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Three joins pack baying for Ofcom blood

Operators square up to regulator ahead of 4G auction

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Three is the latest operator to accuse Ofcom of illegal favouritism: claiming the regulator's decision to allow spectrum refarming shouldn't have been allowed, and that a balance must be restored.

The comments come in Three's response to Ofcom's consultation on next year's mega auction. The proposals within that consultation have already been criticised as potentially illegal by both BT and O2, but Three goes one better by describing the regulator's decision to refarm the 900MHz band back in January as "potentially unlawful". The UK's smallest operator is calling for the terms of the 4G auction to restore the karmic balance with annual license fees which reflect the unfairness of it all.

Vodafone and O2 were both given radio spectrum at 900MHz to launch their 2G services, while Everything Everywhere owns a serious chunk of spectrum at 1.8GHz which it bought at auction for the provision of 2G services. But in January Ofcom changed the rules, permitting 3G services to be deployed in those frequencies, and it's that decision which caused Three to cry foul.

Three's argument, which is well-trodden, is that it bid (and paid) for 3G spectrum at 2.1GHz on the basis that 3G services would only be permitted at that frequency. Permitting 3G across the dial devalues Three's investment and hands an unfair (and perhaps illegal) advantage to the competition. Everyone else's investment in 2.1GHz was also devalued, but all the other operators have bands which increased in value too.

Everything Everywhere at least paid market rates for its 2G spectrum*, and 3G at 1.8GHz is still pretty theoretical, but 3G at 900MHz is already supported by the latest handsets and O2 has wasted no time at all in rolling out 3G connections in its 900MHz spectrum (in London at least). Given that the 900MHz spectrum never went up for auction Three is, perhaps justifiably, miffed.

Three argued against refarming, or at least asked for financial restitution before it be allowed to go ahead, but lost that argument back in January. Now the operator is asking that the 4G auction process be used to re balance the competitive marketplace - to wit: all four operators to end up with at least 20MHz of sub-1GHz spectrum, lower caps on overall spectrum ownership and, critically, Everything Everywhere, O2 and Vodafone to pay a "revised annual licence fee" calculated to make up for their chronological advantage.

It's hard to imagine the regulator agreeing to such a thing, but with Three's position so diametrically opposed to that put forward by O2 it's hard to see how Ofcom is going to appease all the stakeholders. Most of the responses to the consultation are in now: we're still waiting to see the redacted versions of what Everything Everywhere and Vodafone have to say for themselves but it's unlikely to be anything conciliatory.

Ofcom can't win this one: the operators have every interest in delaying the auction process as long as they can (so no-one has to spend money on spectrum or infrastructure), and if they can blame the regulator for being intransigent then all the better. Ofcom is under enormous political pressure to get the 4G auction under way as the UK slips behind the rest of the world in telecommunications deployments, but with incumbent operators clearly ready to resort to the courts to argue their point of view it's going to be a hard battle to fight. ®

* We've been reminded that the 1800MHz spectrum was awarded, not auctioned, so Everything Everywhere did not pay anything to get the spectrum.

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