UK mobile operator O2 has publicly clashed with regulator Ofcom, accusing it of giving preferential treatment to rival Three in the rollout of 5G spectrum.
During the 4G era, Three UK was disadvantaged by holding less favourable spectrum compared with competitors, especially EE, which Ofcom controversially allowed to reuse existing 1800MHz assets, giving EE an early advantage.
Since then, Ofcom has attempted to rebalance spectrum holdings to create a fairer market. Three and O2 once proposed a merger to better compete with larger rivals EE and Vodafone, but regulators blocked the deal amid concerns that reducing the number of major operators would weaken competition.
Three now holds 140MHz of prime 5G spectrum, including a single contiguous 100MHz block, giving it a clear technical advantage. Ofcom itself notes that 5G performs best with large, contiguous blocks of spectrum; such allocations also lower equipment costs because operators can use a single antenna instead of several spaced across distant bands.
The regulator has proposed defragmenting the 3.4–3.8GHz band, but only 120MHz in that range is available for reassignment—insufficient to give any other operator a contiguous block larger than 80MHz.
To address this imbalance, Ofcom has proposed enabling spectrum trading among operators and adding assignment-stage constraints and negotiation phases during auctions:
“In order to facilitate defragmentation of the 3.4–3.8 GHz band, we are minded to impose a restriction on winners of less than 20MHz of 3.6–3.8 GHz spectrum to bidding only for the top or bottom of the 3.6–3.8 GHz band in the assignment stage of the auction.
In addition, we are also minded to include a negotiation phase, within the assignment stage of the auction, during which winners of 3.6–3.8 GHz spectrum would have the opportunity to agree the assignment of frequencies in the 3.6–3.8 GHz band between themselves.”
Under Ofcom’s preferred approach, any reallocation would require unanimous agreement among the winning bidders; a fallback option would allow partial agreements among a subset of winners if unanimity isn’t reached.
That ambitious proposal has drawn criticism from operators. O2 argues Ofcom is placing “far too much faith in the secondary market to address fragmentation,” warning there is a “high risk that trading amongst the MNOs will not resolve the situation.”
O2 also contends that Three has benefited disproportionately from previous policy decisions and accuses it of occupying a “kingmaker” position that could be used to extract windfall gains or anti-competitive rents by blocking rivals from acquiring contiguous spectrum:
“Unfortunately, Ofcom’s policies to date have favoured one operator, allowing it to establish a ‘kingmaker’ position, from which it can attempt to extract windfall gains from rivals in return for moving its spectrum, or otherwise expect anti-competitive rents from blocking rivals from acquiring larger contiguous blocks.”
Three has been openly promoting its spectrum advantage to consumers. Global standards bodies, including the ITU, indicate that delivering the full 5G experience benefits from around 100MHz of contiguous spectrum, enabling Three to claim it can offer “true 5G.” In June, Three CEO Dave Dyson stated that 5G is a transformational opportunity for the operator, and highlighted the company’s unique position.
Three UK announced plans to launch 5G in 25 UK cities—including London, Birmingham, Manchester, Leeds, Glasgow and Bristol—before the end of 2019, positioning itself as an early provider of next-generation mobile services despite broader regulatory and market tensions around spectrum allocation.
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