Friday, 27 April 2018

Orange: Overcharging for spectrum could lead to disastrous consequences

By Chris Kelly, Total Telecom
Monday 09 April 18

Orange warns Ofcom of the dangers of "artificially limiting" the availability of spectrum

Orange's VP for group spectrum, Steve Blythe, has warned of potentially disastrous consequences of over paying for 5G spectrum, following the conclusion of the UK's 5G spectrum auction last week. Blythe said that the UK regulator, Ofcom, had contributed to inflating the price of spectrum, by choosing the format it did for the auction…

Orange's VP for group spectrum, Steve Blythe, has warned of potentially disastrous consequences of over paying for 5G spectrum, following the conclusion of the UK's 5G spectrum auction last week.

Blythe said that the UK regulator, Ofcom, had contributed to inflating the price of spectrum, by choosing the format it did for the auction.

“The auction format Ofcom chose for this auction was unique in that they utilised a modified version of an ‘off the shelf’ type to take account of some of the UK market specifics and their own policy objectives - Ofcom is not adverse to taking this type of approach with auctions, they did the same with the last 4G auction," said Blythe.

"What we have seen from the results that have been published are that the prices paid are much higher than what we have seen in other countries. It is likely that the auction process itself had a large impact," he added.

Blythe said that by "artificially limiting" the supply of spectrum in the 5G auction, Ofcom risked negative consequences for the UK's mobile sector further down the line. 

"It can increase competition in the auction to a level well beyond that which would be expected as operators seek to acquire the spectrum they need to deliver a viable 5G experience, whilst trying to protect themselves against the uncertain risks of a subsequent auction for the remaining spectrum. This sequential approach coupled with the potential fragmented nature of the spectrum on offer in this UK award presents potential business risks. To fully understand the level of impact the auction format and rules had on the results will require further analysis, but the prices paid and the amounts of spectrum won by individual bidders does not appear to be an optimal result," he said.

Blythe said that Orange would continue to advocate for a change in the spectrum allocation process, in an attempt to safeguard the industry for the future.

"Orange has been promoting by itself, and through bodies like the GSMA, that spectrum prices need to be a reasonable otherwise there is an obvious knock on effect on operators’ investment. Operators also need access to large contiguous blocks of spectrum in order to deliver what customers expect from 5G technology. Whether there is an effect as a result of today’s outcome on other 5G auctions across Europe is yet to be seen," he said. 

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