According to the mobile operator, the new proposal favours Three UK by allowing them to establish a “kingmaker” position that could enable them to obstruct rivals.
Under the defragmentation plan, Ofcom is proposing a restriction on winners of less than 20 MHz of 3.6-3.8GHz spectrum to ‘bidding only for the top or bottom of the 3.6-3.8 GHz band in the assignment stage of the auction.’ Additionally, the plan will also include a negotiation phase within the assignment stage of the auction, during which winners of 3.6-3.8GHz spectrum will have the opportunity to ‘agree the assignment of frequencies in the 3.6-3.8 GHz band between themselves.’
In response O2 says that Ofcom is putting “far too much faith in the secondary market to address fragmentation” adding that there is a “high risk that trading amongst the MNOs will not resolve the situation.”
“Unfortunately, Ofcom’s policies to date have favoured one operator, [Three UK], allowing it to establish a ‘kingmaker’ position, from which it can attempt to extract windfall gains from rivals in return for moving its spectrum, or otherwise expect anti-competitive rents from blocking rivals from acquiring larger contiguous blocks,” the company said.
Unsurprisingly Three says that it “supports Ofcom’s initiative to introduce a negotiation stage after the principal stage of the 2020 auction.” However, the second part of the plan that requires All 3.4-3.8GHz holders to reach a unanimous agreement is flawed, saying: “Two MNOs could deliberately fail to reach unanimous agreement, safe in the knowledge that they could guarantee being awarded adjacent 3.6 GHz spectrum and then trade their 3.4 GHz and 3.6 GHz spectrum after the auction.”
While EE’s BT said, “Ofcom’s proposals would enhance the prospects of achieving partial or complete defragmentation of the 3.4 - 3.8 GHz band, with very limited potential downsides, and we therefore support them.” Though it did caveat this by saying it is important” for Ofcom to include “the further option of exploring whether partial agreement between a subset (or subsets) of winners can be achieved.”
Ofcom plans on releasing a statement on this proposal later this year, with the 5G auction still due to take place in Spring 2020.
