O2, which is owned by Telefonica, has asked industry watchdog Ofcom to alter the way the auction is conducted in order to provide a level playing field.

Ofcom needs to prevent firms, such as Three, from acquiring small parts of spectrum in a way that stifles competition, according to Telefonica.

Three could potentially prevent rivals from using larger blocks of spectrum to offer better services and faster download speeds, Telefonica claimed.

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For the next auction, due to be held in 2020, O2 wants Ofcom to adopt a model utilised by some other European countries that guarantees operators can buy uninterrupted blocks of spectrum and prevents spectrum fragmentation.

Such a model would involve an additional round of bidding to ensure companies can obtain bandwidth in segments large enough to be effective.

Telefonica warned Ofcom that Three’s current share of spectrum has given it a “kingmaker” position, that can allow it to “game the situation” and impose greater costs.

In June, Ofcom revealed it was holding a consultation on whether to have a further round to even out the airwave capacity acquired by the UK’s operators.

An Ofcom spokesperson said: “In order to facilitate defragmentation of the 3.4-3.8 GHz band, we are minded to impose a restriction on winners of less than 20MHz of 3.6-3.8 GHz spectrum to bidding only for the top or bottom of the 3.6-3.8 GHz band in the assignment stage of the auction.

“In addition, we are also minded to include a negotiation phase, within the assignment stage of the auction, during which winners of 3.6-3.8 GHz spectrum would have the opportunity to agree the assignment of frequencies in the 3.6-3.8 GHz band between themselves.”

Telefonica said it believes strongly that Ofcom should, as part of the current award, implement “full band assignment”.

A company spokesperson added: “This can and should be done by requiring bidders, as a condition of their participation in the combined award of 700 MHz and 3.6 GHz, to consent to a variation of any frequency ranges they already hold in the 3.4-3.8 GHz band to ensure that all operators are able to acquire contiguous blocks.

“While Telefonica has proposed full band assignment previously, Ofcom has so far failed to conduct a proper evidence-based assessment of the proposal by reference to its statutory duties under the Communications Act 2003 (“CA 2003”) and the Wireless
Telegraphy Act 2006 (“WTA 2006”). That failure is unexplained and unjustified.”

Three has said it supports the idea of further negotiations at the next auction but warned against allowing rivals to secure special deals with one another rather than reaching a unanimous agreement on how to divvy up the 5G spectrum.