Ofcom has revealed the auction process for how it will release 5G spectrum – but the plans have already been criticised by the operator community as potentially derailing the government’s 5G ambitions.
The new rules arrived just as the UK government confirmed its £1bn Shared Rural Network (SRN) scheme to end poor mobile coverage in the country’s rural and non-metropolitan areas. This was set up in agreement with the country’s four mobile network operators – BT/EE, O2, Three and Vodafone – to create a shared rural network to improve coverage across the UK, in particular to deliver a minimum of 4G coverage to at least 90% of the UK over six years.
The government had previously considered an Ofcom spectrum auction as the best way to improve mobile coverage and, historically, Ofcom has used coverage obligations attached to the operators’ licences to improve mobile coverage. It had already proposed to include two coverage obligations in the next auction in 2020 which would require the two operators that acquire them to achieve 90% coverage by 2024, in exchange for a discount.
Ofcom welcomed the government’s scheme when it was first proposed in October 2019 and regarded the new commitments as being able to make “a real difference” to mobile customers across the UK, adding that it would no longer propose to include coverage requirements in its auction process. Indeed, as it made its new proposals, the regulator observed that by mobile companies working together, supported by government funding, the new agreement would achieve higher coverage than Ofcom could have required under its powers, and so it has not included coverage obligations in its auction.
What it has included is plans to allow companies to bid for spectrum in two different frequency bands – 700MHz and 3.6-3.8GHz. The former is regarded by Ofcom as ideal for providing good mobile coverage, both indoors and across very wide areas, including the countryside. It said releasing these airwaves will also boost the capacity of existing mobile networks, giving customers a more reliable service. The higher-frequency airwaves will be used for 5G to carry large datasets in concentrated areas.
The auction will have two stages: a principal stage, where companies first bid for airwaves in separate “lots” to determine how much spectrum each company wins; and an assignment stage, comprising a round of bidding to determine the specific frequencies that winning bidders will be allocated.
Ofcom stressed that as well as making sure spectrum was used efficiently, it was obliged to ensure companies could compete fairly and that customers have a good choice of mobile networks. To maintain competition, it will impose a 37% cap on the overall spectrum that any one mobile company can hold following the auction.
“Demand for getting online on the move is soaring, with mobile customers using nearly 40% more data year on year,” said Philip Marnick, spectrum group director at Ofcom, commenting on the auction proposals. “So, releasing these airwaves will bring a much-needed capacity boost – helping mobile customers get a better service. We are also releasing more airwaves to help cement the UK’s place as a world leader in 5G.”
However, leading UK operator O2 took issue with the idea of the auction cementing the UK’s 5G leadership, and a company spokesperson said Ofcom’s auction proposals put at risk the UK’s competitive position as a leading digital economy.
“A successful 5G auction will be the catalyst for productivity gains, increases in innovation and could enable the UK to develop a secure and competitive edge in a post-Brexit world,” the spokesperson said. “Ofcom’s failure to include adequate measures to provide for spectrum defragmentation in the 3.4-3.8GHz band derails the government’s 5G ambitions and undermines its plans to encourage diversification of the 5G supply chain.”