8/6/2019 3 .co.uk Spectrum Briefing

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Mobile broadband and spectrum.

Competition in the market

During the last spectrum auction in 2000 the then Government reserved a licence for a newentrant with the aim of stimulating competition and innovation in the mobile sector. By ensuringthat all five network operators held roughly the same amount of 3G (2100MHz) spectrum andrequiring that 3G services operate on this and no other spectrum, a level playing field wascreated. This has stimulated competition between operators resulting in increased 3G rollout,lower prices and innovation and investment in new mobile services.

In the past three years competition has seen the price of mobile broadband reduce from 50/GBto under 10/GB, 3G network coverage exceed the revised licence condition of 90% populationcoverage and the development and launch of new innovative mobile internet services.

However, in January this year, Ofcom lifted the restriction on the use of other spectrum for 3Gservices, thereby giving those networks who were gifted 2G spectrum in the 1980s and 1990s, asignificant market advantage.

Mobile internet

Over the past two years internet traffic on mobile networks has exploded, with Ofcom reporting a2,200% increase in data traffic on mobile networks in 2009 alone. Indeed, Morgan Stanley,Gartner and Ovum all predict that mobile internet access will outstrip fixed PC access during thelifetime of the current UK Parliament, with some predicting this will happen as early as 2013. It istherefore critical that European, UK Government and Regulatory policy foster a competitivemobile market that supports the development of the UKs mobile infrastructure.

Spectrum policy

Central to a competitive mobile market is spectrum. There is a need for additional spectrum tosupport the take up of mobile internet services. But in addition, next years UK spectrum auctionmust ensure the competition that existed prior to the decision to allow legacy 2G spectrum to beused for 3G , is re-established. There is a real risk that unless the auction addresses theadvantage that the older mobile networks gain from being permitted to use their legacyspectrum for mobile broadband, competition will be distorted and the consumer benefits thathave flowed from a competitive market will be lost.

Ofcom's current proposals set out the core principle that the UK must retain four wholesale

mobile operators. Against a background of consolidation in the UK and US this is a clear andstrong commitment from Ofcom and the Government that will stimulate investment in mobilebroadband and protect UK consumers.

Mobile networks can and will play a vital role in delivering universal broadband but this will bestbe achieved though spectrum allocation that preserves and enhances competition. As Ofcomconsult on the auction design, it will be critical that all stakeholder raise with the Ofcom theimportance of competition and of ensuring that all four networks have access to spectrum onsimilar terms.

If you have any questions on spectrum or mobile broadband, please contact:

Julie Minns, Head of Public Policy & Regulationm: 07782 329 329 e: julie.minns@three.co.uk