More and more people are choosing to access the internet via their phones, complementing and replacing PC use. This shift is so significant that mobile internet is expected to be the most common way of accessing the internet by 2015.
Mobile spectrum, the band of radio frequencies set aside by the Government for mobile communications, is the fuel that powers our network. This year Ofcom and the Government will make decisions about the UK’s radio spectrum that will have lasting effects on consumers. There is limited amount of spectrum available so the decisions made about how it is allocated are crucial.
Right now, there is a choice to be made about how that spectrum, a public asset, is to be distributed. It can be done in a way that will promote competition which will drive network expansion and coverage, and lower prices. Or in a way that will further advantage the bigger networks who already hold the majority of spectrum, which in turn will limit competition, lead to higher prices and could trigger further consolidation in a market that has already gone from five to four players.
Today, mobile broadband has become mainstream and smartphones dominate handset sales. The last spectrum auction in 2000 ensured 3G spectrum was allocated in a competitive way across five operators. However in January 2011 Ofcom announced that operators could use other spectrum that they were given for free in the 1980s and 1990s to run 3G services. This has created massive market distortion because unlike the other operators, Three does not have any gifted spectrum.
Three, as a pure 3G operator, is widely recognised as having driven 3G coverage, innovation and lower prices in the UK. Three shattered the high prices set by the larger networks when it launched its mobile broadband offering in 2007. Three embraces internet communication services like Skype, while other mobile networks block them. In December last year, in the face of ever-growing limitations and smaller data allowances from other operators, Three opened up true all-you-can-eat data on its core tariff, The One Plan to customers new and old. Three has since followed this up by offering all-you-can-eat data on Pay As You Go.
All this was made possible because a competitive allocation of 3G spectrum was built into the structure of the 2000 auction. With around 25% of the available 3G spectrum and a huge investment in its network, Three was able to compete and establish itself as the market leader in mobile broadband, carrying as much as half of the total UK mobile data traffic. Following the re-allocation of spectrum in January, Three has less than 10% of the spectrum available for 3G use.
The Government and Ofcom now have an opportunity to preserve the competition that has driven mobile data and to expand 3G coverage further by structuring the planned auction of new spectrum in 2012 so that it rebalances the market.
If Ofcom fails to address the spectrum imbalance created in January 2010, then there is a very real risk of higher prices, stalled rollout of new technology and market stagnation for years to come.
