It’s been a long, long time coming, but the first 5G spectrum auction is set to start soon, as the final obstacle – a legal challenge from Three – has been overcome.
Three wanted Ofcom to place a 30% cap on the amount of spectrum any network could hold, rather than the 37% cap that’s currently in place. The network argued that this would be necessary for a competitive four player market, but the courts disagreed, and as of its decision today, so does the Court of Appeal.
5G contacted Ofcom and they gave us the following reactive comment: “The Court of Appeal has very firmly rejected Three’s application for permission to appeal on all grounds.
“We welcome this decision, and will now press ahead with releasing these important airwaves. This new capacity will allow mobile companies to offer more reliable reception, and to prepare for future 5G services.”
That all sounds promising, and indeed it does mean that the 5G auction will finally get under way. Ofcom hasn’t said exactly when the auction will kick off or – more importantly – when it will complete, but based on the time frames given bidders should have qualified today, so we’d expect the auction will begin sooner rather than later.
Based on how long the 4G auction took from start to finish and with the same main operators' bidding, 5G predict that we may well know the winning bidders as early as late April.
And those results could have a major impact on the mobile landscape going forward, as in total 40MHz of spectrum in the 2.3GHz band and 150MHz in the 3.4MHz band is being auctioned off, increasing the total availability of spectrum by almost a third.
Pricing of 5G spectrum
Ofcom has set reserve prices for the auction as follows :
- £10 million per 10MHz lot of the 2.3GHz band - making a total reserve price of £40 million for the available 40MHz.
- £1 million for a 5MHz block in the 3.4GHz band - making a total reserve price of £30 million for the available 150MHz.
Of course, each operator will submit a closed bid which is expected to go beyond the reserve by some way.
Potential winners and losers
More spectrum and progress towards 5G are all good things, but Three’s arguments aren’t without merit, as depending on how the bidding goes it could result in one or two networks being in a very dominant position, rather than there being a healthily competitive market when 5G comes around.
There are at least some restrictions, because - as you can see in the chart above - EE/BT has already hit its cap on the amount of immediately useable spectrum it can hold, which means it can't bid on any of the 2.3GHz spectrum, and can win a maximum of 85GHz of the 3.4GHz spectrum before it hits the overall spectrum holdings cap. Were it to do that though its overall spectrum holdings would still likely tower over any other network.
Vodafone is also slightly limited, in that it can only win 160MHz of spectrum in total before it hits the overall cap, but again, doing so would see it with more spectrum than any rival other than perhaps EE. O2 and Three are in the position of having no restrictions so they could win big, but they're in that position because they have so much less spectrum to begin with, so there's equally a chance they'll get pushed behind.
That wouldn’t just be bad for the losing networks but also for consumers, who might effectively have less choice if some networks stand out as clearly better than others. In that scenario those networks might also be able to push up prices due to the absence of effective competition.
So if will be interesting to see how the auction plays out, because while it will be good for 5G, it might not be good for consumers.
Image credit: Ofcom UK