Spectrum saga

With the entry into force, on December 30, 2010, of the Government's Directions to Ofcom and today's announcement by Ofcom of its variation of GSM (900 and 1800 MHz) licences to implement both the Directions and (at last) the GSM Amendment Directive, at least a part of the long-running saga of implementation of the UK's 'spectrum modernisation' programme has been completed.
This originated with Ofcom's much earlier attempts, and Lord Carter's subsequent Digital Britain initiative, to liberalise the GSM frequencies for 3G services and release (by public auction) new spectrum at both 2.6 GHz and 800 MHz, to support the expansion of mobile broadband services nationally.
Most recently these elements have been distilled into Government 'Directions', issued to Ofcom under the Wireless Telegraphy Act, requiring Ofcom to carry out this auction as soon as reasonably practicable (which may in fact not be until early 2012). These Directions have at long last come into force – on December 30, 2010.
The GSM Amendment Directive ('GSMA') meanwhile has had its own timetable, requiring Member States to "make….available" the 900 MHz band for UMTS (3G) as well as GSM systems and to bring into force the necessary laws and regulations for this purpose by May 9, 2010. (The 1800 MHz band was dealt with similarly in a separate 1800 MHz Decision). So on March 2, 2010, O2 applied to Ofcom for a variation to its licences to allow it to deploy UMTS in the 900 and 1800 bands, arguing that it was entitled to have the necessary variation as from May 9.
Ofcom refused O2's request, saying BIS had asked it not to take action before the next Government had been elected and able to consider the previously proposed Directions regarding the 900/1800 MHz and other spectrum (a response later described in O2's appeal by Mr. Justice Vos as "plainly an inadequate one"). O2 appealed this decision to the Competition Appeal Tribunal (CAT), supported by Vodafone, with Ofcom supported by Everything Everywhere and Hutchison 3G. O2 initially were seeking a ruling that the GSMA created a directly effective right for O2. However, during the hearing its Counsel conceded that it did not have such a right and so the Court was left to decide essentially whether the UK and thus Ofcom were obliged actually to remove any licence restrictions preventing the deployment of UMTS in the 900/1800MHz bands by the May 9 deadline.
In the appeal O2 argued with conviction that "make available" meant "capable of being made use of", but two of the CAT judges disagreed. Focussing particularly on the procedural requirements of Article 14 of the Authorisation Directive, they held that the only steps to be taken by Ofcom by May 9, 2010 were to ensure that any technical harmonisation measures were in place, so that subsequently the 900MHz band could be used for UMTS technology.
The third judge, Professor Pickering viewed things quite differently. Noting that Ofcom's original view (2009) was that it must liberalise the 900 MHz band in the hands of the licensees by the May 9 deadline, and its subsequent change of mind, he diametrically disagreed with the majority opinion that implementation was a two-stage process (i.e. first freeing the band and then subsequently authorising its use after any necessary public consultation). He found this 'not convincing' and decided that the appropriate interpretation was that all steps should be taken by May 9, 2010 both to remove the restrictions and allow existing holders of spectrum rights to use them for UMTS.
So the majority view, that making the bands available for UMTS systems required the two stages of technical harmonisation (although the UK apparently had nothing to do in that respect) and then the authorisation process, remained the decision of the Court, though now subject to appeal to the Court of Appeal, due for hearing (unless withdrawn) in July 2011.
The GSMA required the UK, as an EU Member State and when implementing the Directive, to examine whether the existing assignments of the 900 and 1800 MHz bands to the competing mobile operators were likely to distort competition in the mobile markets concerned (see below). No mention was made of this requirement in the Directions, though apparently when issuing them the Minister stated that he had considered the competitive situation as required by the GSMA and "the greater need for capacity on existing networks…..cancels out any potential advantage of sub-1 GHz spectrum".
It seems that subsequently (October 25, 2010), Ofcom advised the Government in a published statement that in fact it no longer considered there to be a risk that there would be a competitive distortion from liberalising 900 and 1800 MHz spectrum for 3G/UMTS use. Ofcom seem never to have formally consulted the industry before issuing these views. The very next day (October 26) the Minister issued a statement adopting this advice. So, clearly, the Government maintains that it has satisfied the Directive on this score, but doubts nonetheless remain regarding the lack of consultation: critically these were picked up by Everything Everywhere in their recent comments to Ofcom on the then proposed variation to 900 and 1800 MHz licences to comply with the GSMA.
The same statement by the Minister emphasised the further competition assessment required before the auction rules are formulated pursuant to the Directions, so any lingering doubts regarding a competitive imbalance may finally be resolved at that stage. Whether the outcome in preparing for and designing the auction will be sufficient to neutralise further objections remains to be seen, but given the strategic importance of the issues, the discretion exercisable by Ofcom in its assessments (for which the Directions do not provide a security blanket), and the difficulty of resolving all the different interests involved, it cannot be presumed that legal challenges are necessarily behind us. In some ways we seem no further forward than when Ofcom embarked on this journey in 2007/2008. Whatever happened to critical path analysis?

Happy New Year!
January 6, 2011