Industry Trend Analysis - Spectrum Latest Delay To UK's 5G Plans - OCT 2017

BMI View: Potential legal issues are the latest barriers towards early adoption of 5G in the UK, as an operator driving the technology and a clear timeline for the 700MHz spectrum market are missing. The latest issues are a result of the structure of the market, especially the contradicting decisions regarding the mergers between BT and EE (approved at the UK level) and between 3 and O2 (blocked at the European level).

Ofcom is planning three major spectrum auctions before the end of 2020, with the aim of making the UK one of the earliest adopters of 5G, at least in Europe. The frequencies available will be in the 700MHz, 2.3GHz (due to be held in 2017) and 3.5GHz bands. However, the lack of balance between the operators' spectrum holdings and the conditions attached to the auction, has led operators to contest Ofcom's rules, which is likely to lead to legal battles and delays, both in terms of auction timing and the launch of 5G services. While the technology would have been niche at launch, the delay will impact the UK's technological leadership, as it has a regional lead over its peers with regards to 4G uptake.

As part of future auctions, Ofcom decided that spectrum caps would apply. In the case of the 2.3GHz band, due to be auctioned this year, it was decided that no operator could own more than 255MHz of spectrum, therefore preventing BT/EE from taking part. For the 3.5GHz auction, that cap would increase to 340MHz, though the regulator could still add more conditions for the auction of the 700MHz band, which it has been late to do. These rules have disgruntled BT/EE, as it cannot partake in the next auction. It has also affected Hutchison 3 for completely opposite reasons. The company was looking for stricter rules so that it could be awarded a larger holding as a way to catch up, and it was one of the key reasons behind its attempt to purchase O2, before regulatory intervention at the European level blocked the deal.

A Lack Of Balance
Spectrum Holdings (MHz)
*40MHz for future use. Source: Ofcom

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