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Superfast mobile internet plans slowed by threat of legal action

A threat of legal action by O2 has thrown plans for superfast mobile internet in the UK before Christmas into turmoil. Photograph: David Cheskin/PA

Plans to launch 4G superfast mobile internet in the UK before Christmas have been thrown into turmoil by a threat of legal action from the O2 network.

The Guardian understands that Spanish company Telefónica, which owns O2, has written to telecoms regulator Ofcom threatening to challenge its decision to allow rival brands Orange and T-Mobile to launch 4G services this autumn.

Last week, Ofcom gave Everything Everywhere (EE), the company that owns Orange and T-Mobile in the UK, the nod to use some of its existing spectrum to launch 4G from 11 September – a head start of up to a year on its rivals.

Fourth generation – or 4G – services allow data to be downloaded at ten times the speed of today’s 3G networks. The new capacity is urgently needed by mobile operators in order to keep up with the demands on their networks from smartphones.

The move upset O2 and Vodafone, which said they would not have enough bandwidth to launch competing services until the forthcoming 4G spectrum auction. Because the airwaves being auctioned are currently used for digital television, it is unlikely they would be cleared for mobile use in every part of the UK until the autumn of 2013, according to Ofcom.

In a letter believed to have been copied to culture secretary Jeremy Hunt, whose department oversees telecoms, O2 gave notice that it intended to appeal against Ofcom’s ruling at the Competition Appeals Tribunal (CAT).

As part of the appeal, O2 could seek an interim relief, effectively blocking Everything Everywhere from launching its 4G service until a decision is reached. Separately, the Guardian understands that O2 issued EE with an
ultimatum that gave the company until Tuesday evening this week to undertake not to go ahead with its 4G launch.

Both parties declined to comment, although a source at O2 said that legal action “remained an option”. The company is thought to have been unhappy with Ofcom’s decision making process. The regulator took ten months but held only one round of consultation before deciding to approve EE’s application.

A spokesman for Ofcom declined to comment on any challenge from O2, but said: “The consultation responses raised a number of detailed issues that we considered very carefully before reaching our final decision.”

O2’s moves could spark a retaliation from EE and delay the spectrum auction itself. Last week EE chief executive Olaf Swantee indicated he could litigate against the auction rules, which his company is unhappy with, if others sought to block it from launching 4G this year. He said: “I will commit here and now to support the auction process, even though there are aspects of the auction rules that we don’t like. However, and I am hoping it doesn’t come to this, if there is litigation against Ofcom’s ruling, we will have no choice but to review our position”.

O2’s threat comes after a long string of attempts to challenge the 4G auction through litigation. Auction delays could compromise Britain’s position as one of the most vibrant and advanced markets for smartphone technology.

An appeal would be a headache for Ofcom, which recently saw years of work to curb BSkyB’s market power in sports and movies broadcasting unpicked by the Competition Appeals Tribunal in rulings that were deeply critical of the regulator’s decision making in the television market.

EE has invested heavily since January to install 4G radios on its mobile phone masts and is thought to have a number of major population centres already covered. Advertising agency Saatchi and Saatchi has been lined up to create an advertising campaign around the launch of a third brand which EE would use to promote its superfast internet service. Space for television, newspaper and online advertising is understood to have been booked for early October, shortly after the release of Apple’s iPhone 5.

  • This article was amended on 30 August 2012
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