Releasing airwaves for mobile services next year

• Ofcom updates on proposals to auction new frequencies
• Airwaves will help improve coverage, boost network capacity and support rollout of 5G

Ofcom has today announced updated proposals to release crucial airwaves to meet growing demand for mobile broadband and support the rollout of 5G.

Ofcom manages the UK’s airwaves – or spectrum – a finite resource that is essential for wireless services including mobile phones.

To help improve mobile services and enable more people and businesses to access 5G networks, we are planning to release more mobile airwaves through an auction in spring 2020.

Improving mobile coverage

In December 2018 we proposed including coverage obligations in our auction rules. These would have required mobile companies to increase coverage in rural areas, in exchange for winning discounted spectrum through the auction.

Following this, the four mobile network operators – BT/EE, O2, Three and Vodafone – have discussed with Government and Ofcom an alternative ‘Shared Rural Network’ plan to deliver good quality 4G coverage to at least 92% of the UK over six years.

On 25 October, the Government announced that the companies had each committed to reaching this target. The Government has also confirmed it will provide £500 million of funding for the plan. Ofcom welcomes this agreement, which we believe will provide significant benefits to mobile users across the UK.

To make sure mobile companies stick to the commitments, we will write binding conditions into their spectrum licences. Ofcom will also monitor, and report, on their progress in meeting the new commitments.

In light of the commitments, we are no longer proposing to include coverage obligations in our auction. This is because through the companies working together, the agreement will achieve higher coverage than the requirements we could have set through an auction. So we have today published updated proposals for how our mobile auction will work.

Airwaves being released

The auction will involve companies bidding for spectrum in two different frequency bands.

• The 700 MHz band. We are releasing 80 MHz of spectrum in the 700 MHz band. These airwaves are ideal for providing good-quality mobile coverage, both indoors and across very wide areas – including the countryside. Releasing these airwaves will also boost the capacity of today’s mobile networks – offering customers a more reliable service.
• The 3.6-3.8 GHz band. We are releasing 120 MHz of spectrum in 3.6-3.8 GHz band. These important airwaves are part of the primary band for 5G and are capable of carrying lots of data-hungry connections in concentrated areas. All four of the biggest mobile companies have launched 5G this year, and releasing these airwaves will help increase the capacity and quality of mobile data services.

How the auction will work

Ofcom has today revised its proposals for next year’s auction, in line with our objectives to ensure the efficient and timely allocation of spectrum.

For next year’s auction, we plan to use a format known as ‘simultaneous multiple round ascending’. This approach, which is similar to our 2018 spectrum auction, involves two stages. It would work like this:

• Principal stage. Companies first bid for airwaves in separate ‘lots’ to determine how much spectrum each company wins.
• Assignment stage. Then there is a round of bidding to determine the specific frequencies that winning bidders will be allocated.

Winners of 3.6-3.8 GHz spectrum will have an opportunity within the assignment stage to negotiate their placements within the band among themselves. This will make it more straightforward for bidders to join together the new spectrum they win with their existing holdings, and potentially reduce the level of ‘fragmentation’ in the wider 3.4-3.8 GHz band.

Supporting competition

Ofcom has a duty to ensure spectrum is used efficiently. We also ensure companies can compete fairly and customers have a strong choice of mobile networks. So to maintain strong competition, we are still proposing to place a 37% cap on the overall spectrum that any one mobile company can hold following the auction. Promoting strong competition between mobile companies is important because it leads to better services for customers.^[2]

Philip Marnick, Spectrum Group Director at Ofcom, said: “We’re pressing ahead with plans to release vital airwaves to improve mobile services for customers. Together with mobile companies’ commitments to improve coverage, this will help  more areas get better services  and help the UK maintain its place as a leader in 5G.”

Next steps

We welcome responses to our proposals by 9 December. We then plan to publish our final decisions in early 2020, before starting the auction in the spring.

NOTES TO EDITORS

1. The spectrum would be made available for bids in the following lots:
   1. Six lots of 2x5 MHz (60 MHz in total) in the 700 MHz band with a reserve price in the proposed range of £100m-£240m per lot.
   2. Four lots of 5 MHz (20 MHz in total) of 700 MHz downlink-only spectrum, with a proposed reserve price of £1m per lot.
   3. 24 lots of 5 MHz (120 MHz in total) of 3.6-3.8 GHz spectrum, with a reserve price in the proposed range of £15m-£25m per lot.
   4. As we are not planning to include coverage obligations anymore, the two spectrum lots that carried a proposed maximum discount each of between £300-400m will no longer apply.
2. The 37% cap on overall spectrum holdings has the effect of restricting existing mobile companies to acquiring the following amounts:
   1. BT/EE - 120 MHz BT/EE;
   2. H3G - 185 MHz;
   3. Vodafone - 190 MHz;
   4. Due to its current spectrum holdings, O2 will not be restricted by the cap.
3. The 700 MHz band is currently used for digital terrestrial TV and wireless microphones. The 3.6-3.8 GHz band is used for fixing links and satellite services.