‘Other three will attempt to squeeze us out of the market’, says company CEO
Mobile service provider Three has said that the ‘already slipping’ timetable of spectrum auctions means the company may run out of capacity in urban areas by the end of next year.
The company has pleaded the government to ensure that the auctions take place on time, saying that it fears competitors may delay the process to exploit’s Three’s vulnerability.
"There is a huge financial incentive for rival operators to delay the auction. We are worried that the other three will attempt to squeeze us out of the market," said Three chief executive David Dyson.
The 4G auctions will sell off spectrum in the 800MHz and 2.6GHz bandwidths.
Three currently has the poorest coverage of all the operators, and the growing demand for data has been putting the squeeze on Three.
Dyson added that capacity in large urban areas such as London would begin to run out by the end of next year, but he added that such a thing may not happen.
"I believe the auction will go ahead next year and therefore congestion will not happen," he said.
"We have been assured by the government and Ofcom that distortions will be rebalanced when the auction happens," he said.
Dyson added that the timetable for the auction process was already slipping.
"Ofcom originally planed to come back to industry with its plans in September or October but that is now likely to be the end of the year or the beginning of the next," he said.
"It is a hugely ambitious timetable, trying to do in 18 months what took three years for 3G, but most are optimistic it can still be met," he said.
The rapid growth of phones such as the iPhone and increasing requirement for data means that mobile carriers need more bandwidth.
The BBC reported that auctions to free up space for next generation mobile services are earmarked for mid-2012. Ofcom is due to re-evaluate the fees operators pay for 2G spectrum once the auction is complete, said the report.
Ofcom’s 4G auction is expected to start in the first quarter of 2012. The auction will be carried out in five parts and is expected to be the largest ever, equal to 75% of the mobile spectrum in use today. The 3G auction had raised a record £22.5bn for the Treasury in 2000.
Ofcom chief executive Ed Richards has said the auction is not only critical to the future of the UK mobile telecommunications market but it is also of significant importance to the wider economy.
Richards said, "It will support a wide range of data services that are fast becoming essential features of the modern world."
The auction will be for two spectrum bands – 800 MHz and 2.6 GHz. The lower frequency 800 MHz band is part of the digital dividend, which is being freed-up as the UK switches from analogue to digital TV. This spectrum is ideal for widespread mobile coverage. The 2.6 GHz band is at a higher frequency, and is ideal for delivering the capacity needed to deliver higher speeds, said Ofcom.
To address fears of smaller companies, Ofcom has said that there would be a cap on the amount of new bandwidth companies could win at the auction.
Ofcom also said that the successful bid must agree to extend their coverage to 95% of the UK population so that rural areas are not left out of the benefits.
However, mobile operators do not seem to be excited about the auction. There are concerns about use of the bandwidth, handling the enormous data traffic and potential misuse.
BelAir Networks CTO Stephen Rayment said, "Ofcom’s plans to auction the new spectrum is great news but this will not be the panacea for addressing the problems of data capacity faced by mobile operators. The £22bn raised from auctioning of the 3G licences was largely a speculative move as operators weren’t completely sure how the spectrum would be used. It took nearly seven years and the launch of devices like the iPhone before demand for mobile data really started to take shape."
"Now, the vast surges in data consumption are wreaking havoc across 3G networks, particularly in areas of high user concentration. In fact, mobile data traffic is already on track to exceed the capacity that will be available in forthcoming LTE and 4G networks. Consequently, buying new spectrum is no longer a speculative move for mobile operators it’s an absolute necessity," Rayment added.
The necessity for mobile operators is to understand how to cope up with the ever increasing demand for mobile data said Rayment.
Rayment added: "The real elephant in the room is how operators ensure their networks can continue to cope with the increasing appetite for mobile data. Whilst the upgrade path from 2G to 3G consisted primarily of swapping base stations from their tower and rooftop mounting locations, this macro-cellular approach will barely touch the sides when it comes to data capacity. Operators know that smaller cells are the only sure fire way of deploying future networks capable of delivering high quality mobile broadband. The problem then is finding ways to mount, power and backhaul the additional base stations required for small cell architectures."
The UK was one of the first countries to auction off 3G spectrum in 2000. However, it has since fallen behind other countries such as the US, Germany and Japan, where 4G is already in use.
Recently, research firm ABI Research said that though provisioning 4G services and spectrum re-farming will come as a welcome boost to the wireless industry, 4G spectrum will not be allocated in the same generous manner in which 3G was.
The research firm said that operators across the world are starting to move out of 4G trials and switching to commercial services.
It said that while the 4G spectrum allocation will be selective, the re-farming of spectrum and its re-allocation from alternative applications such as broadcast TV and military communications will be necessary.