Like many 5G auctions round the world, the most recent UK spectrum sale has done nothing to shake up the market.
New business models, such as enterprise-centric neutral hosts, are emerging, but almost always on the back of shared spectrum schemes. The UK regulator, Ofcom, for instance, is allowing dynamic sharing in MNOs’ licensed bands, where these are underused, and is proposing lightly licensed schemes for some millimeter wave bands, and very localized licences for enterprise networks. But these progressive ideas are not mirrored in auctions for mainstream 5G spectrum in mid- or low bands.
Only the four existing MNOs bid in the UK’s recent auction of spectrum in 700 MHz, and in 3.6-3.8 GHz (though there are proposals to support a more all-inclusive and flexible approach in 3.8-4.2 GHz when that comes to market). And the limited competition was also reflected in the low prices paid. The operators spent £512.4m ($712m) on the midband licences and £844m ($1.2bn) on the 700 MHz coverage spectrum.
This is a far cry from the £22.5bn (US$31.3bn) the UK operators paid in 2000 for 3G spectrum, or even the £2.3bn ($3.2bn) for 4G spectrum in 800 MHz and 2.6 GHz. In the first 5G auction, in 2018, the total price for spectrum in 3.4-3.6 GHz was £1.4bn ($2bn).
The falling cost of the midband spectrum reflects the fact that the MNOs are not spectrum-starved – they have their previous midband allocation plus the chance to repurpose 3G spectrum in 2.1 GHz within a few years, and to deploy dynamic spectrum sharing (DSS) to allow both 5G and 4G in the LTE bands, especially in the many areas where 2.6 GHz capacity remains underused.
Of course, bids were also probably affected by the economic situation – the operators had petitioned Ofcom to delay the auction further while they stabilized their finances, or better still, to allocate the licences without an auction process at all. The price, especially on a per-MHz/Pop basis was far higher for the 700 MHz band, but that is far scarcer, and while it does not deliver true 5G experiences, it is important for cost-effective broad coverage and some industrial applications.
The operators bid for the spectrum in 34 lots. BT/EE secured 2×10 MHz of paired frequency spectrum in the 700 MHz band for £280m, plus 20 MHz in the part of the 700 MHz band that is assigned to supplementary downlink 9SDL), paying £4m. It also gained 40 MHz in the 3.6-3.8 GHz band for £168m.
Hutchison 3G UK spent £280m for 2×10 MHz of paired frequency spectrum in the 700 MHz band. O2 obtained 2×10 MHz of paired frequency spectrum in the 700 MHz band for £280m and 40 MHz in the 3.6-3.8 GHz band for £168m. Vodafone spent slightly more than O2 for 40 MHz in the 3.6-3.8 GHz band at £176.4m.
Vodafone sat out the 700 MHz auction and plans to refarm its 900 MHz 2G spectrum instead for 5G coverage. Three, which has plentiful midband spectrum in 3.5 GHz thanks to its acquisition of UK Broadband, did not bid for more midband frequencies.
The next challenge for the operators will be to try to sort out their band plans. Only Three has more than 40 MHz of contiguous midband spectrum while the others will aim to swap various holdings to achieve larger contiguous allocations – critical to deliver full 5G experiences and peak speeds without complex carrier aggregations.