Credibility and analysis of Ofcom’s concerns

It is also noted by Ofcom that in future operators may seek further consolidation, by merger or by co-operative joint venture, and any such consolidation would be considered by relevant competition authorities at the proper time. Ofcom’s intention is to avoid the effects of consolidation as a result of the Auction outcome.

By credible, Ofcom meant that a competitor exerts an effective constraint on its rivals with respect to factors like the provision of high quality services, competitive prices, choice and innovation and as such contributes to the overall competitiveness of the market.

Taking into consideration of the complex and multi-faceted nature of mobile services, technology, consumer demand and the characteristics of different spectrum holdings, Ofcom believes that no set of unique capabilities or spectrum portfolio would allow a national wholesaler to become a credible competitor.

Even if a national wholesaler is not in a strong position in some dimensions of service, or in delivering a particular service or to particular customers, it could become a credible competitor. A national wholesaler could be credible if it were able to provide good quality of service, like high data rates and latency, in most indoor locations even if it is not in a position to strongly compete for customers in the most difficult to serve locations.

Such differentiation between rivals is a feature of many competitive markets and it is not a cause for concern. It will add to the benefits of consumers because rivals will try to seek to exploit their advantages compared to competitors and resort to various ways to mitigate their disadvantages which may be creative or open up new possibilities for consumers.

While differentiation has some benefits, Ofcom considers that currently consumers are benefited from competition across a wide range of services and customers. The primary concern of the regulator is that the Auction may result in fewer than four national wholesalers who can be regarded as credible. . Over and above that there is a lesser anxiety that even though there are four credible national wholesalers, competition could be weaker due to the fact that one or more national wholesalers may hold lesser spectrum which would place them at a disadvantage in competing for some services and customers. For instance, a national wholesaler without sub-1 GHz spectrum may be at a disadvantage in serving customers who have a strong demand for deep indoor coverage.

The regulator considers that there are two types of advantage or disadvantage to individual national wholesalers arising from spectrum holdings that would affect the overall competitiveness of the market and interests of consumers.

  • Whether a national wholesaler has the capacity to become a credible competitor
  • Whether the national wholesaler (despite being credible) is disadvantaged in competing across some services/customers.

Although these two types of competition concern originate from a similar source, there is a difference in the degree of importance of each to competition and to consumers. In its analysis, Ofcom first considered the larger competition concern arising from the number of national wholesalers with sufficient spectrum to be considered as credible. Secondly Ofcom considered the lesser competition concern about competition for certain segments of services or customers.

With regard to the larger competition concern, Ofcom has developed a broad analytical framework, to assess the spectrum that would be required by a national wholesaler to be capable of becoming a credible national wholesaler in order to promote competition for mobile services in the market. Ofcom considers that a national wholesaler may need to achieve at least a minimum level of capability on certain service dimensions in order to be credible. Even if a national wholesaler is able to meet the minimum level of capability on a particular dimension, it may be at a relative disadvantage to other national wholesalers on that dimension. The regulator is also concerned that a national wholesaler which has disadvantages in respect of too many dimensions of service, and too few or insufficiently important strengths in other dimensions, would not be a credible competitor. Ofcom has considered all relevant factors in determining whether or not a particular national wholesaler is likely to become a credible competito

Comments are closed.