Mobile operators face spectrum auction

Telecoms regulator Ofcom has said it wants to lift restrictions on the use of spectrum so third-generation (3G) mobile services such as the internet can be offered on second-generation (2G) networks - which may involve taking radio spectrum from mobile operators Vodafone and Spanish-owned O2 and auctioning it off to other users.

The proposals - which are currently under consultation - are looking to improve rural and indoor coverage, allow faster mobile broadband access, and boost competition to lower prices.

"We can't see it, touch it or hear it, but radio spectrum is central to our lives and we are using mobile devices more than ever before," said Ofcom chief executive Ed Richards.

Currently, as part of the European GSM Directive, the 2G networks are only used for voice calls, text messaging and low-speed internet access. Ofcom, noting that the European Commission was also calling for 2G networks to be freed up for a wider range of uses, wants to start with the 900 megahertz frequency band. This is currently only used by Vodafone and Telefonica-owned O2.

The regulator said in a statement that liberalising the 2G spectrum could be worth 6 billion to the UK. Most of those benefits are likely to come from the expanded use of the 900 MHz band, Ofcom said.

This band operates on a lower frequency than its 2G rival 1800 MHz band, which makes it better for providing 3G-type services in rural areas because it needs fewer base stations and masts as the signal travels further. The 1800 MHz band is also used by T-Mobile and Orange.

Ofcom estimated that a high quality mobile network operating over 900 MHz could cover 99 per cent of the population using around 10,000 fewer sites per operator.

"For these reasons, Ofcom is today proposing that some spectrum currently used by Vodafone and O2 for 2G services should be released for use by others in the future," the regulator said.

Ofcom is only proposing that Vodafone and O2 hand over enough 900 MHz spectrum to allow three additional operators to access the band. They should retain "most" of the spectrum for their own services, it said.

An auction of this spectrum could be held in 2009 with the winners potentially able to use it from 2010, it added.

Ofcom is also proposing to remove technology-specific restrictions on the 1800 MHz band and to make licenses tradable, so holders can more easily transfer them to another company. These proposals could come into play as early as next year.

"Our proposals are designed to make more spectrum available for high-speed mobile broadband services across the whole of the UK and to ensure that the UK mobile market continues to be one of the most competitive and innovative in the world," said Richards.