Revised proposals on other issues Spectrum packaging and auction design

Ofcom’s Consultation document clearly shows its views on the packaging of spectrum and the rules of the spectrum auction. Only after considering the responses received to March 2011 Consultation, the nature and extent of the technical restrictions that would be faced by the available spectrum and the regulator’s aim of promoting competition and mobile coverage, Ofcom has prepared its revised proposal. Ofcom is not yet ready with its packaging proposals since there is an element of uncertainty regarding the impact of DTT co-existence on the 800 MHz band. During the Consultation, two options consisting of differing lot structures were discussed. A simpler structure of lots was preferred by Ofcom as it would simplify the auction for bidders. As far as the 2.6 GHz band is concerned there is a general agreement among stakeholders that Ofcom should package the paired spectrum as 2X 5 MHz lot sizes and it was also agreed that the unpaired spectrum won’t be sold as a single lot. As per the feed back from stakeholders Ofcom’s auction proposal would be the paired spectrum in 2 X 5 MHz lots and unpaired spectrum in 5 MHz lots. It was also agreed that through the procurement process the design of MIP infrastructure will be established and the access to that infrastructure should be consistent with the state aid rules.

Ofcom proposed to conduct combinatorial clock auction of the spectrum during the March 2011 Consultation. This auction design was supported by the stakeholders but they raised certain issues with regard to the details of rules. In this consultation Ofcom has made modifications to the rules in such a way that it eliminated all concerns of stakeholders and it became more transparent towards its aim. To make available the 800 MHz and 2.6 GHz bands, currently considerable work is being done on spectrum clearance and co-existence under the supervision of the Government and Ofcom. The update of this work is provided by this consultation and Ofcom in its Information Memorandum will publish further information relating to this matter. Ofcom expects that by the end of 2013, the services of the 800 MHz band would be available across the UK and 2.6 GHz band would be available to the majority of the UK by the same year. The remaining areas would get the benefit of these bands as soon as possible after 2013. Annual license fees for 900 MHz and 1800 MHz spectrum The Government has directed the regulator to implement revision of the level of annual license fees pertaining to 900 MHz and 1800 MHz spectrum after the auction. The new annual license fees should reflect full market value and at the same time due consideration will be given to the amount bid for the 800 MHz and 2.6 GHz bands licenses in the auction as per the direction of the Government.

During the March 2011 Consultation, Ofcom expressed its view that on basing the bids in the auction, Ofcom would be able to fix the license fees because the bids would provide valuable information about the value of similar spectrum. The regulator has prepared detailed proposals in this regard and the stakeholders would get a chance to discuss as to the nature of the revised license fees even before the auction and Ofcom guaranteed that no decision in this matter would be taken before the auction. On this issue Ofcom received many responses and it was made clear once again that with regard to the implementation of the Government’s Direction, Ofcom would conduct Consultation after the auction. Any other possible approaches likely to come up during the Consultation with the stakeholders would also be considered before taking a decision. Ofcom believes that all information regarding the full market value of spectrum could be obtained from the bid in the auction and it would help the regulator in revising the annual license fees. Over and above, during the March Consultation, for extracting information from the bids, Ofcom identified a particular approach. The responses with regard to this approach gave rise to an additional approach on which comments are sought for in this Consultation.

Ofcom doesn’t want to rely of a single source of information or methodology. On the other hand it wants to take into consideration more than one methodology, information from auction for similar spectrum in other countries, information on spectrum value etc for taking the right decision with regard to annual license fees. Liberalisation of 900 MHz and 1800 MHz for LTE As and when technical conditions are agreed within Europe, liberal use of mobile frequencies at 900 MHz band and 1800 MHz band for WiMAX and LTE must be allowed. This was a proposal made by Ofcom during the March 2011 Consultation. In its Consultation dated 2nd June 2011 (“consultation and information on technical license conditions for 800 MHz and 2.6 GHz spectrum and related matters”) Ofcom noted that European Commission has amended Decision 2009/766/EC via Decision 2011/251/EU on 18th April 2011. This amendment added technical conditions for WiMAX and LTE. To allow LTE and WiMAX in these bands, the member countries have to implement these technical conditions before 31 December 2011, which is the deadline.

The decision in the case Telefonica O2 UK Limited Vs Office of Communications (900 MHz band ) CAT, made it clear the amended Commission Decision as follows: By 31 December 2011, all necessary measures should be taken throughout EU member states to make available the use of 900 MHz and 1800 MHz bands for the use with WiMAX and LTE. Some undertakings are authorized to use this spectrum for WiMAX and LTE but this could be possible only after completing the necessary authorizations and license amendments as per Authorisation Directive. Following these developments, Everything Everywhere requested Ofcom to amend the licenses at the earliest possible. Ofcom decided to consider this request besides the proposals for auction during the first quarter of 2012 as the regulator is bound by the Govt. Directives and the Wireless Telegraphy Act 2006. Next steps Ofcom invited responses to Consultation by 22nd March 2012. The regulator has plans to publish a statement in summer 2012 regarding its decision for the award. This statement will be based on the responses received to both March 2011 Consultation and the latest Consultation.

Along with the Summer statement Ofcom plans to publish statutory consultation draft auction regulations and an Information Memorandum which would give the details of the spectrum that are going to be auctioned. After this the regulations will be made practicable with out any delay and the award process would be expedited giving enough time for potential participants for preparation. Regulator is of the opinion that the submission of applications by the prospective bidders could be started by the Q4 of 2012.