Previously owned by the Ministry of Defence, the UK Government has finally been able to free up 190MHz of high capacity spectrum in the 2.3GHz and 3.4GHz band for auction, for that fast 5G action in the UK:
- 1. The first band, 2.3 GHz, can be used by mobile companies as soon as it is released, to increase mobile broadband capacity for today’s mobile users.
- 2. The second band, 3.4 GHz, cannot be used by mobile devices available today, but is earmarked for 5G. This is the next generation of mobile technology, which also has the potential to pave the way for innovative new services in transport, healthcare and many other industries.
The UK’s communications regulator Ofcom commenced the country’s 5G spectrum auction on 20 March 2018 with five companies bidding for airwaves or spectrum: Airspan Spectrum Holdings Ltd; EE Limited; Hutchison 3G UK Limited; Telefonica UK Limited and Vodafone Limited.
What’s the hold up?
Auctioning should have begun last year, but Three and EE/BT both disagreed with the terms of the auction. However, the UK High Court dismissed both claims last December, and a subsequent appeal by Three was rejected back in February.
Our job is to release these airwaves quickly and efficiently, and we want to see them in use as soon as possible. We are glad the auction is now underway. This spectrum will help improve people’s experience of using mobile broadband today, and also help companies prepare for future 5G services.
Philip Marnick, Ofcom’s Spectrum Group Director
How the auction works
The auction will have two bidding stages:
Stage 1: Principal stage
The main one, called the principal stage, comes first and takes place over a number of rounds. In each round, prices go up with bids, and the bids determine how much spectrum each party acquires.
The principal stage begins with all the spectrum being made available at a reserve, or minimum, price. There is one reserve price for each 2.3 GHz portion, or lot, of spectrum; and another price for each 3.4 GHz lot. The reserve price for each 2.3 GHz lot is £10m, and there are four lots of spectrum (each of 10 MHz). The reserve for each 3.4 GHz lot is £1m and there are thirty lots, each of 5 MHz.
Bidders will bid for a number of lots in each band at the given price, which is set by Ofcom. If demand for the available lots is equal to, or larger than, the amount available, then the price for each frequency band will go up in the next round. Bidders will then be invited to bid at the new, higher, price – again, set by Ofcom.
The principal stage ends when there are no new bids in a round. At that point demand across all bidders in the auction will essentially have matched the available supply, and winning bidders will know how much spectrum they have won. The winning bidders will pay the price of their last bids.
Stage 2: Assignment stage
The assignment stage takes place over a single round and determines where the airwaves won by each bidder are located within the radio spectrum. Winning bidders from the principal stage bid to locate the spectrum they have won at particular frequencies within the band.
Unlike in the principal stage, bidders in the assignment stage will pay the price set by the highest losing bidder. This is known as the ‘second price’ rule, and is similar to how bidding works on the consumer auction platform eBay.
Spectrum auctions can take some weeks to complete and are dependent on the level of demand for the spectrum being made available. At the end of each day during the principal stage, Ofcom will publish:
- The prices for 2.3 and 3.4 GHz lots in the last round for that day.
- A measure of demand in each band, called ‘excess demand’, also in relation to that last round of the day.
Excess demand refers to the active demand for spectrum in each band, in excess of the available supply. When the auction is complete, Ofcom will publish full details of the spectrum secured by each bidder.