Digital Britain Interim review - more questions than answers?

The UK's Department of Culture, Media and Sport today published the interim Digital Britain report. While it is a little light on detail, here are my hurried initial thoughts. In reality this interim document poses more questions than it answers.

With particular relevance to mobile broadband were the following two "Actions":

Action 6 - We are specifying a Wireless Radio Spectrum Modernisation Programme consisting of five elements:

• Resolving the future of existing 2G radio spectrum through a structured framework, allowing existing operators to re-align their existing holdings, re-use the spectrum and start the move to next generation mobile services. It’s good to see someone expressly addressing this issue as it has been hanging over the heads of the mobile industry for a while. Without certainty over what will happen to existing 900MHz and 1800MHz spectrum it is impossible for MNOs to plan for further bandwidth requirements, most notably with reference to 2.6GHz frequency auctions. MNOs have been protesting about this for years and their appeal caused the deferral of last year’s 2.6GHz auction.

• Making available more radio spectrum suitable for next generation mobile services. Specifically they’re talking about 2.6GHz spectrum and some of the digital dividend. Were we not expecting this already? All the most recent proposals over what to do with this spectrum has included some assumption that mobile broadband will be a major recipient. The digital dividend review in December 2007 stated that Ofcom would adopt a market-led approach although the implication is that broadband access will take a substantial chunk of that spectrum.

• Greater investment certainty for existing 3G operators: The Government wishes to encourage the maximum commercially-sensible investment in network capacity and coverage…(E)xisting time-limited licences could be made indefinite and subject instead to AIP beyond the end of the current term. Hooray. No-one really ever thought it was likely that an incumbent network operator which was fulfilling its licence obligations would be stripped of its licence. This simplifies MNOs’ long-term planning.

• Greater network sharing: the Government and Ofcom will consider further network sharing, spectrum or carrier-sharing proposals from the operators, particularly where these can lead to greater coverage and are part of the mobile operator’s contribution to a broadband universal service commitment. I read this as a presumption of approval of network sharing, albeit with a few USO strings attached. In a maturing industry, as we have with mobile, M&A activity is the best way to maintain profitability. However, in the interests of good competition, merger at the network level is more appealing.

• Commitments by the mobile operators to push out the coverage of mobile broadband eventually to replicate 2G coverage and mark their significant contribution to the broadband universal service commitment. As competition in the mobile broadband market grows we’ll get towards 99% anyway, but it will be interesting to see exactly how Ofcom plans to enforce this. Public funding for a single operator who will provide this bridging of the digital divide as we’ve seen in Ireland? Or a further USO for each operator based in some way on the network sharing issue above?
  

Action 17 - We will develop plans for a digital Universal Service Commitment to be effective by 2012, delivered by a mixture of fixed and mobile, wired and wireless means. Subject to further study of the costs and benefits, we will set out our plans for the level of service which we believe should be universal. We anticipate this consideration will include options up to 2Mb/s. 2Mbit/s seems reasonable as a minimum obligation for extending the digital franchise. Based on the likely costs, one would have to assume that mobile would be the obvious way to fill in the gaps in the USO. A wired alternative would be substantially more expensive. Can mobile network operators expect to receive some state subsidy?