The rules mean that incumbent BT is barred from a spectrum auction that will be a key battleground for UK mobile operators.
Mobile operator Three issued strong criticism of Ofcom for not going far enough as the regulator proposed a 42 percent cap on the amount of mobile spectrum a single operator could hold.
Currently, Vodafone holds 29 percent of spectrum, Three holds 15 percent and O2 holds 14 percent.
Opening the draft plans for consultation, Ofcom said that it would set a cap at 255 MHz, this is the level of the combined BT and EE’s currently mobile spectrum holdings. The cap means that BT will be barred from competing in the auction at all.
The caps will determine the outcome of the upcoming 2017 auction of spectrum in the 2.3 and 3.4 GHz bands.
The regulator said that this would prevent a “worsening” of asymmetry in spectrum holdings, arguing that implementing a lower cap would be “disproportionate” but that no cap at all would damage competition.
However, for Three the cap does not go far enough. The operator accused Ofcom of “failing customers”, saying that it was “not willing to make the big decisions needed to deliver the best outcome for the UK.”
“The mobile industry is failing customers and Ofcom has showed it has no interest in addressing that.”
Three is attempting to set a new course after the European Commission’s decision in May to block Three owner Hutchinson Whampoa’s purchase of the Telefonica-owned network O2, on the basis that this would reduce choice and raise prices for UK mobile customers.
At an event in September, CEO Dave Dyson made clear that the outcome of this auction and other future auctions will determine whether the small operator will succeed or stagnate.
Three has not been alone in these demands. An open letter to Ofcom CEO Sharon White in October asking the regulator to set a 30 percent cap was co-signed by the CEOs of TalkTalk, CityFibre, Relish and the Federation of Communication Services.
Three believes that the 2014 auction may have involved strategic bidding, with EE and Vodafone holding but not using what Dyson claims would be enough spectrum to launch a fifth operator.
Prior to 2G liberalisation, spectrum in the UK was shared fairly evenly, but recent years have seen the advantage accrue to the larger operators at the expense of both Three and O2.