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Competition in the Mobile Phones Market – Ofcom Passes High Court Test

Auctioning off radio spectrum to mobile phone providers and others is a rich source of revenue for the public purse. However, as a High Court case showed, regulators also keep a weather eye on fostering market competition in the public interest.

With the roll-out of 5G mobile phones on the horizon, telecommunications industry regulator Ofcom proposed to dispose of new radio spectrum in the 2.3GHz and 3.4GHz bandwidths at auction. That represented about 29 per cent of the total mobile spectrum presently available and the auction was viewed as a major opportunity for mobile phone providers to expand their service offerings.

With a view to promoting healthy competition, Ofcom set rules for the auction that included an overall cap on the amount of new spectrum that any single operator could acquire. That meant that, after the auction, no one operator could possess more than 37 per cent of all mobile spectrum. The cap was objectionable to one provider that already held about 42 per cent of available spectrum.

The provider mounted a judicial review challenge to Ofcom’s decision on the basis that the cap limited its ability to expand and handed an unfair advantage to its competitors. It was submitted that Ofcom’s approach was far too rigid and that an unconstrained auction was the best means of ensuring an optimal competitive and market-driven outcome.

In rejecting those arguments, however, the Court found that Ofcom’s approach to setting the rules of the auction was comprehensive, coherent and logical. Following an extensive consultation exercise, the regulator had conducted detailed predictive analysis of how the mobile phone market would work in the future. It had succeeded in striking a delicate balance between protecting competition and consumers, on the one hand, and the interests of the provider on the other. Arguments put forward by a competitor that the rules of the auction were too generous to the provider were also rejected.

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