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Will Ofcom have to stick up its hands on 4G auction?

Speed > fairness

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Comment Ofcom will do anything to avoid seeing the 4G auctions scheduled for next year mired in legal battles - but deciding to whom it would surrender will be tough.

The regulator has told the FT it stands ready to fight for its proposed 4G mega-auction, in the face of operators who seem keen to resort to legal action, but not at the cost of the auction schedule:

"We would of course stand ready to defend robustly our final decisions. But we consider that it is in the best interests of citizens, consumers and the companies operating in the sector that we move on, without additional delays, so that the frequencies can be put to good use," the regulator said*.

O2 and BT have both made it clear they consider that Ofcom's proposed mega-auction, which is scheduled for next year, constitutes illegal state aid to their competitors, and O2's response only just stops short of threatening legal action if the action goes ahead as currently proposed.

The idea of BT (former state monopoly) and O2 (handed spectrum for nothing, over which it now runs 3G services) complaining about state aid might seem laughable, but Ofcom's problem is that if it concedes to one operator then it's only going to upset the others - probably enough to launch court action of their own.

The disputes over spectrum allocations go way back: O2 and Vodafone got lovely spectrum at 900MHz for nothing, while Orange and T-Mobile were gifted slightly unlovelier 1800MHz bands, which they've now combined into a holding so large they'll have to sell some of it off.

That sale presents the interesting spectacle of the German and French governments (who still hold shares in Orange and T-Mobile, and thus EE) selling off something that they were given by the UK government for nothing: but we digress.

Three, meanwhile, feels slighted as the only network operator not to have received 2G spectrum, especially as that spectrum can now carry 3G and 4G services. Three claims to be entirely in favour of rapid 4G auctions, but no one is prepared to rule out legal action if they feel their grievances aren't being addressed.

As we've said before, the operators have nothing to gain by an early 4G auction. They'll have to stump up for spectrum and build infrastructure, so a delaying action based on legal challenges is very attractive.

Ofcom might signal that it's ready to negotiate, but successful negotiation needs shared motivation, and that's far from proven in this case. ®

* Ofcom has been in touch to clarify that this quote refers to the final proposals, which won't be published until later this year - so we don't yet know whom they will offend, though we can guess.

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