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BT prepares for demise of Ofcom? -challenges Government on mobile broadband

Lord Mandelson is a Labour Minister in the UK's Government. So the fact that he wants to ignore BT's protests and "forge ahead with a consultation to extend indefinitely mobile phone companies’ 3G licences," won't bother BT one bit. BT expects a change of Government before that can happen, and is looking for new alliances, say sources.

A BT spokesperson Tom Espiner UK on Tuesday that the company "had sent a letter to the Department for Business, Innovation and Skills (BIS), objecting to proposals to make existing 3G licences indefinite, and to allow greater infrastructure sharing in rural areas."

There is certainly no need for panic; the licences in question were issued at the top of the dot-com bubble at huge price, and don't expire till 2021 - eleven years from now. The proposal is to let the UK's licence holders keep them, which BT says is "a gift from the taxpayer" - a view not shared by the mobile companies, who are all facing hard times.

According to Elizabeth Judge, who miraculously managed to find someone in the Hutchison 3G offices to comment over the holiday break, the fees will continue to be paid:

"A 3G licence extension is simply a move, in 11 years’ time, to the same annual fee structure levied on the vast majority of the radio spectrum used by mobile operators today."

BT does not seem to care much about the fees; it wants a full auction, says Richard Wray, quoting a BT spokesman:

"We would like spectrum to be auctioned in a way that is fair to all operators and stimulates competition in the market for both existing operators and new entrants," he added. "We are discussing our concerns with BIS and are hopeful that these will be addressed."

Wray also observed that "some senior mobile phone industry insiders" were "livid":

[BT itself] itself will benefit from the 50p-a-month telephone tax , which will be in next year's finance bill. The tax is designed to raise upwards of £175m a year to help pay for the roll-out of the next generation of super-fast broadband networks in rural areas. BT is expected to be the main recipient of the cash. Some senior mobile phone industry insiders have also pointed out that while BT objects to anything that helps out their industry, it is currently fighting for the right to be able to demand that the entire fixed-line telecoms industry helps pay its pensions bill. BT is locked in talks with the regulator Ofcom about trying to narrow its pension deficit by raising the price that its Openreach business charges everyone else for access to its residential phone lines.

But other insiders will be noticing that BT is not discussing these issues with Ofcom. Instead, all this debate is being conducted with the Department for Business. Innovation and Skills (BIS) which is conducting the review of spectrum for the next decades.

"Ofcom won't be consulted, effectively," said one insider. "It's been caught up in politics, with the Conservatives having forged some kind of alliance with Murdoch's Sky. Ofcom is seen in Tory-Sky circles as being in BT's pocket, and you can expect it to be emasculated as soon as the election is over in 2010."

The review is being conducted by Kip Meek, Chairman of Ingenious Consulting Network, who was appointed as an independent spectrum broker to handle the diplomatic challenge of supporting all the UK's comms interests. Wray observed:

"Part of his proposals included letting them run mobile broadband on the spectrum they were given in the 1980s and 1990s for voice and text services."

Valuable spectrum indeed! - but BT's suggestion that the mobile companies have the ability to join in another paralysingly swingeing auction is empty, and this is a political gesture, not a business plan