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O2 has appealed to the Competition Appeals Tribunal to force Ofcom into varying its 900MHz licence to allow 3G deployment, though the competition won't be impressed.

O2, like Vodafone, was given some 900MHz spectrum in which to run a 2G telephony service, back in the days when spectrum was allocated, not sold. Since then the EU has directed that local regulators (Ofcom in the UK) vary the licences and allow 3G to be deployed, which should have happened by May 9th and is the basis of O2's complaint.

The problem in the UK is that we have three operators who were never given any plum low-frequency spectrum, and those operators argue that the huge amount they paid for 3G spectrum (at 2.1GHz) was on the basis that it was the only frequency at which 3G would be allowed. Opening up other bands to 3G therefore devalues their investment.

There's also the small matter that O2 and Vodafone didn't pay market rates for the 900MHz spectrum, which has much better propagation properties than the existing 3G spectrum, or the 1900MHz used by T-Mobile and Orange for their 2G networks. So allowing O2 and Vodafone to deploy at 900MHz would put everyone else at a competitive disadvantage.

Ofcom had hoped that the mega-auction would be in progress by now, having put great chunks of 800MHz spectrum on the market and forced O2 and Vodafone to give up bits at 900MHz if they want to bid. The mega-auction was supposed to happen before the EU directive, so the 900MHz spectrum could be liberalised at the same time.

But arguments over the amount of spectrum that O2 and Vodafone would have to give up and how it would be sold on delayed things. Then we had a general election, which mucked things up again. Now we have Ofcom living in fear of the government, the Conservative half of which declared war on the regulator last year.

So O2 reckons it's waited long enough, and has now complained to the Competition Appeals Tribunal to force Ofcom into liberalising the spectrum (having made an official request to Ofcom in March).

The regulator is now stuck in yet another impossible position: liberalise the spectrum and everyone will want their 3G licence money back, or don't and the CAT will force its hand. So the best Ofcom can do is to tie up the complaint in as much red tape as possible in the hope it will run until the mega-auction happens and the problem disappears. ®

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