Three joins Vodafone in auction resistance, but falling on deaf ears

Three and Vodafone are both calling for the spectrum auction at the beginning of 2021 to be scrapped, but Ofcom has stated there are no plans to make alterations.

With priorities being rearranged during the COVID-19 pandemic and budgets under severe strain as Huawei equipment gets ripped out of the network, Three has joined Vodafone in calling for the spectrum auction to be scrapped, replaced by an administrative process where the risk of investments getting out of hand is effectively removed. But as the duo present a logical idea to the regulator, Ofcom has unveiled the plans for a January auction for 700 MHz and 3.6-3.8 MHz spectrum.

“The mobile industry is facing very significant extra costs, from the substantial investment required to roll out 5G to the costs associated with increasing network capacity as COVID-19 alters the geographic demands on the network,” a Three spokesperson stated. “The recent Huawei decision will of course add to the bill facing operators.

“Whilst we recognise the pressures on the Treasury and appreciate their support to date, the Government needs to take a balanced approach given the extra costs faced by the mobile industry. An administrative allocation of spectrum would solve both dilemmas, simultaneously raising significant funds for Government (approximately £1.1bn) whilst also creating a pro-investment environment in which operators can focus on improving their networks for the benefit of consumers.”

It should surprise few that Three has taken this position alongside Vodafone. Both the operators are facing additional costs to remove Huawei equipment from the network, as is BT. BT offered the following statement, though behind closed doors one would presume it is on the same page as Three and Vodafone.

“We note Ofcom’s decision to proceed as planned with the auction of additional spectrum bands for 5G,” BT said.

“BT is continuing to invest and lead in roll-out of 5G and full fibre networks across the UK. We believe that an environment which continues to incentivise and support these investments in the next generation of networks is key to the success of UK PLC.  New spectrum would provide improved capacity and quality of 5G coverage in the UK to the benefit of consumers and businesses.”

O2 has remained unsurprisingly quiet on the matter. As the only UK telecoms operator with immaterial exposure to Huawei, it is not an active player in this debate.

Interestingly enough, Ofcom does not seem to think there will be any changes to the spectrum auction process. An open auction will decide the allocation of spectrum as it stands, though the telecoms operators are within their rights to file an appeal. This appeal will have to be filed with the relevant parties by the end of August, while Ofcom should be notified by August 17.

The spectrum auction is scheduled to take place in January with 80 MHz of spectrum in the 700 MHz band and 120 MHz of spectrum in 3.6-3.8 GHz band available. It is of course very encouraging that the regulator is attempting to make more of this valuable resource available to the industry, but a bit of common sense should have perhaps been applied.

Considering the impact of COVID-19, while three of the four operators are dealing with the consequences of a Huawei ban, perhaps an open auction is not the best idea. The price of spectrum has been creeping up across the world, and the last thing anyone wants is a financially strained telecoms industry as 5G begins to ramp. That is what most people would call a net loss.