UK spectrum auction is ‘illegal’ and will cost Treasury £1bn, says O2
O2, Telefonica’s UK mobile network operator, has rejected Ofcom’s proposed floor allocations of spectrum saying they are illegal under EU regulations and will cost the Treasury £1bn in the upcoming frequency auction.
The mobile carrier said the argument that it and Vodafone already had enough sub-1GHz spectrum was based on the “mistaken belief” that 800MHz and 900MHz bands were directly comparable. “They are not,” it said in a statement.
“We believe that the proposed spectrum floors are a state aid and are therefore illegal under EU law. The spectrum floors would distort the auction process, allowing all bidders, except Vodafone and O2, to potentially acquire spectrum at discounted prices. Ofcom’s own figures suggest this effect could cost taxpayers £1bn,” it said.
Ministers have said the raising money is not the primary aim of the auction. However the government was delighted to receive more than £24bn from its auction of 3G licences in 2000.
Ofcom is auctioning spectrum in the 800MHz and 2.6GHz bands, the frequencies needed for so-called 4G mobile services such as LTE (Long Term Evolution) which potentially provides 100Mbps download speeds, roughly 10 times the average speed present fixed broadband users enjoy today.
O2 welcomed Ofcom’s proposal to use a “combinatorial clock auction” structure. This would prevent bidders from acquiring spectrum simply to prevent someone else from getting it.
O2 said it also supported the proposed spectrum caps. These would safeguard consumer interest and stop any one bidder from owning most of the spectrum.