No forced spectrum farming planned for O2 and Vodafone

14 May 2009 | 10.05 Europe/London

Vodafone and O2 can breathe a sigh of relief. A Government spectrum farming report has decided that neither company should be forced to give up any of its most valuable mobile broadband spectrum. However, the carrot of spectrum released by switching off analogue tv in 2012 remains in front of the pair to tempt them to release some capacity.

Pressure was growing on the pair to give up part of their 900 MHz assets which are used for their GSM networks. The spectrum is highly prized because the Government is relying heavily on mobile broadband to usher in an era of universal broadband of 2Mb by 2012. The 900 MHz spectrum travels much further than 1800 MHz and above spectrum used by the country’s three other mobile providers. Hence, it would potentially cover a bigger area of rural Britain offering far wider broadband coverage with fewer towers.

However, a Government report, penned by former Ofcom executive, Kip Meek, said that neither Vodafone nor O2 should be compelled to surrender any part of their 900 MHz spectrum.

It paves the way for both parties to enjoy ‘first mover advantage’, as Meek calls it, by offering mobile broadband service in rural areas through their 900 MHz airwaves at least two or more years before rivals can act.

However, there is a catch and it comes with 800 MHz spectrum. This will be released when analogue television is switched off in 2012 and is just as suitable for beaming mobile broadband in to rural areas as 900 MHz and so will be keenly competed for.

Hence, Meek is suggesting that the only way Vodafone and O2 should be allowed to bid in an 800 MHz auction is to give up part of their 900 MHz assets.

So for O2 and Vodafone the choice is very clear. Each can chose to have first mover advantage of a couple of years or they can play ball and give up some existing spectrum to be allowed to bid for equally as useful spectrum which will be released in three years time.

Certainly a spokesperson for 3 is hopeful there is now enough of an incentive for voluntary refarming that the industry can move forwards without being bogged down by years of court action that would have followed forced refarming.

"We see the Kip Meek report as potentially a great opportunity for the whole industry to move forward in the development of more effective digital networks without becoming mired in long-term legal battles which will be of benefit to nobody. If the preferred option presented is succesfully adopted all the operators who are able to re-farm will benefit. That's not just O2 and Voda, it's also T-Mobile and Orange. It also provides the potential to create a more level playing field for innovation going forward and one in which we believe the Government's Digital Britain objectives will be more effectively met."

Meeks claims that once these decision are made and new spectrum is bid for and, potentially, existing capacity re-alloacted, Britain could have mobile broadband services which reach 4Mb.