UK punters face higher prices from an oligopoly of three mobile providers unless Ofcom rethinks its spectrum policy, Three UK's CEO Kevin Russell said at a policy debate in London today. As it stands, Ofcom will hand all of the prime 900Mhz spectrum currently used by Vodafone and O2 for 2G back to them to use again for 3G. Ofcom …
Ofcom is more "con" than "com"
"Ofcom did so on the basis of a cost-benefit analysis that suggest that an operator in the 2100Ghz range sites could be competitive with one in the 900Mhz range if it had three times as many sites."
So if I operate three times as many sites as a 900Mhz operator, I'll be competitive? How can a company that needs three times as many assets, and presumably around three times the operating costs, be "competitive"?
And how can the future prospect of 800MHz spectrum (which can't be used by current handsets AFAIK) be compared with the allocation of 900MHz now? By the time 800MHz auction comes around, Three will be in no shape to bid.
The comments from the Barclays Capital analyst show just how much contempt the City has for the "free market"; the government should be acting on behalf of consumers, not doing the City's dirty work at tax payer's expense!
>>"So if I operate three times as many sites as a 900Mhz operator, I'll be competitive? How can a company that needs three times as many assets, and presumably around three times the operating costs, be "competitive"?"
I suppose the simple answer would be 'if they can have three times as much business'.
I guess things depend a lot on what the spread of demand is - if someone has more shorter-range sites, that does mean they can potentially support a higher total data transfer rate for a given bandwidth per site, and therefore more customers, but exactly how that works out overall, I really wouldn't want to guess.
Where the sweet spot might lie between having low costs and sod-all total bandwidth or high costs and vastly excessive bandwidth, and how broad that sweet spot might be could be a complicated issue, especially with demand changing significantly over time.
"The City hopes that all these pesky companies like 3 will just bugger off or let themselves get bought out so that Orange & Vodafone can increase prices and profit margins in a market bereft of competition and make obscene profits for their shareholders"
Give them a break
Come on, you can't expect a bunch of media types (Ofcom) to understand the technicalities of radio bands and how they affect performance, costs, profits and competition.
Last to the Table Gets the Scraps
I can't say I recognise too much understanding of the issues from comments here, to be honest.
This spectrum is currently in use already, and great efforts are needed to clear a portion of it. O2 and Vodafone have no reason to go through this effort and expense at the moment. As it is not currently supported in standardisation (as well aslegacy HW issues), they cannot use the existing NW equipment for UMTS, so need to but separate new kit.
Another key item to look at is history. Racal and BTCellnet (now Vodafone and O2) created networks 26 years ago when people were predicting that the market forecast was sized in thousands of potential customers. This turned out to be in the millions and OfCom offered new spectrum in 1800MHz.
So 18 years ago the ancestors of today's EverythingEverywhere saw that the market was much larger than had been imagined and bought 1800 spectrum, and the market then grew to around 40 million and OfCom offered new spectrum at 2100 MHz.
Then 11 years ago the above operators were joined in the market by 3, who have have now had over 9 years of operation to establish a competitive business model.
Now OfCom is mandated by EU law to de-regulate the GSM900&1800 spectrum. With rising smartphone demand, they are also to offer 2600 and 800 spectrum. They currently propose to exclude O2 and Vodafone from bidding for 800 band unless they give up an equal amount of 900 spectrum. I don't see 3 mentioning this anywhere??
So business-wise, 3 knew as well as the other operators what they were getting into, but thought they had hitched a ride on the gravy train powered by the other operators.
Time for another auction
You'd think, given how desperate the Government are for money, they would find an excuse to hold a new auction rather than simply hand it over?
Disband and reform
Kill Ofcom, kill it now. Open markets mean greater innovation: the promise of infrastructure consolidation has been made for decades and never happens. Look at BT if you want to see a sham of the infrastructure it inherited: its decent services are ACTUALLY available to a small percentage of the country and they're allowed to get away with saying that the UK is somehow competitive with Europe on broadband. Get real.
If companies use a valuable resource that they've acquired for nothing (and then have the cheek to pay no tax in the case of scummy Vodafone) then they should be regulated properly and new players should have a chance. 900MHz is a vastly superior frequency to provide coverage over. If it's gone automatically to the incumbents, that stifles the underdogs. If an industry need regulating, the regulator needs teeth and power. Ofcom has neither of these things, nor the brain to use them effectively. Shred it, sack the key players for good, and give regulatory power over our digital infrastructure to a new body that isn't an industry apologist.
Kill Ofcom and watch BT kick every ISP and Phone provider out of their exchanges, and ITV shut down local news, CHildrens programs, and add more ads. Meanwhile your mobile isn't working because noone can agree who's supposed to be allowed to use the requencies its using.
Okay, so the regulator isn't perfect, but the solution to bad regulation isn't no regulation.
>>"Without decent spectrum, said Sanders, Three would have to chose from a palette of unattractive options – such as choking demand with pricing, or charging different amounts for different products or services. This is an anathema to Three, which has popularised all-you-can-eat data."
Surely, whatever services Three *wants* to offer, the economics of all-you-can-eat aren't the same as the economics of pay-for-what-you-get?
Given that bandwidth is neither unlimited nor free, should Ofcom have to care about whether a company can pursue a particular business philosophy or not?
Alternatively, if the argument being used is that they want spectrum to do a certain kind of service, and it's considered that all-you-can-eat is something that's good for the country, would Three be forced to sign up to keeping all-you-can-eat as part of their conditions for having the spectrum?
Or should it be the case that a portion of spectrum is designated to be reserved for all-you-can-eat irrespective of who is providing the service?