Call for easier consolidation as Ofcom investigates UK mobile market shake-up

As the UK government embarks on plans to accelerate the roll-out of 4G and 5G networks across the UK, the country’s communications regulator Ofcom has launched a discussion document in which it sets out initial thinking on future demand for mobile services and how mobile networks may need to evolve to meet that demand.

Framing the publication of the document is the rapid growth in mobile data traffic in the UK, which Ofcom calculates has grown by an average of 40% year on year in recent years and with much more growth expected that growth to continue. The organisation conceded that calculating the likely rate of growth would be difficult, particularly beyond 2030.

Yet despite not being able to put a precise figure on traffic levels, Ofcom warned that mobile networks would need to evolve to meet future demand and deliver the quality of experience needed by consumers and businesses. The regulator proposed a number of ways in which they might do this, including more extensive deployment of existing spectrum holdings and planned future spectrum for mobile (for example, in the millimetre wave (mmWave) bands, using technology upgrades to increase the efficiency of the spectrum they use, and through network densification by using small cells to leverage the capacity offered by the large bandwidths available from mmWave spectrum. Ofcom will consult shortly on its approach to making mmWave spectrum available.

The regulator has also published a discussion paper setting out the future approach to mobile markets. It stressed that it was not making any proposals at this stage, but instead was seeking the views of stakeholders and others on the right way forward. We hope to encourage longer-term thinking about how public mobile networks in the UK may adapt. It said it would take stakeholder inputs into account as it develops its future strategy for mobile spectrum.

Fundamentally, Ofcom accepted that people expect to access good quality mobile services wherever they live, work and travel. It believes the mobile market has served the UK well, driven largely by competition between four national mobile network operators (MNOs), and expects that growth to continue, with more demand for data-hungry services such as streaming and video calls.

While Ofcom stressed that MNOs would continue to play a significant role in this growth, it also expects to see an increased role for other companies in providing mobile networks and selling mobile services. Given the changes taking place, it said it was considering whether and how it might adapt its regulatory approach.

The regulator emphasised that it would take steps to clarify its future regulatory approach to support investment and also proposed to set out more clearly how it considered investment when making future policy decisions. It noted that while it currently has no plans to introduce any new consumer pricing rules, if new problems that required further intervention emerged, it would be ready to act.

Ofcom also clarified its position on mobile consolidation, remarking that its stance on a potential merger would be informed by the specific circumstances rather than just the number of competitors. Responding to Ofcom’s plans, leading telco Three said consolidation in the industry could change a current situation where the UK did not have the quality of mobile infrastructure it deserves as investment was spread too thinly across too many players, meaning networks were below par by international standards.

Making its case, Three pointed out that seven of the top 10 European countries in Connect 2020 testing of network quality were three-player markets. Two of the four-player markets on the list (Sweden and Denmark) featured only three mobile networks due to network sharing agreements. Comparatively, the UK ranked 18th out of 28 European countries (Connect 2020) and 29th of 37 European countries (Tutela 2021) in terms of mobile network quality.

“At Three, we are committed to building a big network for our customers. More than 300 locations now have 5G live, covering 32% of the population, and we are committed to rolling out thousands more over the next few years. But we could do so much more if the environment was better geared towards investment,” said Three UK CEO Robert Finnegan.

“Moving from four to three mobile players in the UK would mean better, smarter investment in the networks, which would, in turn, improve the quality and scale of connectivity in Britain and would unleash more competition. Ultimately, this would be better for customers and [businesses] who would benefit from more choice and better deals,” he added.

“We welcome Ofcom’s clarification that it has no fixed position on mobile consolidation and its recognition that what matters is the effectiveness of competition rather than just the number of competitors.”

Ian West, head of TMT KPMG UK, said: “The future of work depends on good quality connectivity and devices that rely on 5G technology will only reach their full potential – and deliver the most value – if they can operate at high speeds. Therefore, it is imperative for the UK to have world-leading networks to stay competitive.

“Ofcom’s new stance on mobile market consolidation is welcome. It will hopefully trigger a new wave of investment and deals to spur the evolution of 5G in the UK so that our businesses can get the most out of innovative new technologies.”