Everything Everywhere flogs 4G hand-me-downs to Three

Everything Everywhere has flogged its excess 1800MHz radio spectrum to rival mobile operator Three with one rather important condition. The sale briefly raised the possibility of the UK having competing 4G networks this year until EE crushed that dream by failing to relinquish the bands until September 2013.

The European Commission required Everything Everywhere to get shot of the spectrum as a condition of the merger that created it. When Orange and T-Mobile eloped to form EE, the mammoth phone network was left holding almost half the UK mobile radio spectrum. So EE offered to sell off two 15MHz-wide blocks before the 4G mega auction, which it has now done, but it won't let Three take possession until the last possible moment required by the EC: September 2013 for two 10MHz blocks, and September 2015 for the rest.

This ensures that Everything Everywhere's 4G next-gen mobile broadband monopoly period is maintained.

Neither company will say how much money has changed hands, nor whether their shared 3G network deal will extend into 4G, though given the proximity of radio frequencies and existing agreements that seems likely. In fact the only detail they are sharing is that Three won't get to take possession of its secondhand bands from Everything Everywhere until well after EE 4G monopoly has expired.

Everything Everywhere won its 4G monopoly on Tuesday when Ofcom announced that it would be allowed to deploy 4G (LTE) services in the 1800MHz band. EE lobbied very hard for that decision, which also applies to the spectrum blocks sold to Three, and argued that the lack of 4G was damaging the UK economy and fast deployment was essential for the country. If EE were to hand over the bands early then Three could start deploying LTE too, bringing competition to the UK's 4G market, but it seems that's a step too far for the UK's largest mobile operator.

Not that it hasn't already started. Huawei has been busy for the last few months putting 4G base stations into EE's 2G sites, ready to be switched on come September 11 (when Ofcom's new permission kicks in). The company won't say how many base stations will be supported at launch (and given EE's aversion to Sitefinder we've no way of finding out) but each one gets a gigabit-a-sec of backhaul which should be enough to support the handful of devices capable of supporting LTE at 1800MHz, assuming the new iPhone isn't one of them.

Such an iDevice, if it emerges this year, is unlikely to work in Blighty: Apple's New iPad only supports LTE700, which won't work in Europe but has been adopted in the US. The most-standardised band for LTE is 2.6GHz, with 800MHz a close second, both of which are already in use around Europe and will be available in the UK once next year's mega-auction of 4G spectrum is over. So any new iPhone will do LTE in some of those bands, but probably not 1800MHz. Prototype handsets from the ever-flexible Huawei are being tested, and early deployments will make do with Mi-Fi hotspots and USB dongles as the service is expected to appeal to data users most.

What's more interesting is the effect this transaction will have on the mega-auction. Ofcom's rules for the auction state that a "forth player", for which we can read "Three", is guaranteed to come out of the auction with a minimum spectrum holding. That holding was complicated by not knowing if the 30MHz-wide slot would end up in Three's hands, but taking that into account the auction rules require that Three wins either 10MHz at 800MHz or 40MHz at 2.6GHz. Given Three already owns 30MHz at 2.1GHz (currently filled with 3G signals), and has repeatedly claimed that it can't survive without sub-1GHz spectrum (which has better penetration), one might suppose that a 10MHz block at 800MHz is the obvious choice.

Three is unlikely to have made up its mind yet, and the auction will consist of enough rounds to allow everyone to change strategies at least once. Three was the obvious customer for the 30MHz of bandwidth EE was required to get shot of, and given the dearth of other customers it seems unlikely that Three paid more than a few hundred million for it. EE could even have been motivated into giving Three a good deal in the hope of keeping the UK's smallest operator quiet, but if so then it will likely be disappointed as Three is not known for keeping to itself at the best of times. ®