Everything Everywhere's bid to launch 4G services in the UK later this year has created quite a stir, with rival operators O2, Vodafone and Three claiming that the move could damage competition in the market. But is the proposal a real threat to competition or just big fuss about nothing?
Everything Everywhere (the combined entity of Orange and T-Mobile) holds a large portion of spectrum at 1800MHz – currently used for 2G. The company hopes to steal a march on other operators by refarming this spectrum for 4G services, ahead of Ofcom's auction of spectrum in the 800MHz and 2.6GHz bands later this year.
Ofcom gave its provisional approval for Everything Everywhere to deliver 4G services over its existing 1800MHz spectrum in March, stating that the refarming of spectrum would “bring material benefits to consumers”.
However, the watchdog has been forced to extend its consultation period amid a storm of protest from rival networks, none of whom hold sufficient quantities of 1800MHz spectrum to launch their own 4G services in any compelling way.
O2 said that Ofcom's proposal was “contradictory to its objective of delivering a competitive market environment,” Vodafone accused Ofcom of “taking leave of its senses,” and Three threatened to take legal action against Ofcom, citing concerns that it may be squeezed out of the market.
The deadline for responses to Ofcom's consultation is Tuesday 8 May.
Where are we now?
It is understandable that operators are concerned about being left behind in the race to launch 4G services. LTE and WiMAX are expected to provide faster mobile broadband and greater capacity than existing 3G services, and have been touted as a solution to rural broadband scarcity.
The majority of spectrum belonging to Vodafone and O2 is in the 900MHz band, which was originally earmarked for the delivery of 2G GSM services; Everything Everywhere currently delivers 2G in the 1800MHz band.
In 2000, all of the existing operators were also allocated a chunk of spectrum at 2.1GHz to deliver 3G services. Three, which was founded in 2002, only holds spectrum at 2.1GHz.
Over the years, regulators have relaxed how the spectrum bands can be used, and last year O2 became the first UK operator to deploy 3G services in the 900MHz band, using HSPA. The advantage of lower frequencies is that they can travel further and penetrate deeper into buildings, whereas higher frequencies have greater capacity.
While Everything Everywhere's plan to deploy 4G at 1800MHz is certainly viable – there are currently 16 operators around the world offering commercial LTE services in this band – the issue is around competition.
Most countries in Europe have already auctioned off spectrum in the 800MHz and 2.6GHz bands, which have been formally ratified for 4G use, meaning that deployments at 1800MHz pose little threat to market competition.
However, the 4G spectrum auction in the UK, originally planned for September 2008, has suffered repeated setbacks, and is now scheduled for the last quarter of 2012, meaning that most operators will not be able provide 4G services in these bands until 2014.
The importance of bringing 4G to Britain must not be underestimated. The UK has committed to having the best superfast broadband in Europe by 2015, and mobile will have an important role to play in achieving that aim.
Moreover, recent research by Capital Economics (sponsored by Everything Everywhere) claims that the introduction of 4G mobile networks has the potential to add 0.5 percent to GDP by the end of the decade – equivalent to £75 billion.
According to Ovum analyst Matthew Howett, the earliest route to 4G would be through Everything Everywhere's 1800MHz spectrum, and Ofcom is right to consider this option. However Ofcom must also consider how to safeguard competition.
Howett proposes two solutions. The first is to give permission for Everything Everywhere to deploy 4G at 1800MHz, with the caveat that other interested operators can rent parts of its spectrum to deliver their own 4G services – similar to the obligation that BT is under to share access to its fibre optic infrastructure. However, Howett said that this would not be a quick or easy option.
The other concerns the conditions imposed on Everything Everywhere as part of the regulatory approval for the merger of Orange and T-Mobile in 2010, which state that the company must sell a quarter of its spectrum holding in the 1800MHz band.
Howett said that whoever acquires the 1800MHz spectrum could launch a rival 4G network. However, Ofcom would have to restrain Everything Everywhere from deploying 4G at 1800MHz until it has completed the sale of this spectrum.
“Clearly neither of these two options are ideal, which makes the joint award of new spectrum at 800MHz and 2.6GHz later this year that much more important,” he said in a blog post.
'No threat of nationwide coverage'
In spite of the brouhaha, Alan Hadden, president of the Global mobile Suppliers Association (GSA), reckons it's a storm in a teacup. Even if Ofcom does give the go ahead for Everything Everywhere's to launch its 4G network, it is unlikely to cause serious market disruption, he said.
“This is not really what I would call a threat of nationwide coverage,” said Hadden “The operators that we're talking about are already in the business of GSM and mobile broadband, so LTE is really an additional investment, and that investment may be limited to the cities or expanding rural areas.”
He said that 1800MHz is a prime band for LTE, and is already being used in countries such as Angola, Singapore, Sweden, Australia, Korea and Saudi Arabia to deliver 4G services. There is also an ecosystem of user devices – including smartphones, tablets, routers, dongles and personal hotspots – that can pick up 4G signals at 1800MHz.
Hadden added that the trend in Europe is for operators to run LTE in three bands – 2.6GHz (for high capacity), 800MHz (freed up from the switch off of analogue TV) and refarmed 1800MHz. Swedish operator TeliaSonera, for example, requires all of the new devices coming onto its network for LTE to run triple band.
“The point is that what Everything Everywhere is requesting is not unusual,” he said. “It is part of the mainstream direction in Europe and Asia and in other markets.”
4G: a mobile revolution?
The current lack of 800MHz and 2.6GHz spectrum in the UK has not stopped operators finding other ways to test 4G technology.
In March, UK Broadband switched on a wholesale 4G network in London, using spectrum in the 3.5GHz band. The network has been built using Time Division Long Term Evolution (TD-LTE) – a variant of LTE developed by China Mobile to meet the growing demand for data capacity.
UK Broadband's 4G network will not deliver commercial services, but is intended to provide a solid platform for other operators to drop onto when capacity on their own networks becomes constrained, the company said.
Ofcom has also granted a number of test and development licences in the 800MHz and 2.6GHz bands. All of the major operators have conducted LTE trials around the UK, and Clear Mobitel, Arqiva and Manx Telecom (Isle of Man) have also set up pilot projects.
To add to the confusion, it was recently revealed that the "Wi-Fi + 4G" version of Apple's latest iPad will not support 4G in the UK, even after the spectrum auction later this year. This is because in the United States, where Apple is headquartered, LTE is delivered in the 700MHz band.
The new iPad does support HSPA+ in all of the main bands, which in the US is described as 4G. However, in the rest of the world, HSPA+ is regarded as 3.5G, or “3G+”. Apple has now been forced by the Advertising Standards Authority to withdraw claims in the UK that its new iPad has "4G capability" to join high-speed mobile broadband services.
The iPad incident demonstrates the need for operators and device manufacturers to prepare for the arrival of 4G in the UK. Operators need to fortify their networks in preparation for the forthcoming deluge of data, and device manufacturers need to make sure their smartphones and tablets support as many 4G frequencies as possible.
Whether Everything Everywhere gets permission to launch its network ahead of the auction or not, GSA predicts that LTE will be a mainstream global technology by the end of 2012, and the eventual arrival of 4G in the UK will bring greater productivity, economic benefits and new jobs.