CCS Insight: Three UK's dire need for spectrum set to provoke 'feisty' debate

Three UK's "precarious position" in the UK market following the failed attempt to buy O2 UK is set to underpin the next "feisty and potentially acrimonious debate" over future spectrum allocations, according to CCS Insight.

In a research note emailed to FierceWireless:Europe, the analysts noted that Three UK CEO Dave Dyson's call for regulator Ofcom to impose restrictions on rivals at an upcoming spectrum auction is understandable given the operator's lack of assets and scale.

"The operator claims to carry over 40 per cent of UK data traffic, but holds only about a 15 per cent share of the airwaves -- an unsustainable position that has already forced Three to raise prices on some tariffs," CCS Insight observed.

Understandable as it may be, Three's position is nonetheless unlikely to be greeted with much sympathy by rivals when the upcoming auction of 2.3 GHz and 3.4 GHz frequencies takes place. Dyson is seeking a 30 per cent spectrum cap on any operator following the auction.

"This seems wishful thinking given that the combined BT and EE -- which owns over 40 per cent of the spectrum -- would have to give up significant airwaves to take part," CCS Insight said.

Ofcom could be more sympathetic to Three's situation as the network's very future depends on acquiring more spectrum and the regulator is keen to maintain four mobile network operators, the analysts added.

"In 2014 Ofcom initially proposed a 37 per cent spectrum limit post-auction in an effort to maintain competition, although it later backtracked," CCS Insight said.

However, any proposal is likely to anger rival players, which CCS Insight noted will "likely argue that Three missed the opportunity to bid more aggressively at the 4G auction in 2013."

Ofcom is planning to award 190 MHz of spectrum in the 2.3 GHz and 3.4 GHz bands. This forms part of the government's commitment to release 500 MHz of spectrum under 5 GHz from the public to the private sector by 2020.

The auction was delayed until after the European Commission made its decision on whether CK Hutchison should be allowed to buy O2 UK. As has been well documented, the deal failed to gain approval, in part because both the EC and Ofcom strongly favour the retention of four MNOs on the market.

Related articles:
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Three UK CEO calls for Ofcom to level spectrum playing field to address BT dominance
Three is no longer a magic number in EU telecoms
EC blocks proposed O2/Three UK merger; CK Hutchison considers legal challenge
Ofcom delays spectrum auction following O2/Three legal threat

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