UK mobile operators continue to invest and deliver good consumer outcomes, but face persistent challenges around monetisation and increased political pressure. Here we share views on what the Government should consider including in the new SSP.
With an ambition to deliver 5G SA nationwide by 2030, promoting investment must be a first order priority for Ofcom. Some potential enablers sit with the Government to implement, although repurposing ALFs for network capex would be an initiative welcomed by operators that could be overseen by the regulator.
Given the prevailing urban-rural divide in connectivity, achieving universal access to high-quality mobile services will take a concerted effort, likely requiring private and public sector funding. This is particularly true in the case of addressing not-spots along the rail network.
Removing barriers to innovation would help operators drive demand for advanced services, such as network slicing, and facilitate a return on 5G investment. Meanwhile, support from Ofcom for the 2G switch-off would reduce costs for industry and accelerate the transition of end users away from inefficient legacy networks.
Effective spectrum policy must remain a central component of the new SSP. Ofcom must not lose sight of the need to establish a healthy pipeline of new frequencies to support operators’ provision of mobile broadband services, making timely decisions on some key bands.
Despite Ofcom having made several recent interventions to protect consumers, there is still work to do to further improve QoS and tackle scams. The regulator’s monitoring of the market should also sharpen, not least due to its role in enforcing a potential investment commitment should the Three/Vodafone merger go ahead.
The UK’s mobile operators continue to invest but face persistent headwinds and increasing political pressure
The UK Government is preparing a new Statement of Strategic Priorities (SSP) for Ofcom relating to telecoms, spectrum management and postal services. The current SSP, from 2019, came shortly after the Future Telecoms Infrastructure Review (FTIR), which set out the changes the Government considered needed to be made to the UK market and its policy framework in order to deliver world-class digital infrastructure across the country. The FTIR’s recommendations formed the basis of the current SSP and while it is weighted in the direction of fixed over mobile, there are clear aims to secure leadership in 5G technology and maximise the economic and social value from the use of spectrum. In addition, the SSP focuses on consumer protection, outlining the Government’s intention to tackle harmful business practices and improve overall quality of service (QoS) for end users.
The mobile market in the UK has evolved since 2019, although it has perhaps seen less change than in the fibre market. Operators have continued to invest in rolling out, maintaining and upgrading network infrastructure, with all four launching 5G services by the end of that year. According to Ofcom, 5G is now available from at least one operator to at least 92% of premises, meeting comfortably ahead of time the SSP target of deployment to the majority of the country by 2027. In April 2023, the Government unveiled the Wireless Infrastructure Strategy (WIS), which set an ambition for nationwide coverage of standalone 5G (5G SA) to all populated areas by 2030. On some counts, the SSP appears to have delivered on its ambitions (see Table 1) and we are beginning to see early progress against aspects of the WIS, including 5G SA launches by EE, Virgin Media O2 and Vodafone. However, the industry faces ongoing challenges, in particular network rollouts in very hard-to-reach (VHTR) areas and 5G monetisation, and is also subject to increasing political pressure on issues such as connectivity on railways and the future switch-off of 2G services.
Under section 2A of the Digital Economy Act 2017, the Secretary of State – in this case Peter Kyle MP – may designate a new SSP following a general election. The UK has a new government in place after the July 2024 election that saw the Labour Party return to power after a 14-year absence. Under section 2B of the Act, Ofcom must have regard to the Statement when exercising its regulatory functions. Under section 2C, before designating a Statement, the Secretary of State must consult on a draft version for at least 40 days. As such, the Department for Science, Innovation and Technology (DSIT) expects to issue a formal consultation on a draft SSP by the end of 2024. Ahead of that consultation, in this note, we outline some suggested priorities relating to mobile and spectrum that DSIT should be minded to consider – see Figure 1.
Infrastructure investment, security and resilience should all feature more prominently in a revised SSP for Ofcom
The Government’s recent Industrial Strategy Green Paper indicates that the 5G SA ambition outlined in the WIS remains in place. The Government has also previously called for a “renewed push” and continued investment to meet this target. Despite progress being made, further expanding the availability of 5G SA – and later 5G Advanced – should be a primary goal of an updated SSP and of Ofcom’s regulatory activities. Key to this will be incentivising investment, which the Government has stated is falling behind other countries. According to the current SSP, Ofcom should closely monitor mobile investment and consider appropriate options if it is not being supported at sustainable levels. While Ofcom reports publicly on industry capex, it is less clear how Ofcom has intervened directly to promote investment, leaving the market to identify its own solution – i.e. the proposed Three/Vodafone merger. This deal is expected to be approved with a headline investment commitment that would be overseen by Ofcom. The revised SSP can reinforce the regulator’s role in monitoring whether a combined Three/Vodafone delivers against its merger commitments, while stressing Ofcom’s responsibility to view the sector in the round, including the functioning of competition and end user outcomes.
Many issues constraining investment may sit with DSIT, in particular the Barrier Busting Task Force, to address – e.g. legislation or the lack thereof that can hinder network rollouts. Nevertheless, with obligations under the Growth Duty to prioritise economic growth when exercising its regulatory functions (something not yet fully put into practice), it is an auspicious time for Ofcom to consider how it can be a more active enabler of investment, while continuing to act in the interests of competition and consumers. A reconsideration of the regulator’s approach to the setting of annual spectrum licence fees (ALFs) could present a relevant opportunity for that, which would be well received by operators given they represent a cost to them of nearly £320m per year and may not always accurately reflect spectrum bands’ true market value.
Following an ask from the Government in the WIS, Ofcom published a review of its spectrum management strategy in January 2024, stating that awarding frequencies via indefinite licences with ALFs remains the most appropriate mechanism to achieve efficient outcomes. Ofcom also found no evidence of ALFs negatively impacting investment. However, it did indicate some preference for imposing ALFs but diverting proceeds to an industry investment fund managed by DSIT. Under this model, ALFs could be – either partially or fully – repurposed into network capex, with competition for funds based on operators’ ability to meet a given commitment. Some monitoring and auditing would be required, although the GDP impact of deploying the fund could offset the revenue loss. Ofcom should remain open minded and flexible, potentially revisiting its approach if there is scope to drive investment for specific purposes, such as 5G SA.
In addition to availability, the security and resilience of mobile networks must be paramount – and should arguably feature more prominently in a new SSP. Since 2019, the Telecoms Security Act (TSA) has imposed obligations on operators in the UK to remove Huawei technology from 5G networks. Ofcom’s focus should therefore be on monitoring compliance with the framework established by the TSA, while preparing for the implications of a new Cyber Security and Resilience Bill once it is introduced in Parliament in 2025. On resilience, Ofcom’s priorities should be two-fold, with both intrinsically linked to the physical – often environmental – threats facing network infrastructure. Firstly, with the dependencies between telecoms networks and the power grid, Ofcom should work with Ofgem (and the Government) to proactively identify vulnerabilities and plan comprehensive mitigation and responses to major, but inevitable, outages well in advance. Secondly, the regulator should seek to strike a balance between requests for battery back-up for mobile services in the event of power cuts. Sir Chris Bryant (Minister of State for Data Protection and Telecoms, DSIT) has highlighted how battery back-up mitigations vary significantly by site and by operator, leading to a lack of consistency nationwide. According to our research, the length of power back-up required and the funding to source requisite equipment vary greatly between countries. With the Government acknowledging that a universal solution may be difficult and expensive to implement, Ofcom is well positioned to determine an appropriate outcome, taking into account factors such as the level of consumer protection, obligations on industry and source(s) of funding.
Delivering mobile telecoms services nationwide will require a mix of technologies and public funding via an updated SRN
The new SSP should also place a greater emphasis on rural and VHTR areas (as well as urban not-spots). Ofcom’s latest Connected Nations report finds that 69% of rural premises are connected to at least one 5G network, highlighting a sizeable gap compared to urban areas. With a view to extending high-quality mobile coverage to all places people live, work and travel, there are a number of initiatives the SSP could suggest Ofcom explores and considers how it might lend support, including:
The use of alternative technologies to achieve ubiquitous connectivity. In some instances, 5G, fixed wireless access (FWA) or satellite could be an appropriate and viable alternative to a full fibre connection, reflecting expected convergence between fixed and mobile as complementary infrastructures;
The role of mobile in the universal service obligation (USO). While the USO has historically targeted fixed services – initially landline telephony and later broadband – some European countries, such as Norway and Switzerland, enable operators to take a technology-neutral approach to meeting their requirements; and
The future of the Shared Rural Network (SRN). With operators having met the coverage obligations required by 30 June 2024, there is now a question of whether the project is shuttered, continued (in light of the additional January 2027 obligations) or reformulated, for example to focus on supporting 5G deployments.
While the current SSP suggests Ofcom consider the costs and benefits of roaming as a solution to improve consumer choice and address partial not-spots in rural areas, this has not been mandated for 25 years and does not need to be revisited now. National roaming has been repeatedly debated and discounted over the past decade, leading to partnerships between the Government and industry such as the SRN, jointly funded by both sides, to broaden coverage while avoiding a range of potential unintended consequences. In focusing on rural areas, Ofcom should, however, work with the Government not only to plan for delivery at the UK level but to also set a clear roadmap to achieve goals for each of the four nations, recognising the unique factors and challenges at play, while ensuring no one country is left behind the others.
Improving connectivity along rail routes could be a further priority for Ofcom – and again one that would necessitate cooperation. Though the SRN has helped deliver coverage to 16,000km of roads, signal along the UK’s other major mode of transport continues to be a problem. The existing SSP recognises that delivering rail connectivity involves particular challenges, indicating that a breakthrough here would require Ofcom working with other regulators, principally the Office of Rail and Road (ORR), for example to secure for operators wayleaves for access to Network Rail’s infrastructure or land. In seeking to tackle the issue, the Government and Ofcom should be mindful of the potential burden mandating any new obligations could have on industry. Even if access can be negotiated, there is then the question of who foots the bill. In Germany, the Government has extended spectrum licences in exchange for better coverage along transport routes, with Deutsche Telekom describing the requirements as disproportionate, expensive and unrealistic. Delivering mobile broadband services along more of the UK’s rail network would be costly and operators would likely need government support, which could draw from any unused SRN funding.
Ofcom should consider its role in helping to drive 5G adoption among consumers, businesses and the public sector
5G adoption in the UK is currently around 20%, broadly similar to France, but behind Germany, South Korea and the US. Take-up of 5G services is predominantly a puzzle for operators to solve, and receives no mention in the 2019 SSP; however, the inability of industry to sufficiently monetise 5G could slow or put at risk future investment cycles and the delivery of 6G, and there may be ways that Ofcom (in conjunction with the Government) can facilitate demand among consumers, businesses and the public sector. For example, given the potential of 5G SA to support the delivery of emergency and other public services, and to enhance the productivity of vertical industries, Ofcom may be able to play a role in helping develop business cases and commercial models, reflecting widespread political recognition of the importance of mobile for economic growth – and the regulator’s duty to support that.
Evolving net neutrality rules would potentially enable mobile operators to meet changing consumer needs with new tariffs involving a premium quality or ‘specialised services’. Ofcom revised its guidance in October 2023 to provide greater clarity on network management, zero-rating and service innovation, but wider legislative change, including a move to a more light-touch code of practice as advocated by operators, would be a matter for the Government – although it may welcome the regulator’s advice. Where Ofcom may be able to contribute now is in ensuring that, within the bounds of its guidance, there are no technical barriers to operators offering differentiated or content-specific retail propositions, or solutions such as 5G network slicing that have significant commercialisation potential and may actually improve consumers’ choices and experiences online. With the net neutrality review suggesting a potential issue relating to network slicing and mobile operating systems, there may be cause for Ofcom to collaborate with the Digital Markets Unit (DMU) to take a broader look at the ecosystem. In the event barriers are identified, the regulators should consider intervening to ensure operators are able to bring innovative services to market and are not prevented from shaping the connectivity experience to a specific consumer, device or application.
The current SSP makes no reference to the switch-off of legacy mobile networks (i.e. 2G and 3G). Failing to consider this again in a revised version would be a missed opportunity. As 5G SA rollouts gather pace, scaling adoption will become an increasingly pressing matter given the capex sunk into infrastructure. Operators are currently in the process of decommissioning their 3G networks and will soon turn their attention to switching off 2G. While the 3G shutdown has broadly run smoothly, improving download speeds in certain locations, there may be lessons for 2G (either from the UK or elsewhere), including the need to raise awareness among some consumers, protect against coverage loss or offer free SIM swaps to facilitate the transition. 2G also supports myriad connected devices and emergency services access. A well handled switch-off must be a top priority for the Government and Ofcom so that end users can be migrated on to future-proof networks without inconvenience or harm. The SSP is a chance to set expectations of the regulator in this regard, which will in turn enable more consumers to share in the benefits of more advanced mobile connectivity while helping operators control costs and energy consumption.
In the context of demand, it is vital the SSP focuses on ensuring individuals and communities are not excluded from the online world. According to Bryant, around 1.5m people live in digital poverty with either no or limited access to connectivity, and 27% of adults on low incomes only access the internet by smartphone. With the UK’s most recent national strategy a decade old and past its use-by date, it is for the Government and Ofcom to reduce digital exclusion, focusing on access (to devices as well as telecoms services), affordability, skills and trust. The regulator has previously called for better promotion of social tariffs, but they are just one piece of the jigsaw. Tackling the issue comprehensively will Ofcom working collaboratively to find creative solutions that leaves no group behind.
Effective spectrum policy will involve Ofcom establishing a healthy auction pipeline while handling rising demands on a finite resource
Over the past five years, average monthly mobile data usage (excluding M2M) has trebled from 3.3GB to 9.9GB. Network coverage and download speeds have both increased in parallel. The sites and spectrum deployed by operators has underpinned these developments, benefiting consumers and businesses across the UK. In light of rising demands, changing usage patterns and emerging use cases, ensuring an appropriate spectrum pipeline will be vital. Since 2019, Ofcom has completed the award of 700MHz and 3.6-3.8GHz – and arguably in a timely manner, as the current SSP called for. However, the regulator has been less prompt, relatively slow possibly, in respect of yet-to-be-awarded mmWave (e.g. 26GHz) spectrum, with this band already assigned in several Southern European and Nordic countries. The UK is not unique in this regard, with Poland and Switzerland pushing back on mmWave until demand materialises in the market. With the potential of mmWave to support 5G capacity at live music, sporting events or industrial sites, Ofcom should move quickly after the final decision on the Three/Vodafone merger to award the spectrum and get it into the hands of those that can deploy it.
To guarantee a sufficient spectrum supply, Ofcom should ensure it participates in meaningful and continued dialogue with industry stakeholders to understand their future spectrum needs and those of emerging applications and technologies (e.g. 6G). It is also crucial that the regulator engages with incumbents in potentially important bands, such as the military, as well as with its international peers, who will be undertaking similar work implementing the outcomes of WRC-23 and preparing for WRC-27. In establishing a spectrum roadmap, ranges Ofcom should be minded to explore include mid-band, which offers a good balance of coverage and capacity characteristics, and 600MHz, which suits less populated areas and indoor coverage.
According to the SSP, spectrum sharing models could enable new players, alongside mobile operators, to access spectrum and invest in new business models and services. Ofcom is particularly proud of the sharing it has enabled in the C-band and signalled this will increase in the future as new frequencies become available, stating that exclusivity in licensing is becoming harder to justify. The Upper 6GHz band is a major focus for regulators and industry post-WRC-23, with many considering it the next logical band for both mobile and Wi-Fi. In an attempt to balance various uses, Ofcom is championing a hybrid sharing approach, including an indoor Wi-Fi/outdoor mobile split, but there are concerns that this may risk interference between technologies as well as poor network performance. It may also be complex and challenging to implement compared to geographic spectrum sharing. If the coexistence Ofcom envisages turns out not to be technically feasible, the regulator will have to weigh up the best course of action to take based on the value each allocation of Upper 6GHz is able to deliver, as well as its duty to support an effective and efficient use of a scarce resource. With regulators in other European countries locked into the same debate, Ofcom could stand to benefit from engaging with its counterparts in the EU, following their debates with interest and taking note of any likely direction of travel.
Satellite is a further issue, linked to debates around spectrum, that an updated SSP should encourage Ofcom to be mindful of. Advances in direct-to-device (D2D) services and low Earth orbit (LEO) infrastructure have been key to growing optimism around satellite broadband, with mounting expectations about the role it will play in meeting government’s connectivity targets, particularly in the most remote locations. Ofcom’s future approach to mobile markets and spectrum published in December 2022 made minimal reference to satellite, although it has since launched a call for inputs to better understand the various use cases for the technology. It is critical Ofcom deepens its knowledge base and expertise in this area, particularly on the market outlook for D2D and potential spectrum demands from satellite, which would help manage the relationship between different actors or networks, while ensuring the most appropriate uses of different frequency bands. In light of the Government’s recent creation of the Regulatory Innovation Office (RIO) and its stated focus on space technologies, there may be opportunities for Ofcom to work with policymakers to update rules or licences that speed up access to, and in turn adoption of, satellite services, without causing interference for mobile operators in the UK or those in adjacent countries.
Protecting consumers should evolve to tackle the most pressing issues, principally scams
With increasing reliance on connectivity in everyday life, it is vital that furthering the interests of mobile consumers remains core to the SSP. Aspects of the 2019 SSP have been (at least partially) delivered, with Ofcom introducing rules to help tackle the loyalty penalty through end-of-contract notifications (ECNs) and ban mid-contract inflation-linked price rises. However, consumer protection must continue to be a priority of the Government and Ofcom, particularly for vulnerable end users that can be among the most susceptible to harmful practices, terms or conditions. Operators are already playing their part – e.g. offering voluntary mobile social tariffs, making contributions to the National Databank – but there may be issues that could warrant regulatory attention. For example, as with fixed broadband, smart data is one aspect of the 2019 SSP that could feature in an updated version so long as a scheme can be developed without adding to the burden for industry – something Ofcom’s current phase of consumer protection work is intending to avoid. Given its mention in the current SSP and recent campaigns from industry, consumer overpayment, particularly on handsets, could be another focus. The fact that Ofcom’s research states that ECNs and annual best tariff notifications (ABTNs) had a lower impact on engagement in the mobile market than in fixed broadband underlines why this may need to be the case.
Tackling scams could be well-placed as a priority in the new SSP. This was not mentioned in 2019 but it has become a growing problem – and would likely have the backing of industry, with Virgin Media O2 calling on the Government to combat the national fraud epidemic. While an issue in fixed telecoms given gaps in regulation around number sub-allocation, it is more commonly a mobile issue, with calls and texts to mobile phones (e.g. with fake bank or parcel delivery messages) the most common channel for scams. In line with the Government’s manifesto commitment to introduce an expanded fraud strategy, there is an opportunity for the SSP to drive cross-sector collaboration to address the issue at source and to target a tightening of the rules, complementing potential anti-scam initiatives Ofcom already has in progress, such as rules designed to eliminate mobile spoofing.
In the current SSP, the Government emphasises its eagerness to work with Ofcom and industry to improve overall QoS in the telecoms sector. QoS – measured by network coverage, capacity and performance – is only ever an increasingly important issue for consumers that should be top of mind for Ofcom, but there are concerns that data collected, analysed and used by the regulator today belies the actual experience of end users on the ground. Ofcom regularly publishes customer service reports, finding relatively high consumer satisfaction with mobile services; however, third-party research paints a less favourable picture, ranking the UK below most other European countries on 5G availability and download speeds. Operators report to Ofcom on metrics required by it, but it may be appropriate for the regulator to adjust its approach, potentially focusing more on network capacity and performance, or by leveraging different testing techniques. This could help it better target its interventions, while boosting competition if data is made public in some form that helps make end users make more informed choices. Such an intervention that expands obligations on operators must be proportionate, again balancing benefits for consumers with the impacts on industry.
