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Badly structured spectrum auction could affect mobile competition
Auctioning off Britain’s radio frequency spectrum could severely damage competition in the UK mobile phone market, the Three network has told MPs.
During the first session of the Culture, Media and Sport Committee’s inquiry into Spectrum held this week Kevin Russell, chief executive of Three, told the cross party parliamentary group that if the auction was not structured properly it could see some providers, such as Three, drop out of the market. Telecoms watchdog Ofcom is in the process of drawing up plans to sell off the spectrum which will be critical for mobile providers to offer fourth-generation (4G) services.
Mr Russell, who is due to leave Three in July, said: “This decision on spectrum fundamentally sets up the competitive structure for the UK mobile market for the next 10 years.” Mr Russell argued that without access to spectrum Three would not be able “to grow as quickly as we need to.” He said the impact of the Orange and T-Mobile merging to create Everything Everywhere had “yet to be felt” but the move meant “there will be a degree of competitive tension that comes out of the marketplace”. He warned the MPs: “There is fragility to the competitive dynamic of the UK marketplace.”
Mr Russell said Three was also angry rivals O2 and Vodafone had been able to use “re-farmed” spectrum for 3G services from the start of this year without having to pay a higher fee. He said: “That, to Three, does not seem fair.” Everything Everywhere’s deputy chief executive, Richard Moat, who was also giving evidence at the committee meeting, agreed that O2 and Vodafone’s “significant advantage” was unfair to other operators.
However during the session Mr Moat was also told that any profit Everything Everywhere made from selling excess spectrum should be used to facilitate the roll-out of broadband to rural areas. Everything Everywhere was required by the Office of Fair Trading to dispose of the spectrum when it formed from the merger of Orange and T-Mobile last year. On Monday (20 June) Ofcom announced that telecoms companies could trade radio spectrum for the first time.
However, MPs have said it is unfair that Everything Everywhere, which counts the French and German governments among its shareholders, should receive a dividend for spectrum originally gifted to it by the UK government in the 1980s. Tom Watson, a Labour MP and member of the Culture, Media and Sport Select Committee, said: “Do you think it is right that the government should give away a public asset to a private company that it then makes a surplus on? The British taxpayer is not getting any of the money but the French and German governments will.”