Ofcom again revises plans for much-anticipated 4G spectrum auction

The regulator has responded to criticism regarding Everything Everywhere

In its second consultation document for the 4G spectrum auction document released today, communications regulator Ofcom has said it will no longer guarantee network access to network operator Everything Everywhere - a move that will please the wider industry.

The first consultation, carried out between March and May 2011, guaranteed Everything Everywhere access to sub-1Ghz spectrum to ensure it was a credible national wholesaler following the auction, which is now scheduled for fourth-quarter 2012.

However, Ofcom now claims it miscalculated the risk and because Everything Everywhere already holds a significant amount of 1800Mhz spectrum, which can be used for 4G rollout, Ofcom no longer needs to reserve this 800MHz spectrum for it in the run-up to the auction.

"In light of the responses to our March 2011 consultation and our further analysis, we now believe there is significantly less risk that Everything Everywhere might not continue to be a credible national wholesaler after the auction," reads the Ofcom report.

It continued: "We take greater account of the large amount of 1800MHz spectrum that Everything Everywhere holds, which is in our view likely to mean it has sufficient quality of coverage and capacity, as well as providing it with a large bandwidth of spectrum suitable for LTE and the possibility to offer highest peak speed in both the near and long term."

Ofcom's recognition of the importance of 1800Mhz spectrum may also impact the UK's smallest network operator, Three, according to Ovum analyst Matthew Howett. At present, and to ensure there is a fourth competitor in the market, Ofcom has also promised Three it will receive some 4G suitable spectrum.

But whether it will receive this may depend on whether it takes up an opportunity to purchase 1800Mhz spectrum made available following the T-Mobile and Orange merger to create Everything Everywhere.

The European Commission stipulated at the time that it would have to give up some of its 1800MHz spectrum, either in the run-up to the auction, or during the process.

Howett argues that if Three were to purchase some of this before the auction, Ofcom might renege on its original plan to reserve some of the spectrum for this fourth network operator (after Vodafone, Everything Everywhere and O2) to ensure there was a fourth competitor.

"The responses to the March consultations demonstrated that people felt Ofcom was being too favourable to Everything Everywhere. The regulator has tried to correct that position and in doing so has won some favour in the industry," explained Howett.

"I think the only thing left open now is what will happen with the Everything Everywhere divestiture of the 1800Mhz - this raises some interesting questions," he added.

"In this report, Ofcom has put a lot of emphasis on how 1800MHz is better than 800Mhz - a change in position for it. What's interesting is that if Three acquires 1800Mhz from Everything Everywhere before the auction, then it is likely Ofcom will change its position in guaranteeing a fourth operator.

"But I don't know what Three's bidding strategy is, and we don't know whether or not it will be interested in purchasing the 1800MHz."

Since the last consultation, Ofcom has also changed the rules around the responsibility of the operator awarded the 800MHz licence. It now says the holder will either have to roll out a 4G network to 98 per cent of the population, or match existing 2G coverage and extend into mobile 'not spot' areas of the UK.

The first consultation only stipulated that the winner of this 800MHz licence would have to roll out a 4G network to 95 per cent of the UK.

This additional requirement will be supported by a government investment of £150m.