O2: 4G Auction Illegal Under EU Law

O2 has said Ofcom’s current plans to auction off the nation’s 4G spectrum are illegal under EU law.

Ofcom recently announced its plans to sell off the UK’s 4G spectrum in an auction next year. However, it seems one of the major players in the mobile phone industry is not happy with the way Ofcom plans to execute the auction. O2 has said that the watchdog’s rules constitute state aid for its competitors.

ZDNet reports that Ofcom’s proposed rules for the auction are intended to promote competition and ensure Everything Everywhere, O2, Vodafone and 3 each end up with enough spectrum to be able to wholesale connectivity to smaller operators, like Tesco Mobile. However, O2 says that this method distorts the auction process because it allows other bidders to acquire 4G spectrum at cut prices.

In a 101-page response to Ofcom’s proposed rules, the network operator argues that Ofcom’s insistence that at least four separate operators end up with spectrum under 1GHz range means those that have already paid for 900Mhz licences (Vodafone and O2) will be at a disadvantage when the 800Mhz spectrum goes up for grabs.

An O2 spokesperson told ZDNet that although O2 would be allowed to bid for up to 2x10MHz in the 800MHz band, the remaining two bidders that are not O2 or Vodafone would be guaranteed one of five minimum portfolios of 800MHz spectrum, potentially at the reserve price.

"Spectrum floors distort the prices paid by different classes of bidder - those with 900MHz versus those without 900MHz," an O2 spokesperson told PC Pro. "The European Courts have determined that using different rules and pricing mechanisms for different classes of bidders in a spectrum auction would constitute an unlawful aid under the EU Treaty."

O2 is just one of the companies that has issue a response to Ofcom’s plans. To read more on its objections, and the 50 or so other responses, head on over to Ofcom’s website.