O2 UK claims LTE spectrum auction is illegal

The UK arm of Telefónica, O2, has released a statement blasting UK regulator Ofcom’s consultation over the forthcoming digital dividend spectrum auction.

The operator is objecting to the use of spectrum floors, whereby at least four operators will get at least 10MHz of spectrum below 1GHz.  However, O2 believes that these spectrum floors amount to a state aid, which would make them illegal under EU law.

“We believe that the proposed spectrum floors are a state aid and are therefore illegal under EU law,” the carrier said in a statement.

The use of spectrum floors would prevent it from gaining as much 800MHz spectrum as it would like. This is because Ofcom views O2 and Vodafone to have an advantage by already owning 900MHz spectrum. Sub 1GHz spectrum is more valuable as lower frequencies provide greater range and superior in-building penetration than higher ones.

“The proposed floors, and the argument that Vodafone and ourselves already have enough sub-1GHz spectrum, are based on the mistaken belief that 800 MHz and 900 MHz are directly comparable spectrums. They are not. Our response to Ofcom clearly explains why.

“Ultimately this auction is about new, next generation services. It is not about 2G and 3G, but about the future. It should therefore be used as an opportunity to provide fair, open and equal access to newly.”

O2 also said that limiting the amount of 800MHz spectrum to purchase will reduce its potential value. “Ofcom’s own figures suggest this effect could cost taxpayers £1bn,” it said.

The operator was also frank in its belief that Ofcom should rethink its whole approach. “While we support the proposed auction structure and spectrum caps, Ofcom is faced with a difficult choice of either revisiting its spectrum floors proposal or discarding the floors and getting on with the process.”