3UK’s new chief spars with Vodafone over auctions

In the UK, controversy continues to rage around LTE spectrum, especially the 800MHz digital dividend band. Vodafone and 3UK, which has a new CEO, are taking opposite sides on whether regulator Ofcom should take steps to ensure all four UK cellcos remain viable – or let the market take its course. Meanwhile, Ofcom itself has proposed measures to limit interference in the 800MHz band from mobile services.

David Dyson will replace Kevin Russell as CEO of 3UK on July 1, and says he refuses to be “distracted” by the possibility that the smallest cellco could be sold to a rival. The structure of the UK mobile market changed when the third and fourth players, Orange and T-Mobile, merged to form Everything Everywhere, now the largest mobile carrier. This left a far wider gap between the big three cellcos and 3UK. But Dyson said in an interview with the Financial Times: “If we start to get distracted by what happens in three, four, five years time, we will potentially miss the opportunity to build this business into the force it can be.”

His key demand is that Ofcom adopts a spectrum auction framework that is “fair, does promote competition and doesn’t put 3 in a position where other people can take advantage”, adding: “We will pay a fair price – we’re not looking for any favors here.” The UK will sell off 2.6GHz and 800MHz licenses next year but 3 has called for caps on low frequency spectrum to avoid competitive disadvantage. Vodafone and O2 are the only carriers to have 900MHz GSM spectrum, which can be refarmed for 3G or LTE, and Everything Everywhere and 3 want reassurances that these two will not be allowed to build an unfair advantage in sub-1GHz bands, important for broad coverage. The former thinks current Ofcom proposals on sub-1GHz caps do not go far enough, though it has five times as much 1.8GHz GSM spectrum as the others.

Ofcom said in March that it wanted to maintain at least four national operators in the market, when 3 complained that it would be forced out of the market if it were unable to win sufficient good spectrum. But Vodafone’s public policy director, Richard Feasey, said the market should decide the number of cellcos, and that the regulator must avoid determining this number before the auction is held. Recently, Vodafone CEO Vittorio Colao said that further cellco consolidation was needed in Europe, on the lines of that proposed under the AT&T-T-Mobile merger plan in the US.

“I’m not sure it’s always wise for regulators to prescribe what the market structure will be,” Feasey said in an interview. “It’s important to get it done right, more than getting it done fast.” He added: “The UK has suffered particularly acutely from a very extended period of uncertainty on this issue. It’s very desirable that there is more certainty about what the long term position of spectrum will be, and that will only arise after the auction is completed because then the industry in the UK can get on with investing and building the next infrastructure.”

Ofcom plans to force 800MHz winners to shoulder the cost of preventing interference to digital TV signals lower down the band. The regulator claims up to 3% of digital terrestrial TV (DTT) viewers could be affected by the problem, and has opened a consultation on proposals to mandate carriers to deploy filters to block interfering signals from mobile services. About 0.1% of DTT viewers will still have to switch to other TV platforms such as cable or satellite.