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Ofcom’s 5G spectrum auction has been a long time coming, but it will finally happen before the end of the year, and the rules have now been set, limiting the ability for some networks to bid.
Although no exact date has been set, we know that 190MHz of spectrum will be auctioned in all, with 40MHz in the immediately useable 2.3GHz band, supported by various phones, including devices from Apple and Samsung, and 150MHz in the 3.4GHz band, which isn’t compatible with many current devices, but will be useable by future phones and tablets.
That latter spectrum is expected to be central to the rollout of 5G across Europe, so it will be valuable to networks, but there are some limits on how much they’ll be able to acquire.
Ofcom is placing a cap of 255MHz on the immediately useable spectrum that any mobile network can hold as a result of this auction, which will limit the ability for some networks to bid on the 2.3GHz band.
The regulator is also placing a cap of 340MHz on the overall amount of spectrum that any network can hold as a result of the 5G spectrum auction.
These caps are necessary as there are wild imbalances in the amount of spectrum held by the four UK networks (as we’ll explain below), and that’s a problem, because lack of spectrum could make it hard for networks to keep up with demand, especially as that demand is expected to skyrocket around 2020 when 5G arrives.
Ofcom is also wary that spectrum in the 3.6 to 3.8GHz band won’t be available for 5G use as soon as was once expected, making the spectrum that’s being auctioned now even more valuable.
What the caps mean for EE
EE/BT have by far the most spectrum at the moment, with 255MHz in total, all of which is immediately useable. As such, they won’t be able to bid on the 2.3GHz band at all.
They’re still some way below the overall spectrum cap of 340MHz though, which means they could potentially win up to 85Mhz of the 3.4GHz band.
That wouldn’t be a bad haul, as that’s more than half the total amount that’s being auctioned in that band, and if EE did come away with all that it would have 37% of the all the spectrum that’s expected to be useable by 2020 – a figure which includes 80MHz in the 700MHz band, set to be auctioned at a later date.
Of course, just because EE could come away with all that it doesn’t mean it will. There’s the cost for one, with Ofcom setting reserve prices of £10m per 10MHz lot of the 2.3GHz band, and £1 million for a 5MHz block in the 3.4GHz band.
And Ofcom will be awarding the spectrum to the networks that are “likely to put it to the most efficient use in the best interests of consumers”, not just those with the deepest pockets.
If EE does hit the overall cap of 340MHz that won’t help it today, since it won’t be claiming any immediately useable spectrum, and it may also limit its ability to bid in future auctions, such as for spectrum in the 700MHz band, but it will put the company in a very strong early position for 5G.
What the caps mean for Vodafone
Vodafone has the second most spectrum at the moment with 176MHz overall, and as with EE it’s all immediately useable.
That means the network can grab at most 160MHz of spectrum in the 5G auction, but unlike EE it’s not prevented from bidding on the 2.3GHz band.
Assuming Vodafone comes away with 160MHz (which it very possibly won’t as it will have competition) it depends on how the spectrum is split as to where that leaves the network.
Theoretically it could come away with all 40MHz of immediately useable spectrum, which could boost its current network (though even if it does it will still have less immediately useable spectrum overall than EE). Or it could grab all of the 5G-focused 3.4GHz band, or some combination of the two.
What the caps mean for Three
Three currently has 90MHz of immediately useable spectrum and 40GHz that should be useable by 2020. As such there are no caps on what it can bid on or acquire during the auction.
Although it’s not possible for the network to come close to EE or Vodafone’s immediately useable spectrum holdings as a result of the auction, it is feasible that it could level out with them in terms of total spectrum – though only if it comes away with the bulk of the spectrum being auctioned.
What the caps mean for O2
O2 is in a similar boat to Three, but with even less spectrum – just 86MHz, all of which is immediately useable. As such there’s no restrictions on what it can bid for in the 5G spectrum auction.
Theoretically it could come away with all the auctioned spectrum, and doing so would give it marginally more than EE to play with – though most of that won’t be immediately useable, which EE’s is.
It’s also very unlikely that any one network would win all the spectrum being auctioned, but it’s clear from the restrictions in place that Ofcom wants to close the gap, so don’t be surprised if O2 and Three do come away with a lot.
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