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Ofcom talks up telephony spectrum trading

Wanna buy some second-hand spectrum?

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Changes to the licences held by the mobile operators will shortly enable them to buy and sell their radio spectrum, along with the obligations that go along with it.

The changes (pdf, dull, really dull) come into effect on 4 July and are largely what the regulator proposed back in February. There are a few clarifications based on operator feedback, and explanations why other feedback hasn't been incorporated, but in general the final changes are what was expected.

The new licences allow operators to buy and sell radio spectrum to each other (and anyone else), which is considered a good thing as it increases competition though there is always a threat of spectrum hoarding or similarly uncompetitive behaviour.

An increasing proportion of the radio spectrum can be traded freely between companies, but the frequencies used by mobile telephony are uniquely valuable for reasons of utilisation and the business model that enables. Mobile spectrum has, historically, been internationally standardised which makes for great economies of scale, but the mobile phone business also connects the end users of the spectrum directly to the owners: so the value of a frequency is easy to realise.

The operators, in general, would like to see mobile-phone spectrum freely tradable like any other frequency, but Ofcom maintains that its value makes it special and that every trade will have to be approved by the regulator. Moreover, the regulator refuses to say what criteria it will use to assess competitiveness, arguing that every trade will be different and thus no standard rules can be applied.

The complexity shows up when one considers coverage obligations: the 3G licences, now being extended indefinitely, come with a coverage obligation requiring 90 per cent of the population to have a 90 per cent chance of getting 768Kb/sec outside their front door. If an operator sells the licence then the obligation goes with it, but what happens when an operator sells half the spectrum encompassed by the licence?

One of the modifications to the new 3G licences (also published today, pdf) is an explicit statement that an operator can achieve obligated coverage using any technology at any frequency, so it might not matter now, but with coverage obligations almost certainly playing a part in next year's 4G auctions, the precedent is important.

Most of the operators are looking forward to spectrum trading, but then most of the operators have plenty of spectrum to play with having been allocated chunks of bandwidth for their 2G services (now available for 3G too). Three, on the other hand, is quite dismissive of the whole thing:

"This move simply allows those who have been gifted access to public spectrum to profit from it, with no benefit for UK taxpayers," the company told us. "Ofcom’s ambition to deliver faster and more capable services to consumers is best served by a truly competitive allocation of this public asset."

No sour grapes there, then... ®

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