LONDON (Reuters) - Industry regulator Ofcom has given the go-ahead for Britain's biggest mobile operator Everything Everywhere (EE) to use its existing airwaves to provide next generation 4G services while rivals have to wait, saying the benefits to consumers outweighed any risk of unfair competition.
The operator, a joint venture between France Telecom's FTE.PA Orange and Deutsche Telekom's (DTEGn.DE) T-Mobile, said in February it wanted to start rolling out the first 4G services in Britain by the end of the year.
Rivals such as Vodafone (VOD.L), however, protested that EE had an unfair advantage because only EE's allocation of the 1800 MHz radio frequency can be reconfigured to handle 4G while they would have to wait and buy new licenses in the next auction of frequencies.
Ofcom, which said in March it was minded to approve EE's application, said its decision had been swayed by the forthcoming auction, which is set to begin later this year after prolonged wrangling between operators over the terms.
Britain has fallen behind the United States, Asia and parts of Scandinavia in developing 4G networks that offer much higher connection speeds for services such as video.
"Everything Everywhere 1800 MHz licenses would deliver significant benefits to consumers, and ... there is no material risk that those benefits will be outweighed by a distortion of competition," Ofcom said on Tuesday.
The regulator said EE could start offering 4G services from September 11, although the timing was up to the company.
It had already set a precedent for allowing operators to re-use airwaves for new services in 2011 by ruling that 2G spectrum could be used for 3G services.
Analysts at Espirito Santo Investment Bank said it was good news for EE, giving it a temporary commercial advantage as it may be able to market 4G branded services ahead of the other UK mobile operators.
Vodafone said it was "frankly shocked" by the decision.
"The regulator has shown a careless disregard for the best interests of consumers, businesses and the wider economy through its refusal to properly regard the competitive distortion created by allowing one operator to run services before the ground has been laid for a fully competitive 4G market," a spokesman said.
He said the timing of the decision was particularly bizarre given that EE was according to a newspaper report in talks to sell some of its spectrum to Hutchison Whampoa's 0013.HK Three, Britain's fourth operator behind EE, Telefonica's (TEF.MC) O2 and Vodafone. link.reuters.com/gan22t
"This means the balance in the auction will fundamentally change," he said.
"The regulator has spent several years refusing to carry out a fair and open auction. Now its decision today has been granted the two most vociferous complainants during that entire process a massive incentive to further delay it."
Three agreed that Ofcom's decision could make the market less competitive.
"Liberalization of 2G spectrum to date has distorted the competitive landscape in the UK, which ultimately harms consumers," the company said.
"Further liberalization without addressing competition issues could make that distortion worse."
Editing by Greg Mahlich