Vodafone wants 5G auction to be scrapped after Huawei move

One of the UK’s leading mobile operators has called on the government to cancel the forthcoming telecoms spectrum auction following the decision to phase out Huawei from the UK’s 5G market as companies look to claw back some of the cost of replacing equipment. 

Ofcom, the telecoms regulator, is due to conduct a competitive auction of new spectrum for 5G but the sale will not take place until November at the earliest because of the coronavirus pandemic.

The regulator has rejected a call by Vodafone, the UK’s third largest operator, to abandon the auction in favour of a “mandated award” whereby the spectrum — the radio frequencies allocated to operators for mobile connectivity — would be distributed to the country’s four mobile phone companies for a total reserve price of around £1.2bn.

Nick Jeffery, chief executive of Vodafone UK, told the Financial Times he now wanted the government to intervene.

“Return on investment in telecoms in the UK is amongst the lowest in the world,” he said. “With additional money being taken out of the mobile industry from [Monday’s] decision on Huawei, now is the time to focus on ensuring operators can still afford to invest in the network this country deserves.”

Analysts say it is hard to predict how much a spectrum auction might raise, particularly now the pandemic has knocked business confidence.

The government has said its new policy on limiting the role of Chinese company Huawei over concerns to the security of telecoms infrastructure is expected to add £2bn to the cost of a full 5G rollout.

A move to allocate spectrum rather than conduct a complex auction could not only reduce costs for the sector but also potentially speed up the rollout of 5G at a time when the government has warned that the ban on new equipment made by Huawei, from next year, could delay a wide deployment of the new wireless technology by up to three years.

A move to allocate the spectrum would also potentially help surmount a technical issue related to the fragmentation of the frequencies being sold that has been exacerbated by the Huawei ban.

Networks want Ofcom to “harmonise” the spectrum so that the bands being sold are in contiguous blocks but the regulator believes the companies can trade the frequencies between themselves after the auction. Operators say this is hard to do in practice. O2 has already threatened a legal challenge over the fragmented nature of the auction which, according to industry executives, will reduce the speed and capacity of 5G services.

The Huawei ban presents a new hurdle as the Chinese company’s equipment is much better at dealing with fragmented spectrum bands than that provided by Ericsson or Nokia, according to network engineers interviewed by the FT.

Telecoms companies have started to discuss the prospect of compensation with the government for the cost of replacing Huawei’s 5G equipment now that formal guidance from the government has been announced, although the seven-year timeframe for a phase out of Huawei from 5G has given the industry breathing room.

BT said the restrictions would cost it £500m but that is the same figure as complying with the 35 per cent cap on the use of Huawei equipment that was introduced in January.

Spectrum auctions have long been seen as the most efficient way of carving up the airwaves and valuing the finite resource. A move to allocate spectrum among the four large operators would bar potential new entrants to the UK telecoms market and probably raise less money than a traditional auction.

The UK government raised £22.5bn in 2000 selling spectrum in the 3G auction but the value of the airwaves has plummeted since then. Ofcom’s initial 5G auction, held last year, raised only £1.35bn.

Countries including Japan have moved to spectrum allocations to encourage networks to invest in faster rollout.

“Now is the time to consider a new way to manage these auctions,” said Mr Jeffrey. “There is little point in operators owning spectrum if we don’t have the money to use it — history teaches us that from the 3G auctions.”

Ofcom did not immediately comment on the proposal.

Source Article

Next Post

Brexit vote hits leave areas the hardest

Areas of the UK that voted to leave the EU have suffered the biggest economic hit since the 2016 referendum, according to new research that suggests Brexit is likely to further complicate efforts to level up underperforming regions. The research from the Centre for Competitive Advantage in the Global Economy […]