O2, BT cry foul over UK LTE auction rules

The much-delayed UK LTE spectrum auction could face fresh hold-ups if Telefónica's O2 and BT are successful in challenging how Ofcom, the UK telecoms regulator, plans to manage the bidding rules.

The Ofcom auction proposals, according to O2, will guarantee Everything Everywhere and 3UK LTE spectrum and could therefore be considered to be state aid. The operator believes this proposal will depress the auction prices by around £1 billion, and believes there is now substantial risk of the auction being delayed pending European Commission approval.

Ofcom indicated in March it wanted to see at least four national operators providing LTE services within the UK market, and would impose maximum and minimum amounts of spectrum that Vodafone and other operators can bid for.

The spectrum proposals "are a state aid and are therefore illegal under European Union law," Telefónica spokesman David Nicholas told Bloomberg. He added that the proposals would distort the auction process, allowing some bidders to potentially acquire spectrum at discounted prices.

BT said Ofcom's proposal to force successful bidders of the 800MHz spectrum to provide wireless broadband coverage in rural areas would drive down the bids, and effectively provide the licence holder with a public subsidy. "This is an anti-competitive subsidy against other rural broadband technologies, in particular fixed broadband," BT said in its submission to Ofcom seen by the Guardian.

Responding to the O2 and BT accusations, Ofcom said. "We are fully aware of state aid rules and would not have made proposals that we considered illegal," the regulator said, according to the Guardian.

Meanwhile, Everything Everywhere said Ofcom's proposals didn't go far enough and were "undermining the long-term prospects" of UK operators that don't already hold spectrum at the lower end of the LTE band, according to Bloomberg.

From an unbiased viewpoint, Ovum analyst, Matthew Howett, cautioned that this latest disagreement would likely upset Ofcom's already highly ambitious auction timetable, telling the Guardian: "If any of the operators go ahead with their threats to launch legal challenges, the auction could be delayed by at least a year, which will leave the UK languishing even further behind other European countries which have far more advanced mobile phone networks."

For more:
- see this Bloomberg article
- see this Guardian article
- see this Telegeography article

Related Articles:
Ofcom imposes spectrum caps for LTE auction, splitting operators
3UK calls for preferential treatment in LTE spectrum auction
LTE: Bidding for spectrum not high on BT's priority list, for now
Everything Everywhere, BT prep 800MHz LTE trial