UK 2G and 3G licences to become tradable from 4 July

by

Ofcom yesterday finalised proposals to enable trading of 900 MHz, 1800 MHz and 2.1 GHz spectrum licences (currently held by mobile network operators and used to provide 2G and 3G services).

Ofcom has adopted its draft proposal to make trades subject to an ex-ante analysis of whether ‘competition is likely to be distorted’ by a trade in addition to normal ex-post competition law control.

Ofcom justify this change from current practice on the basis that:

“First, [our] analysis and research since the 2004 Statement, e.g. in the context of mobile spectrum liberalisation, has made it clearer now that there is a material risk that concentration of mobile spectrum holdings could affect downstream competition, because:

  • Spectrum is a necessary input to the provision of mobile services and can affect competition at a level of the mobile value chain which fundamentally determines the nature and quality of the services that consumers receive. Access to spectrum is essential for firms to compete at the crucial wholesale level in the mobile market where firms control the nature of the service proposition and the quality of the service provided to the consumer.
  • Mobile spectrum is relatively scarce. This, together with its nature as a key input for mobile services, makes spectrum a strategic asset in the mobile market. Concentration in mobile spectrum holdings could potentially lead to reductions in the intensity of competition to the detriment of consumers. This for example was part of the concerns which led the European Commission to accept commitments from Deutsche Telekom and France Telecom to divest some 1800 MHz spectrum when allowing the merger of Orange UK and T-Mobile UK.
  • The auction of 800MHz and 2.6GHz is likely to be the last significant opportunity for the next decade or so to acquire new spectrum suitable for the provision of mobile services and mobile spectrum is likely to remain relatively scarce even after the auction, given the rapid increase in mobile (especially data) traffic. 

Second, while no decisions have yet been taken regarding the measures that might be taken to promote competition, including as part of the rules for the award of the 800 MHz and 2.6 GHz spectrum, following completion of Ofcom’s current assessment of future mobile competition, it is possible that some measures will be needed. If this were the case, we believe that it is unlikely to be in the interests of consumers to allow spectrum trades to take place shortly after the auction that would be inconsistent with any competition rules established for the auction. If we did, it might allow participants to game the rules in the auction.”

Ofcom go on explain that the test will involve an analysis of whether a proposed trade is likely to distort competition, although in a rather unclear way Ofcom make it clear that the test will be applied on a discretionary basis, and so may not be required for all trades – in particular it will not be applied where there has been other regulatory scrutiny.

They then illustrate this general point by making it clear that they do not plan to apply the test to the spectrum sales committed to by DT/FT to obtain clearance for the EverythingEverywhere merger.