Auction outcomes might raise competition concerns

As the first step, Ofcom is considering what outcomes from the Auction is going to be detrimental to competition.

Ofcom’s larger competition concern is that if there are fewer than four credible national wholesalers, the intensity of competition in mobile service is likely to be lower. Hence Ofcom focus on what distributions of spectrum could result in fewer than four national wholesalers capable of being credible. This requires identifying a number of dimensions to the capability of a national wholesaler such as the spectrum hold by the wholesalers, how they relate to one another, including the trade-offs between them. Then Ofcom will conclude on what may be necessary for a national wholesaler to be credible and what may contribute to a national wholesaler having sufficient capability to be credible. To arrive at this judgement, Ofcom has to consider the types and quantities of spectrum that a wholesaler need to hold in order to deliver different quality dimensions. The regulator has also to consider whether a national wholesaler has alternative approaches or mitigation techniques to deliver those quality dimensions.

Using this assessment, Ofcom will assess each of the existing national wholesalers whether they are likely to be capable of being credible even if they did not acquire any additional spectrum in the Auction. The fact that what spectrum a new entrant might require may also be considered by the regulator. Where Ofcom conclude that there is concern that each might not be credible, then the regulator will consider what additional spectrum might make them credible. This analysis also helps the regulator to identify the sources of risk for its lesser competition concern, i.e. that competition is weaker because one or more credible national wholesalers may be at a disadvantage in competing for certain service and customer segments.

Dimensions of capability of a national wholesaler
In accordance with the responses to March 2011 Consultation, Ofcom has identified four dimensions of quality of a mobile service to consumers and dimensions of capability to national wholesalers which are affected by spectrum holdings, that could be important to the credibility of a national wholesaler in the future. These are: 1) The capacity of the national wholesaler to provide services and the average data rates it can provide (Whether delivered by UMTS or LTE) 2) the quality of coverage that it can provide 3) whether it can provide the highest peak data rates (using large bandwidths of spectrum with LTE) and 4) whether it can offer services based of LTE technology so that it can gain from other LTE advantages like better latency and the ability to better prioritise traffic.

Taking account of the responses to the January 2012 Consultation relating to these four dimensions, Ofcom has assessed how likely it is that having these capabilities could be important to competition and to consumers. For each of the four dimensions, Ofcom considered the evidence available to it about the extent to which particular spectrum holdings are necessary to have a certain capability or the availability of alternative ways to achieve such capability which are not dependent on a certain type or quantity of spectrum.

The regulator has also considered whether any technical advantages related to holding particular spectrum portfolios are likely to translate into a significant competitive advantage, taking into account the extent to which consumers might value the service characteristics that the capability would allow the national wholesaler to offer.

Though these dimensions of capability were considered separately by Ofcom, it recognized the fact that there can be important interactions between them. When particular portfolios are assessed Ofcom considered the interactions between the dimensions especially between1) capacity and average data rates and 2) quality of coverage.

With each dimension of capability there can also be a time dimension involved because the dimension of capacity may change over time and the national wholesaler’s ability to provide the capability with different spectrum may also change with time.

Minimum components that a national wholesaler should have, if it is to be considered as credible, are mentioned in these four dimensions. But possession of these bare minimum requirements is not sufficient to make a wholesaler credible. To be credible, a national wholesaler should have more capability in at least one dimension.

A national wholesaler must have the minimum four necessary components like capacity and average data rates, quality coverage, other LTE advantages and highest peak data rates to achieve credibility. But this may not be sufficient to make a national wholesaler credible. It should have more capability than this necessary minimum in at least one of the four dimensions.

Ofcom has the view that there is potentially more than one way to achieve credibility. For example one national wholesaler may have the necessary components together with much more than the necessary minimum capability in some dimensions, while another may have the necessary requirements and much more in different dimensions. Alternatively, sufficient overall capability might be achieved through having a little more than the minimum necessary in each of the dimensions. When Ofcom assess this for particular portfolios, it also considers the interactions between the dimensions of capacity.

Another way of seeing this is in terms of risk. If a national wholesaler is not having the necessary minimum capability in any of the four dimensions, it is unlikely to become credible. However, it is not straightforward to specify these necessary minimum requirements with precision. In the light of the available evidence, Ofcom make a judgment in the form of a range rather than a single threshold figure. Considering the element of uncertainty associated with the Judgement, Ofcom consider that if a national wholesaler’s capabilities are towards the weak end of the range that Ofcom identify for the necessary minimum in any of the dimensions, there is a risk that it would not be capable of being credible, and the more dimensions to which this applies, the greater the risk.

Not only that, even if a national wholesaler has the necessary minimum requirements in all dimensions, this may not be sufficient capability to be credible. Having only the necessary minimum capabilities in all dimensions but no strength in capability in any of the dimensions may mean that a national wholesaler is still at risk of not being capable of being credible. This is because a national wholesaler with minimum capability in all dimensions may well struggle to compete against competitors that have either a materially greater capability in one or more key dimensions. Consequently the more capability that a national wholesaler has, the lower will be risk of not capable of being credible.

Ofcom’s credibility involves a relative assessment. The rivals are to be able to compete with one another and for that there must be strong competition. According to Ofcom even if a national wholesaler is disadvantaged in some dimensions relative to its rivals it may be considered as credible. In this case the disadvantages should not be too large or are compensated by sufficient strengths in other quality dimensions. A national wholesaler may even be credible even if it is at a disadvantage when compared with its rivals, provided these disadvantages are not glaring. Ofcom doesn’t want all companies to be equally strong for them to be credible.


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  1. miguel says:


    thank you!…

  2. Jay says:


    tnx for info!!…