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Ofcom aims to slash EE advantage in 4G race

The government hopes to appease rival mobile operators and avoid legal action

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Culture Secretary Maria Miller has called a meeting with the major mobile phone operators and Ofcom, to discuss whether the 4G auction can be accelerated enough to dissuade O2 and Vodafone from taking legal action.

Back in August, Ofcom announced that it would allow Everything Everywhere – now known as EE – to use its existing 1800MHz spectrum to launch a Long Term Evolution (LTE) network ahead of the auction of 4G spectrum in the 800MHz and 2.6GHz bands, scheduled for January.

The move effectively gave EE a monopoly on offering 4G services until after the auction, as no other operator holds sufficient quantities of 1800MHz spectrum to launch its own 4G services in any compelling way.

Although EE has agreed to sell a large chunk of its 1800MHz spectrum to the UK’s smallest operator 3, as part of the terms of the merger of T-Mobile and Orange in 2010, the spectrum does not have to be handed over until September 2013.

EE plans offer 4G to customers by Christmas in London, Edinburgh, Cardiff, Belfast, Birmingham, Bristol, Derby, Glasgow, Hull, Leeds, Liverpool, Manchester, Newcastle, Nottingham, Sheffield and Southampton.

O2 has said that it is “hugely disappointed” with Ofcom's decision, claiming that it “undermines the competitive environment for 4G in the UK”.

Meanwhile, Vodafone said that Ofcom had shown “a careless disregard for the best interests of consumers, businesses and the wider economy through its refusal to properly regard the competitive distortion created by allowing one operator to run services before the ground has been laid for a fully competitive 4G market”.

In one of his last acts as Culture Secretary, Jeremy Hunt negotiated a four-week ceasefire between the operators, whereby EE would hold off announcing a 4G launch date, and its rivals would refrain from any legal action. However, the ceasefire is now over, and today's meeting will decide what happens next.

Ahead of the meeting, Ofcom has told the government that it could bring forward the auction by about a fortnight from its current January date, and then accelerate handover of control of the frequencies from 18 months to six months. This would allow operators to start rolling 4G services in the 800MHz and 2.6GHz bands in May or June 2013.

However, it is unclear whether this will be enough to placate EE's rivals. Many of the operators feel aggrieved that EE has been given a considerable headstart in the 4G race, and this has been exacerbated by the fact that EE is now the only UK operator able to offer customers 4G speeds on Apple's iPhone 5.

Moreover, O2 and Vodafone are concerned that EE might try to further delay the auction in order to extend its advantage, and are seeking reassurance that it will not hinder the operation of Mitco – an organisation set up to ensure that 4G signals do not interfere with digital television.

The fear of further delay to the auction may in itself be enough to dissuade mobile operators from launching a legal challenge, Ovum analyst Matthew Howett told the BBC.

“Ofcom made quite a clever move by allowing EE to launch early, because it's now really set the wheels in motion, and will see the others pull their fingers out,” he said.

Shadow chancellor Ed Balls suggested yesterday that the £3-4 billion expected to come out of the auction should be used to build 100,000 new low-cost homes and provide a two-year stamp duty holiday for all first-time buyers.


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