August 21, 2017 / 10:50 AM / a month ago

O2 – and Britain – are losers in 5G spectrum fight

The company logo for BT is seen on the BT Tower in London, Britain, January 24, 2017. REUTERS/Toby Melville

LONDON (Reuters Breakingviews) - A high-stakes legal fight is brewing in the esoteric world of mobile-spectrum licensing. Telefonica’s O2 has much to lose, as do British consumers waiting for ultra-fast 5G internet.

BT, the largest operator, and Three - part of Chinese billionaire Li Ka-shing’s CK Hutchison conglomerate and the fourth-largest network – are threatening legal action over planned auctions of mobile spectrum. Three wants tougher limits on how much 5G spectrum the biggest holders can buy while BT wants looser restrictions.

Regulator Ofcom’s rules prevent operators owning more than 37 percent of the mobile spectrum expected to be usable in 2020. But Three said in an Aug. 7 letter to Ofcom that the timing of auctions could allow BT to hold a 41 percent share until a final batch of spectrum is sold, probably by 2020 but maybe later, and that the cap would effectively become meaningless after 2020.

True, BT may breach the cap if an auction slated for 2019 is delayed. But a time-consuming legal challenge by Three could make that a self-fulfilling prophecy. And asking the regulator to set caps beyond 2020 is equally pointless since today’s market analysis will probably be out of date by then. BT’s challenge is no better, since Ofcom’s spectrum caps strike a good balance between the interests of consumers and operators. The real aim may, however, be to counterbalance Three’s objections.

The auctions have already been delayed because of CK Hutchison’s 2015 attempt to merge Three with Telefonica’s O2, which failed. Further delays are likely to benefit Three, which might win time to develop a network based on the 5G-compatible spectrum that it already holds.

The losers from a delay are equally obvious. First, spectrum-starved O2 would be barred from acquiring the immediately usable frequency it needs to meet demand for high-speed mobile data. Owner Telefonica will struggle to price an expected IPO of its UK unit as long as uncertainty over the issue persists.

And Britons may have to wait longer for superfast 5G mobile internet if legal challenges delay the auctions. A protracted court fight risks holding back Britain’s tech infrastructure. But short of a damaging public outcry, there’s no reason for either company to back off.

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