisions and to enable economies of scale in early 5G roll-out.

In response to EE’s move, Mark Evans, CEO of Telefonica O2 UK, said: “Legal action will inevitably cause delay to the auction and gives no thought to the impact and harm this will have to UK customers, UK plc and economic growth. Should litigation go ahead, it must be expedited. In addition, and even more importantly, on the basis that all operators have accepted the rules for 2.3 GHz, Ofcom should go ahead with auctioning this immediately either on a permanent or temporary basis. This would allow spectrum to be used whilst a potentially protracted legal process in relation to the 3.4 GHz spectrum is contested.”

He continued: “This country desperately needs more mobile airwaves. It is possible to hold the 2.3GHz auction now and grant immediate access to the newly available spectrum. Ofcom can and must act.”

The remaining MNO, Vodafone UK, has not yet responded.