Contents

Introduction

What is infrastructure sharing

Regulatory background

WT Act issues

Facilities/mast sharing

Competition Issues

Introduction

1. The purpose of this document is to give an overview of the issues that would arise from operators sharing infrastructure as Third Generation (3G) mobile networks are rolled out in the UK. The issues are those related to the licensing regime, spectrum use and competition. This document reflects the views of Oftel, the Department of Trade and Industry (DTI) and the Radiocommunications Agency (RA). It contains a brief description of the different sorts of infrastructure sharing which might take place and then describes the general principles of regulation which apply to infrastructure sharing.

What is infrastructure sharing?

2. Infrastructure sharing can have a number of variants, but has as its ultimate objective the reduction of costs associated with setting up a 3G mobile radio network by sharing such facilities between one or more mobile operators. In its simplest form it is the sharing of space on masts and in associated buildings/sites (sometimes referred to as "mast sharing"). In this form there are still two physically separate networks.

3. Another variant might be a form of geographic division of the UK market. One example might be for operator A to cover Manchester, and operator B to cover Leeds, on the understanding that network A will allow B's users onto its Manchester network. Similarly operator B would allow A's customers onto its network in Leeds. Another example might be for operators to carve up rural areas, while rolling out separate networks in core areas. These variants would amount to a form of "national roaming" (and in effect is an agreement to divide up the UK market between two or more operators).

4. The most involved and complex form of infrastructure sharing would be for two separate 3G licensees to share more and more of the elements that make up such a network. At one extreme this would be equivalent to mast sharing, at the other a single network would be run by a separate entity on behalf of two or more WT Act Licensees. Thus the model becomes a single network company "netco" with the licensees becoming service companies "servcos".

Regulatory background

5. To provide a mobile radio service in the UK requires mobile network operators to comply with the requirements of the Wireless Telegraphy (WT) Act and the Telecommunications (T) Act. The WT Act deals with the use of radio spectrum within the UK, and places duties on and gives powers to the Secretary of State. These functions are primarily exercised by the Radiocommunications Agency on behalf of the Secretary of State. In relation to 3G the main issues are those associated with the requirements of the WT Act Licences.

6. The T Act provides for the Director General of Telecommunications to promote the interests of consumers and users of telecommunication services, and to promote and maintain effective competition for such services within the UK. Oftel also has powers, which are held concurrently with the Office of Fair Trading (OFT), with regard to general competition law under the Competition Act 1998. Depending on the precise form and extent of any infrastructure agreements, they may fall to be considered by the European Commission under Article 81 of the Treaty, if they affect trade between Member States.

7. The licences issued under the Telecommunications and Wireless Telegraphy Acts do not a priori exclude infrastructure sharing. Some forms of infrastructure sharing are positively encouraged (mast sharing).

WT Act issues

8. Operators will need to ensure that any proposals for infrastructure sharing do not breach the terms of their WT Act licence. The WT Act spectrum licences for 3G give each licensee exclusive rights to operate a specified technology within a specified frequency band that is individual to each licence. At present, WT Act licences are not assignable to third parties and the rights and obligations conferred are not affected by changes in the ownership of the licensee. These rights and obligations may only be transferred if the Secretary of State revokes the licence and issues a new licence under the Wireless Telegraphy Acts to the new operator. The exercise by Secretary of State of his discretion to do this would depend on the circumstances and should not be taken for granted in any particular case.

9. Any change in ownership of a licensee through merger or acquisition would also be subject to competition regulation.

Facilities/mast sharing

10. There is an obligation on the Director General of Oftel to encourage the sharing of facilities and property for the provision of public telecommunications networks, as well as for publicly available telecommunication services. This duty encompasses, but is not restricted to, the sharing of mobile masts. This duty arises from Article 11 of the Interconnection Directive (Directive 97/33/EC). The mobile operators have pledged, as part of their response to the Stewart Report, to publish clear, transparent and accountable criteria and cross-industry agreement on site sharing, against which progress will be published regularly.

11. However, such "encouragement" should not compel an operator to engage in anti-competitive behaviour (as recognised under UK or EC competition law).

Competition issues

12. In addition to the potential environmental benefits of mast and site sharing, initiatives would be supported where the positive consumer benefits outweigh any potential disadvantages of any lessening of competition. Consumers might benefit from infrastructure sharing if it allowed the delivery of 3G services earlier and at lower prices than might otherwise be the case. However, some infrastructure sharing might mean less competition on aspects such as network coverage or quality, and the absence of competition in these areas might mean that coverage or quality was poorer than it otherwise might be.

13. Any individual proposal for infrastructure sharing would need to be assessed on the detail of the commercial arrangement and its consequences for consumers, which would be subject to general competition law.

14. Most such agreements are governed by UK Chapter I competition prohibitions (EC Treaty Article 81), which prohibit agreements which have the object or effect of preventing, restricting, or distorting competition and that may affect trade within the UK. Some agreements, depending on how they are structured, could fall to the European Commission under the EC Merger Regulation.

15. Operators would need to satisfy themselves that any infrastructure agreements do not fall foul of general competition law; general guidelines have been published by both OFT and Oftel. However, operators may ask Oftel for guidance or a decision under the Competition Act as to the compatibility of the agreement with competition rules. They may apply for an exemption if they apply for a decision. Oftel cannot give legal advice in advance of any agreement being notified to it for guidance, a decision or an exemption. It is up to the parties concerned to ensure that any agreements do not fall foul of the law. An exemption may be granted if the agreement satisfies the criteria set out in the Competition Act, and it may be subject to conditions if the Director General sees fit and with the agreement of OFT. The Commission can similarly grant an exemption if the conditions in Article 81(3) are met.

16. Any infrastructure sharing arrangements would need to ensure that consumers get a fair share of the benefits of such a deal, and that the terms of the deal only cover what is required to deliver those benefits.

Prepared by Oftel in cooperation with the DTI and RA

1 May 2001