Three Adds Unlimited Data, Warns Of 3G Crunch

Mobile carrier Three is now offering unlimited data to customers for a £3 supplement, but has warned that it could begin facing a 3G capacity squeeze in urban areas by the end of next year due to delays around spectrum auctions.

Three has extended its £15 pay-as-you-go offering, adding unlimited data to all its contracts, starting at £18 per month. However, at a press briefing in London on Tuesday Three chief executive David Dyson said his network is facing huge demand from new devices such as smartphones and tablets and warned this could exhaust capacity by the end of 2012 unless the company can buy more spectrum.

Delays

Spectrum auctions are scheduled for the middle of next year but Dyson said the timetable for the auctions is slipping due to pressure by rivals Everything Everywhere, O2 and Vodafone.

Those companies can reuse their 2G spectrum to ease 3G congestion, but Three doesn’t have that option, Dyson argued.

“There is a huge financial incentive for rival operators to delay the auction,” Dyson stated. “We are worried that the other three will attempt to squeeze us out of the market.”

Dyson’s remarks are the latest development in the complex negotiations around the future of mobile data in the UK.

Three is dependent on the ‘4G’ spectrum auctions – which will sell off spectrum in the 800MHz and 2.6GHz bandwidths – to maintain its position in the market, and is therefore pushing to ensure the auctions happen as quickly as possible.

800MHz spectrum, freed up by the switch-off of analogue television, is considered particularly valuable by mobile operators because it can cover large areas and penetrate buildings.

Competition

Three’s rivals, however, already have access to both 2G and 3G spectrum and face paying more for 2G spectrum once the 4G auctions are complete. It is therefore in their interest for the 4G auctions to be delayed, according to some industry observers.

In order to ensure that Three stays in the market Ofcom has said it will impose a cap on the spectrum companies can buy at the 4G auctions. This has become a point of contention for Three’s rivals – further delaying the preparations for the auction.

Also looming in the wings is next year’s Olympic Games, expected to create a spike in mobile broadband demand.

Dyson noted that Ofcom had planned to present its auction plans in September or October but that this has now slipped to the end of this year or the beginning of 2012.

However, he said he remained confident that the auction would happen.

“I believe the auction will go ahead next year and therefore congestion will not happen… We have been assured by the government and Ofcom that distortions will be rebalanced when the auction happens,” he said, according to the BBC.

Earlier this month Ofcom told eWeek Europe UK that the auctions were still on target to occur in the first half of 2012.

“Ofcom has been very explicit in its aim to begin the 4G auction as soon as is practicable and this remains our objective,” said an Ofcom spokesperson. “However, this is a complex area, involving a large number of technical and competition issues that we need to consider and resolve before finalising proposals. For example, a very high proportion of households in the UK rely on Digital Terrestrial TV – Freeview – which needs to be relocated before 4G can be rolled out. This kind of complex problem needs to be properly addressed before we award the spectrum.”

The auction has been anxiously awaited for more than four years, and is intended to provide spectrum for operators to deliver advanced “4G” mobile services such as LTE (long term evolution). The auction process became tangled with moves to allow re-farming of 2G spectrum, opening it up to allow those who hold it to offer more modern mobile services.

Peter Judge contributed to this report.