Equal share of spectrum unnecessary –Ofcom Analysis

Ofcom doesn’t consider that all the four national wholesalers should hold equal shares of spectrum or closed to the same. The reason is that spectrum is not the only way of adding capacity.

The national wholesalers can make choices about the mix between the various different approaches for providing capacity. A national wholesaler can choose whether to invest in spectrum and thereby reduce its network or technology costs of providing capacity or alternatively it could choose to reduce its costs of spectrum and rely to a greater extent on the other approaches to increasing capacity. At the same time Ofcom recognizes that a wholesaler with a very small share of spectrum may not be able to provide an effective constraint on rivals. This is because while there are a number of substitute’s available, spectrum is an important input to capacity. With a small share of spectrum the costs for expanding capacity to serve more consumers or meet increasing expectations of existing customers may be substantially higher than for their competitors. This could give a national wholesaler less incentive to want to win customers, weakening its impact on competition.

In providing capacity in the future the role of small cells is very important. They are most suitable for delivering capacity in relatively small areas of high demand. There is likely to remain a role for macro cells delivering capacity over wide areas to reach locations not in small cells. National wholesalers are therefore likely to want access to a mix of small and macro cells. A national wholesaler with a small market share may be able to deliver the same average data rates as its rivals, even though it has less capacity. However, to act as an effective constraint on rivals, a national wholesaler must have the capacity to increase its market share. A national wholesaler with a very small share of spectrum may not have this capability.

Ofcom also considers what spectrum bands are relevant when considering whether a national wholesaler is capable of being credible. For a national wholesaler to be credible, the spectrum needs to be capable of serving a reasonable range of user devices. If a national wholesaler is not able to provide services to a reasonable range of more sophisticated user devices, like tablets and smartphones, it is unlikely to be credible.

It is also recognized that national wholesalers have some influence over the availability of devices for particular spectrum. They also have some influence over the spectrum that is used by more sophisticated devices like smartphones and tablets.

Ofcom recognizes that when it considers the share of spectrum, the paired 800 MHz, 900 MHz, 1800 MHz, 2.1 GHz and 2.6 GHz bands are also taken into account. In Europe these bands are mainstream harmonized mobile bands and the regulator believes that in future there will be wide range of devices like HSPA or LTE, for these bands including sophisticated user devices like smartphones and tablets.

Though it has potential to be valuable for providing capacity, Ofcom do not consider that it can rely on other spectrum being available and used in a sufficiently large range of user devices for enabling the credibility of a national wholesaler. This is because there is greater uncertainty concerning either the availability or usefulness or both of those spectrums compared to the paired spectrum in the bands.

It is recognized by the regulator that the share of spectrum is to some extent an imperfect measure. However, in Ofcom’s view a national wholesaler’s share of spectrum is a relevant factor in assessing its capacity to be credible.

It is admitted that Ofcom finds it difficult to identify that the minimum share of spectrum a national wholesaler would need in order to be credible. Ofcom’s conclusion is that there is a material risk that a national wholesaler would not have enough capacity to be credible after the Auction if it has less than 10 – 15% of the total paired spectrum available after the Auction for the provision of mobile service.

The regulator considers that if the spectrum holding of a national wholesaler is less than 10 -15%, greater will be the risk for the national wholesaler to be capable of being credible.

Comments

One Response to “Equal share of spectrum unnecessary –Ofcom Analysis”

Trackbacks

Check out what others are saying about this post...
  1. wayne says:

    .

    hello….