Ofcom has proposed revised plans for the UK 4G auction scheduled for the end of the year

UK regulator Ofcom has announced revised plans to promote competition in the country ahead of the country’s 4G spectrum auction.

The spectrum in the 800MHz band that is becoming available, freed up from the nationwide switchover from analogue to digital TV,  is equivalent to three quarters of the mobile spectrum in use today. The refarmed 800MHz band will be auctioned along with higher frequency airwaves in the 2.6GHz band at the end of 2012.

Ofcom believes that consumers are likely to receive better services at lower prices in the future if there are at least four operators in the market and without the right quality and mix of spectrum, an operator might struggle to compete with other national wholesale providers. So ahead of the second round of consultation with telcos, Telecoms.com takes a look at the impact Ofcom’s revised plans will have on operators in the UK.

Everything Everywhere

Everything Everywhere, the company formed by the merger of T-Mobile and Orange in the UK, currently has no spectrum in the 900MHz band, but owns a lot of spectrum in the 1800MHz bands, which it is currently using for 2G services.

When the two firms decided to merge, the European Commission (EC) assessed the merger and one of the conditions  proposed in order for the deal to get the go-ahead was that the operator had to give up some of the 1800MHz spectrum that the two firms owned – a total of 2x15MHz of 1800MHz spectrum.

Ofcom had previously said that it would guarantee both Everything Everywhere and 3UK, or a new entrant to the market, sub-1GHz spectrum in order for them to deploy LTE. However, the new proposals see the regulator withdraw that guarantee from Everything Everywhere.

“Ofcom had to do something to make everyone else happier and Everything Everywhere less happy, so that they could get this through without legal challenge,” said Matthew Howett, analyst at Ovum.

“On balance, Ofcom decided that Everything Everywhere’s holding of 1800MHz is sufficient for the operator to use in order to deploy LTE, rather than worry about it getting access to 800MHz for that. Ofcom has said it believes the benefits of operating LTE at 1800MHz, in some instances, are higher than operating at 800MHz. That’s because 1800MHz allows more capacity, which is important.”

Of course the operator itself was not happy to hear the news and a spokesperson told Telecoms.com: “Everything Everywhere is very disappointed to see that Ofcom has again reversed its proposal to ensure all mobile operators hold a minimum amount of sub 1GHz spectrum. Ofcom is missing a huge opportunity for the UK to address the imbalance in sub 1GHz spectrum holdings, which has damaged consumer interests for the last 20 years, and is a situation which is now threatening to continue.”

The company argued that the importance of sub 1GHz spectrum has been recognised by other regulators across Europe and supported by economic analysis.

“All of the regulators bar Ofcom have made vigorous efforts to support healthy and sustainable competition by ensuring that the imbalance of sub 1GHz holdings is redressed,” said the spokesperson.

However, it should be stressed that things could yet change if Everything Everywhere decides to divest its 1800MHz spectrum before the auction, rather than during it.

According to Howett: “If this spectrum is auctioned before the joint award of 800MHz and 2.6GHz it could remove the need for any spectrum reservation. This is not insignificant given the growing interest in launching LTE at 1800MHz.”

3UK

3UK is likely to be quite happy with the new proposals because either it or potentially a new entrant to the market, is guaranteed spectrum in the sub 1GHz band. However, if 3UK, or a new entrant acquires some of the 1800MHz from Everything Everywhere before the spectrum auction, Ofcom would not necessarily guarantee them spectrum in the 800MHz band.

“It’s up to 3UK to decide whether it values spectrum in the 1800MHz band more than the 800MHz band and decide whether it participates in the bidding of Everything Everywhere’s 1800MHz band before the auction,” said Howett.

“It needs to spend time doing cost benefit analysis to find out what works for its business. However, if a new entrant comes along and secures some 1800MHz spectrum, which is not very likely but still a risk nonetheless, 3UK can mitigate the risk by bidding for 1800MHz or by bidding aggressively for 800MHz. Ofcom can’t be any more fair to 3UK than it is being.”

O2 and Vodafone

Vodafone and O2 are likely to be the happiest to hear of Ofcom’s revised proposals. Everything Everywhere has been disadvantaged by the revisions, and there has been no decision by Ofcom to take back any 900MHz spectrum from the two companies.

A Vodafone spokesperson told Telecoms.com that the revisions bring the UK closer to a “fair and open auction that will benefit the wider economy, increase competition and ultimately lead to the creation of innovative new services for consumers”.

However, the firm said that it still does not completely understand the regulator’s rationale for protecting a fourth operator.

The spokesperson also outlined its plans for rolling out LTE, and suggested that the company will be ready to roll out the technology when bidding is over.

“In the UK, Vodafone has already moved well beyond the testing phase for 4G. We have run three trials of the technology in the UK over the last three years and the international team of engineers who launched Vodafone’s 4G network in Germany over a year ago are already in this country, working closely with our own technical specialists.”

So, Ofcom has been in an unenviable position to try to remain fair to each of the operators but also promote competition and conclude the auction as speedily as possible. However, according to Howett, the regulator has not done a bad job.

“The decisions Ofcom takes now are likely to affect the level of competition in the sector for at least a decade. Striking a balance was never going to be easy. The set of proposals now on the table appear to leave everyone with something to be optimistic about, but at the same time requires compromises to be made. Perhaps Ofcom have got it right?”

Ofcom outlines new proposals to get 4G to rural areas

UK telecoms regulator Ofcom has outlined new proposals to extend 4G coverage to at least 98 per cent of the population.

Last year, Ofcom proposed that a condition should be attached to one of the 800MHz licences up for grabs, which would oblige the holder to roll out a 4G network that provides coverage to 95 per cent of the UK population.

Now, following news that the government will invest £150m to boost mobile coverage in areas with poor or no mobile service – with part of that figure to be spent on building new mobile infrastructure in areas where there is little or no commercial incentive for operators to do so – Ofcom believes that this condition can be strengthened in one of two ways.

The first option is to increase the obligation for coverage to 98 per cent of the UK population. The second and, in Ofcom’s view a potentially more effective option, is to require that one of the 800MHz spectrum licenses has a condition that forces the buyer to provide 4G coverage that not only matches existing 2G coverage but also extends into mobile ‘not spot’ areas of the UK where the £150m will provide infrastructure capable of supporting 4G coverage.

This may have the potential to extend 4G mobile coverage even further than to 98 per cent of the population, according to Ofcom.

“This second option would make it more likely that mobile broadband services would be provided in locations where they could be most valued by consumers, rather than in those areas where it is easiest for a licensee to meet the obligation,” the regulator wrote in a statement.

Arqiva owns all of the UK’s terrestrial TV and radio networks and around 20 per cent of the mobile network infrastructure in the country. It will likely play a major role in getting 4G to not-spots in the UK, as it aims to act as a neutral host for operators to provide broadband, and hopes to give a choice of providers to those living in rural areas. Alastair Davidson, director of mobile, said he was very encouraged by Ofcom’s proposal, hailing it as a “significant milestone”.

However, he suggested that Ofcom should make sure the 98 per cent coverage obligation is applied to all the operators who win 800 MHz spectrum.

“If Ofcom decides to place the coverage obligation on only one operator, many consumers in rural areas will receive a second-tier broadband service, denied the benefits of competition available to those who live elsewhere,” he said.

But he added: “This auction provides an opportunity for the whole country to benefit from high-speed data networks and we very much hope that it can now proceed without further delay.” The UK is trailing behind many other mature markets, especially in Europe, that have already auctioned 4G spectrum.

Everything Everywhere is investing £1.5bn over three years

UK communications firm Everything Everywhere, which owns and operates the British Orange and T-Mobile brands, has announced that it is to invest £1.5bn ($2.4bn) in a three-year network evolution programme. The project will accelerate the integration of the Orange and T-Mobile networks and ready them for LTE through the “implementation of 4G-ready technology following successful trials,” the firm said.

The plan represents double digit growth in network investment from 2011 to 2012. T-Mobile’s 3G network has already been merged with that of UK competitor Three, as part of the two firms’ network management joint venture, MBNL.  Orange and T-Mobile have allowed each others’ users to roam across both 3G networks since October, with 2G roaming in place since 2010.

CEO Olaf Swantee said: “With mobile data increasing 250 per cent over the past two years, we are making these investments so we can deliver on our ambition to provide the UK’s most reliable, biggest and best mobile data network.  We believe that the UK requires a 21st century infrastructure and are committed to rolling out 4G as soon as possible to support growing data use, connect parts of the country with little or no mobile broadband, and drive economic growth.”

The firm said that sometime during the first half of 2012, customer devices will automatically select the strongest available signal from the two networks.

An LTE trial conducted in partnership with BT launched in September this year. Everything Everywhere said that the trial, which focused on the delivery of mobile broadband services to rural areas, has delivered “satisfaction rates of over 90 per cent.”

The UK is lagging comparable European markets in LTE deployment. While regulator Ofcom has said that it expects LTE availability before 2013, it is expected that nationwide coverage will not be available until 2017.

The free wifi offering will target short term users

Finnish handset vendor Nokia has teamed up with wifi network operator Spectrum Interactive and location based media firm Selective Media, to trial a free wifi offering on the streets of London, UK.

The trial project, which runs from Tuesday until the end of 2011, takes advantage of 26 London hot spot locations from Spectrum Interactive’s portfolio of real estate, most of which will be based on payphone boxes.

The two-month trial is intended to assess both the demand for free wifi access and the browsing behaviour of consumers using the service across the British capital. The hotspots are typically fed by a 20Mbps DSL backhaul link, while individual users will allowed a 1Mbps connection in order to keep bandwidth hogging down.

Usage will be unrestricted across devices, browsers and apps, with users confirming a terms and conditions check box before access is granted. Following a successful trial, Nokia said plans are in place for a large-scale rollout across London from early 2012.

Simon Alberga, executive chairman of Spectrum Interactive, said the venture was targeting short stay users in high footfall locations, like those just wanting to check Facebook, their email or a mapping application. These types of use cases are becoming more popular on mid-range devices and wifi only tablets, and are no longer restricted to high end smartphones.

Out of the 77 million or so mobile subscriptions in the UK at the end of September, just over 38 million of those are prepay subscriptions, which would make them less likely to be heavy data users.

The question remains as to how this initiative is monetised, which is where Chris Bull, founder of Selective Media, comes in, saying that mobile advertising is on the agenda. Presumably the reason for allowing open access to start with would allow Selective to build up an idea of who is using the service and what they’re using it for. The firm would then be able to use its ad network to serve appropriate ads to popular sites. Pre roll advertising at the wifi login stage is also an option according to the company’s web site.

3UK says 97 per cent of all of the traffic on its network is data

Mobile operator 3UK has announced that 97 per cent of all the traffic travelling through its network today is data. The carrier added that in the 14 months between June 2010 and September 201, it has seen a 427 per cent increase in data usage for smartphone customers.

Phil Sheppard, director of network strategy at 3UK, said that the operator’s focus has primarily been on users’ online experience and that its 3G network was made for the mobile internet.

“Downloading apps, streaming movies, getting around town with Google Maps, even checking in on Facebook – it all adds up, and you’re doing it now more than ever,” he said.

He added that, in 2003 when the firm began its journey as a 3G network, few knew how 3G and mobile data could become so relevant in people’s lives, particularly as at the time there was a lack of capable handsets.

3 is the smallest player in the UK market, with just shy of six million users at the end of September.

BT ahead of target with its fibre rollout

BT expects to have connected two-thirds of UK premises to its fibre-based broadband network by the end of 2014 – one year ahead of its original target of 2015 – thanks to its recruitment of 520 new engineers, most of whom will be ex-armed forces.

The telco will be investing around £300m ($343m) over the next few years to fund this accelerated rollout, as part of its total investments of £ 2.5bn in commercial fibre broadband, based on a combination of Fibre-to-the-Home (FTTH) and Fibre-to-the-Cabinet (FTTC) technologies.

Around six million premises are believed to have already been connected to the new network, and this figure is expected to rise to 10mn next year, and then two-thirds of all UK homes and businesses in 2014.

“Thousands of our engineers are busy installing fibre broadband across the UK at an astonishing pace,” said Ian Livingston, CEO of BT. “The recruitment of an additional five hundred engineers will help us go even faster and ensure we are ready to help supply other areas should we win BDUK [Broadband Delivery UK] funds. We are proud that most of these jobs will be filled by ex-armed forces personnel.”

BT recently announced that it will increase the speed of its fastest fibre broadband product (delivered via FTTH) to 300 Mbps by spring of next year, and also double the speed of its FTTC offering from 40Mbps to 80Mbps.

Ofcom hopes to be ready for spectrum auction by end of 2012

UK regulator Ofcom has announced that it will delay the 4G spectrum auction until the final quarter of 2012, at the earliest.

Ofcom said that it received a number of “substantial and strongly argued responses” to its initial plans and will undertake a further round of consultation to address issues raised.

“In light of these responses, and the significance of the decisions that we need to take—decisions that are likely to shape the future of the mobile sector in the UK for the next decade or more—we have decided to undertake a further round of consultation on these issues,” the regulator explained.

Ofcom said that it plans to publish a further consultation document around the end of 2011 and will then give stakeholders another opportunity to comment and respond to its revised proposals—a period that is likely to be at least eight weeks.

“Our aim will then be to make our decision and publish a statement in the summer of 2012. The auction itself would then follow a few months later – perhaps starting in Q4 2012,” the body said.

Ofcom tried to dismiss speculation about an impending delay to the auction as irrelevant last month, claiming that operators will not be able to roll out 4G LTE services until 2013 at the earliest, due to technical issues. However, through Ofcom pushing back the auction even further, operators could lose valuable time in their attempts to bring LTE to the UK at the beginning of 2013.

Vodafone, Everything Everywhere and O2 had each denied claims that they had been trying to stall the UK spectrum auction that is scheduled for 2012, following accusations from 3UK’s new chief executive David Dyson.

Responding to the latest development, a 3UK spokesperson told Telecoms.com that the company understands Ofcom’s desire to get this competitive issue right, but that its UK competitors will gain from the regulator’s tardiness.

“This delay extends to 2013 the massive competitive and commercial imbalance created by the decision in January 2011 to enable the use of existing 2G spectrum for 3G data services,” said the spokesperson.

“Operators that currently rent low frequency spectrum for a fraction of its fair value will continue to get a free ride at the expense of UK taxpayers as prices for rented low-frequency spectrum will only be re-balanced at the time of the auction.”

Vodafone is offering a 3-month test drive for smartphone users

Vodafone UK is trialling a scheme for new and upgrading customers, allowing them to “test drive” an all-you-can-eat data plan for three months, to inspire confidence in smartphones and in the contracts that they opt for.

The deal applies to any smartphone that the operator offers data plans for, regardless of whether it is a 12, 18 or 24-month contract.

“For the first three months of your price plan, we’ll waive our standard data charges if you exceed your UK data allowance,” explained the firm.

“We’ll monitor your data use, and in the third month we’ll send you a text summarising how you got on, whether you exceeded your data allowance during the trial and the monthly cost of adding a higher data allowance to your plan.”

The company added that the deal is aimed at encouraging users to explore their phone and inspire confidence in smarthphones with no restrictions or limits. It’s a classic bait and switch manoeuvre – let the users run free for three months then tell them they should sign up for the heavy user package.

If users find that they are using more data than what their plans allow, there are options open to them – they can pay £3 extra a month for 250Mb more allowance, £5 for 500Mb, and there are also 1GB and 2GB plans as well.

Users can also check their data usage at any time on their My Account portal, the My Vodafone app, available on iPhone and Android, or by calling 44555.

The three month Data Test Drive is for data use in the UK only and does not apply to SIM only, mobile broadband and price plans where data is not included.

As recently as 2005, HDTV-ready sets were present in just three per cent of the world’s TV households and still seen as something of a novel technology. However, HD set sales are growing rapidly with a net 60 million households forecast to be added in 2011 alone. This means that 23 per cent of the world’s primary TV sets will be HD-ready by year-end.

Owning an HD-ready set does not, of course, automatically mean reception of HD programming. But, by 2016, 70 per cent of the world’s homes with HD sets are forecast to be using them to watch HD programs. Again, the UK is ahead of the game, with 72 per cent of HD-ready homes expected to watch HD programming by 2016. But this time it is well behind the global leader, which is the US at 91 per cent. The UK lag is caused by the popularity of Freeview which is forecast to have only around half of its users watching HD programming by 2016.

* UK ranked 25th (38 per cent in 2011 rising to 72 per cent in 2016)

These numbers indicate that, by the end of the forecast period, TV services in several countries will be approaching the point where most, if not all, of their users are watching HD content. This raises the interesting prospect of a second wave of switchovers after 2016, with standard definition being switched off and HD effectively becoming the new standard definition. The extra capacity freed up by such a move would then raise the possibility of another generation of SuperHD appearing, which would offer an enhancement to what will, by then, have become standard HD.

Charles Dunstone

As the 1990s came around, UK entrepreneur Charles Dunstone had recently started selling ‘car phones’ from his flat in London’s Marylebone. Two decades later and Carphone Warehouse is one of the UK’s great success stories, established as a major high street brand with overseas expansion in place through Europe to the USA.

But Dunstone, who remains co-founder and CEO of Carphone Warehouse, is humble about the firm’s origins and maintains that “generally what happens in the mobile business is anything that wasn’t anticipated.

“To understand the mobile industry you have to understand the history of it,” he says. “I didn’t really have any insight when I first started out in the business, I was really just stumbling around trying to make a living.” And if Dunstone is saying that his success was sheer fluke, he shares a similar attitude to other ‘accidentally’ successful players in the business.

“All through the history of mobile, everyone has failed to understand its potential and then they’ve failed to capitalise on it,” he says. “Yet the mobile business has succeeded in spite of the incompetence of the people running it.”

Going back to the early days of Carphone Warehouse and the arrival of his first business opportunity, Dunstone highlights Vodafone predecessor Racal, one of the UK’s first mobile licensees. “When the first mobile licences were awarded, Racal said it anticipated that one day there would be around 600,000 mobile phone users in the UK. Even the government thought they were being recklessly optimistic.” Today that number is close to 80 million, at nearly 130 per cent penetration.

The next thing to astonish was the success of SMS. It’s an oft-quoted story that the original spec for GSM was designed by engineers who thought it would be useful for the networks to be able to communicate with their customers. SMS fit the bill in this instance. “But one of the senior guys at Nokia revealed to me that when they first made a GSM phone they could not conceive of why anyone would ever use SMS,” Dunstone says. “But the engineers couldn’t decide whether the inclusion of the technology was optional, or a mandatory part of the spec, so they included it anyway just to be safe. So text messaging is 100 per cent accidental.

It’s unbelievable that SMS is so light in usage of the network, yet operators can charge so much for it. SMS was the start point for data pricing.” And again, the industry failed to capitalise on it until much later. “The success of the Blackberry is a great reflection of this. People couldn’t use data until a company came along and said ‘look here’s a device that lets you do email really well from a handheld’.” Yet Dunstone finds that this model is becoming increasingly challenged. He likens devices that are good at one thing to the Wang of the PC market. When the PC first arrived on the scent it couldn’t do word processing, so Wang filled the gap with an electronic word processor. As the PC evolved users moved away from devices that did just one thing really well and gravitated towards multi purpose gadgets.

“There’s been a transformation in the last three to four years. Fundamentally the incumbent players in the market have squandered their opportunity to such an extent that there’s a whole new tier of people that are now the most influential in the market. It’s the people who develop the operating systems, not those who operate the networks or provide the hardware,” says Dunstone, citing the impact of Apple and Google. “It’s a sad reflection on everyone else that it’s taken these new entrants to come in and show everyone else how to sell mobile data.”

The use of the mobile as a payment mechanism is a battle Dunstone believes the operators should be able to win as they are used to thousands of micro transactions. “But Apple has shown that if you can let people spend money so easily that they barely notice they’re doing it, they can pick your pocket £1 at a time. Whoever can consolidate on some kind of one click transaction, whether it’s Amazon or Apple or whoever is winning an enormous prize.”

And he believes more change is to come: “Fundamentally, mobile-only platforms feel like they’ve had their day. Today people want to use their phone to get to the service they want and the days of the mobile operator being able to force people to do things their way has been very much discredited.

“Users of smartphones are not just users of phones, they are users of every other type of technology too. We’ve found that 52 per cent of people calling into a call centre are already browsing the site of the company they are calling on another screen. So you have to understand that when someone’s talking to you they’re also checking your site and your competitors’ sites at the same time. And we all have inconsistencies in the way we present information via different channels. You have to have a homogenous service offering across all the different channels,” he says.

“Mobile is complementary to the desktop internet experience and it’s commonly used by savvy and high tech users. You get very targeted responses from people because they are not just browsing, they are looking for something specific. So conversions over the mobile more valuable than those from desktop. The only way to succeed in this industry is via experimentation—and fortune favours the brave.”