Connected Research

Union policy research in the 21st century

Spectrum issues and the T-Orange JV

with 2 comments

The Financial Times reported this week that O2 and 3 have told the European Commission that it is the UK authorities that are best placed to review the T-Orange joint venture, while Vodafone has also publicly commented on its view that the UK authorities are keen to review the spectrum aspects of the merger, an issue to which O2 also points.

These pages have declared their view on these issues already – it should be investigated in the UK, as the joint venture affects only the UK market and there are thus strong subsidiarity-related reasons why the EU should choose not to get involved – but the most interesting part of the FT‘s story is the bit relating to spectrum allocations.

Last summer’s report by the Independent Spectrum Broker included a useful chart documenting existing spectrum allocations, which I have reproduced below:

Vodafone and O2, as the two earliest operators from the mid 1980s, have some frequencies at the 1800 MHz level but frequencies here are otherwise dominated by T-Mobile and Orange, which appeared on the scene in the early 1990s. Vodafone and O2 have the only spectrum awarded at the 900MHz level while frequencies at 2.1 Ghz are the ones allocated for 3G services, which is where 3 comes in – it has none of the lower frequencies allocated earlier.

The key to understanding spectrum issues is that lower frequencies (like 900 Mhz) lend themselves well to quick network roll out because they cover longer distances, and thus requires less infrastructure (base stations and masts), and because their signals penetrate buildings better than those at higher frequencies (like 1800 MHz), which require more infrastructure and which are better suited to providing capacity in denser populated, urban areas. The less good penetration of signals at higher frequencies is the reason why 3G services are, in principal, suitable for mobile services outdoors and are much less suited to fixed installations inside buildings.

Ensuring a more even allocation of frequencies was the aim of Kip Meek, the Independent Spectrum Broker, on the grounds that allowing operators to trade frequencies between them would allow them all to choose the combination of spectrum that best suited their needs and which, as a result, would improve services (and access speeds). By ending the legal challenges by operators over policy on 2.6GHz frequencies (best suited for so-called 4G services), it would allow Ofcom to catch up with European counterparts on allocation.

The dominance of the T-Orange JV at the 1800 MHz level, and thus its ability to dictate the terms of spectrum trading between the operators, is the reason why the argument has been raised that the JV should concede 1800 MHz spectrum. Without necessarily going too far down that road, it is easy to see why the JV would blow apart the work done by the Independent Spectrum Broker in reaching his conclusions on spectrum trading. It thus becomes easier to see why it is the UK authorities that need to investigate this proposed JV: these are issues that properly concern the UK, not the EU.

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Written by Calvin

08/01/2010 at 12:44 pm

2 Responses

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  1. Yes, your point is well made but you shouldn’t underestimate the chances that the EU will get involved in this. The recent telecoms regulatory package got through the EU hoops recently (and eventually) after a lot of opposition from the Commission when it became clear that many member states (including the UK) wanted to keep regulation at the national level. The JV could be just the opportunity that the Commission have been waiting for to flex their regulatory muscles. They could claim that as both France Telecom and DT are multistate European companies, it should be a matter for EU wide regulation rather than simply the UK. I know this is a bit thin but nevertheless…..

    Adrian Askew

    08/01/2010 at 1:04 pm

  2. Fair points, Adrian.

    T-Mobile and Orange want an EU-level investigation, on the grounds that this lets them point to ‘precedent’ elsewhere in the EU with one market dominant operator (which, I think, is a false argument given the origins of these larger operators amongst former monopolies).

    However, there is a bit of an interregnum in Brussels at the minute, with the InfoSoc commissariat becoming the Digital Agenda one; Neelie Kroes moving from Competition, where the JV would be investigated, to Digital Agenda; and prior to BEREC being established. I wonder consequently whether Brussels yet has the appetite for such a scrap.

    The timetable for all this is, however, unclear. The closest I can find is detailed in The Times (http://business.timesonline.co.uk/tol/business/industry_sectors/telecoms/article6939863.ece ) – but I don’t think any such formal notification of the JV has yet been lodged with the Commission, despite the letters which have been pinging their way to Brussels and the behind-closed-doors discussions which are no doubt taking place. The merger was formally agreed on 6 November – surely there has to come a time when the tactical advantages of hanging on before making any such formal notification begin to cast the whole process into disrepute?

    Calvin

    08/01/2010 at 2:13 pm


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