Chapter 8

GSM FREQUENCY CHANNELS AND THE DELUGE

In parallel with GSM’s quiet progress in the proverbial back room, analogue mobile radio services were grabbing the public’s attention across Europe, led by the Scandinavian countries, with services in the UK also starting to accelerate away. As the autumn of 1985 approached, stories of mobile phone congestion in central London started to circulate. A commercial conference on cellular radio was held at the Barbican in London. Colin Davis, the managing director of Cellnet, made a public statement that the surge of demand was so great that Cellnet would require access to the channels being held in reserve for the GSM system.

Two days later, Thomas Haug, the Chairman of the GSM, telephoned and asked what the basis was for Colin Davis’s statement. It was new to me and I suggested that it was no more than a kite being flown. In December, at a Christmas reception given by Cellnet at the Ritz, Colin Davis, a large man, bore down on me. He said that the European system would never happen, at least in the UK. The reason was that the government, in licensing two competing systems, had unleashed a tidal wave of competitive energy. The force of that tidal wave was gathering strength and would simply burst the dam protecting the GSM frequency channels. He urged me to face the reality. With ‘beating me up’ over reserving the GSM frequencies ticked off his lobbying list, Colin engaged gear and moved off to talk to another guest.

At the beginning of January 1986, I received an invitation to a lunch given by Vodafone to celebrate the first birthday party of the opening of their cellular service. The guest of honour was Geoffrey Pattie, the Minister for Information Technology.

I strolled from my office to the Savoy hotel and still arrived far too early. After wandering around for ten minutes to kill time, I found myself loitering outside the door to the room where the lunch was to be held. I quietly turned the door handle with a view to seeing the lie of the land. To my shock, the door immediately swung open under the energetic power of Sir Ernest Harrison, and I was swept over to the bar and surrounded by Vodafone executives.

While we waited for other guests to arrive, I asked him about the City of London’s ‘short-termism’. What effect did it have on the running of his company? He said that it put enormous pressure on the company to focus on short-term profits. When he’d decided to become a cellular radio operator, it had been all money out and nothing back for quite some time. It wasn’t long before the buzz being put around in the City was that Ernie was getting past it, he was over the hill, and it was time for him to be pensioned off. Now the City could see for itself the rapidly expanding cellular radio market, and it was ‘Ernie the far-sighted’ from the very same people. It confirmed other anecdotal evidence that the UK’s industrial decline had, in large measure, been the product of the lack of access to long-term, patient capital and the rise of the casino mentality in the City of London.

These insights into the UK’s version of capitalism by a successful industrialist came to a halt as some more guests arrived, including Alastair Macdonald. Still no minister! Ernie Harrison had his back to the door for a brief moment. The minister, Geoffrey Pattie, quietly walked in. As he approached Ernie Harrison, he put his finger to his lips to signal silence. To everyone’s surprise, he suddenly clasped Ernie Harrison from behind with a bear hug. A look of shock and complete disbelief crossed Ernie Harrison’s face. The minister let go and stepped back in my direction. I stepped back to make room for him and toppled over a low coffee table. As Ernie Harrison spun around, Alastair Macdonald feigned a look of shock and then, with a grin on his face, said that he wouldn’t have come if he’d known it was going to be that sort of party. The tension broke. The room descended into hearty mirth.

We sat down to a pleasant lunch. Then came the after-lunch speech. Ernie Harrison talked of the unforeseen, explosive growth of customers. If this miracle of UK liberalisation was not going to be stopped in its tracks, both operators needed more frequency channels. The memory of the meal faded rapidly in my mind. He had a proposition. The DTI should ‘loan’ both the operators the frequency channels being held in reserve for the GSM system, and in return, they would put their maximum effort into the development of the GSM system. As the words ‘GSM system’ were spoken, he gave a long, penetrating stare in my direction. Mr Pattie thought for a few moments and said that he would give an answer within a few days.

In the taxi back to Victoria Street, Alastair Macdonald instructed me to contact the Radio Regulatory Division and get a submission up to ministers in 48 hours. Unfortunately, everyone who mattered was on the usual extended Christmas to New Year leave. The duty officer gave me the home telephone number of Alan Marshall, one of the assistant secretaries. He agreed to come in.

Prior to Ernie Harrison’s bombshell, a few other matters had accumulated where some political guidance was needed. There was the matter from the Berlin GSM meeting of how many operators the European system should accommodate. An even bigger issue was who the eventual recipients of the UK’s reserved GSM frequency channels would be. Would it be the two existing operators? Or was there an opportunity for a third operator? When the original competition had been run off both Cable and Wireless and GEC had been very disappointed. They were both carefully watching the situation. A few memos had been passed around at official level on the various options, but nothing had been decided.

From my perspective, there was much merit in giving the European digital opportunity to the two existing UK operators. The rapidly expanding network coverage and customer base in the UK showed that competition was working successfully. A third new, unknown mobile operator was no help in the enormous task of defining the new GSM technical standards, whereas the two existing operators were committing their scarce technical experts to this vital task. If the DTI signalled that the frequencies reserved for the GSM network would go to a new entrant, the two mobile operators would redeploy their experts.

More arguable was my perception that the risk was high of the two incumbent mobile operators betting everything on advancing the TACS analogue technology. History is full of examples of better technologies never quite making it. An inferior technology can often get sufficient volume behind it to make prices low enough to beat off the challenge. A new entrant was in a particularly weak position to be the sole carrier of the huge task of introducing an entirely new technology. 

Finally, getting the rest of Europe to accept the idea of two operators, despite the hostilities I had encountered, seemed a great achievement in view of the prevailing climate. Effective competition, which we had at the time, seemed far more useful to consumers than simply maximising the number of competitors.

It was a straightforward political choice as to whether extra domestic competition or the introduction of the European system was to be given the higher political priority. It was my firm view that the UK, as part of Europe, would need a pan-European cellular system in the 1990s to support its business people and citizens travelling around the European Union.

The submission to Mr Pattie on the Vodafone demand for the short-term ‘loan’ of the GSM frequency channels was an ideal opportunity to bring this fundamental political choice of priorities to a head.

Everyone knew that the Conservative government orthodoxy was that market forces should be the undisputed king and European ‘anything’ was secondary. Competition was becoming more of a mantra than a valuable economic tool. The ‘servant’ in civil servant often led to officials’ putting up submissions trimmed by what they believed ministers wanted to hear, particularly with a government having very strong ideological convictions. It does not take many submissions being thrown back before everyone gets ‘on message’. I was not in the least bit confident of winning the argument, but at least the case in the best long-term interest of the UK would have been put before ministers…. That was the best I could do.

When I got to Alan Marshall’s office, he’d already hacked out a draft. It basically didn’t say yes on the GSM frequency issue and didn’t say no. It proposed monitoring tests on congestion.

Alan read my proposed text on the telecommunications policy issues. He drew a sharp breath. My text read that if the two operators signed the digital cellular cooperation agreement (which was, by that time, out of Germany and on its way to Italy), the minister would give a broad hint that this would appear to make a third operator ‘a less than practical proposition’.

‘You’ll never get away with it,’ said Alan. His heart went along with what I was proposing, but his wise political instincts were saying it was politically off-limits. In the end, we agreed that my proposition should be included but together with a well-balanced list of all the pros and cons. The covering minute would strongly recommend that Mr Pattie should call a meeting of officials to discuss the matter in view of its far-reaching nature. We included Alan’s idea of tests to verify whether the need really existed.

In an act of purely wishful-thinking, I attached to the submission a draft letter for Mr Pattie to send to the two UK operators that more or less closed the door on a third UK operator at 900 MHz in favour of a pan-European digital cellular radio service. The submission went up.

John Avery, my colleague in the division responsible for telecommunications policy, came back from leave. He did not like the submission one little bit. His remit was domestic, and he was keen to expand mobile network competition. It was far more in tune with government policy and very much in tune with Oftel thinking. He was, however, mollified that the submission was only a basis for discussion. We awaited the proposed meeting with the minister – which is the normal way in which policy differences are resolved.

A few days later, I hurried back in the rain to my office from lunch. It was 24 January. I walked into the DTI building past a sizeable pack of waiting reporters. The newspaper billboards screamed the latest on the ‘Westlands’ crisis. There was a surreal atmosphere in the department as the crisis neared its peak. Leon Brittan was on the point of resigning. Only a handful of officials were involved in the crisis, but most people knew at least one of them, including the well-respected Colette Bowe, who was press secretary to Leon Brittan.

As I passed through my secretary’s office, I glanced at my in-tray. At the top was a copy of a letter from the minister to Sir Ernest Harrison. I stopped to read it. It was the draft which had gone up with the submission. Not a word had been changed. I picked it up and turned it over. My heart missed a beat. It had been signed by the minister and sent!

A week later, the private secretary of Mr Butcher, the junior minister, telephoned me. Did I know the date for the meeting to discuss the submission on Sir Ernest Harrison’s request for the GSM frequency channels? Their attention had been drawn to the letter Mr Pattie had already signed and sent. Everything went quiet. The policy had been set, at least as far as the third mobile operator was concerned.

Had Mr Pattie read the submission, shared the vision of a pan-European digital cellular system and overridden the recommendation for a meeting? Or had all eyes been on the ‘Westlands’ crisis and the private office become dysfunctional, as the Secretary of State was about to resign – a big thing for any Whitehall Department? I didn’t know anyone in the minister’s private office on a personal basis to satisfy my curiosity.

The letter from Mr Pattie had only bought some time as far as the GSM frequency channels were concerned. The localised congestion problem remained. Subscribers were flocking onto the analogue systems at a faster rate than the cellular radio operators’ investments could keep up.

The real answer was for the cellular operators to invest in more radio sites. But apart from their costing a lot of money, it would take them at least 18 months to get them on stream, due to planning permission delays. Meanwhile, with customer complaints piling up, I couldn’t see ministers indefinitely allowing some perfectly usable frequency channels to remain idle in the cupboard. I’d heard Colin Davis’s warning words about the deluge.

‘If the operators got their hands on the channels, we would never see them back again,’ Donald Cameron from Plessey darkly warned me on the phone. He said that it was the existence of the reserved GSM radio channels that was driving industry forward to invest in the new digital technology. Once they were in the hands of the two existing operators for their expanding analogue mobile services, he doubted whether, politically, they could ever be wrestled back from them. He was quite possibly right.

David Court from the Radio Regulatory Division came up with the solution. The Ministry of Defence had some frequency channels immediately adjacent. The cellular congestion problem was only in central London. Military exercises usually took place well outside of London. Couldn’t the cellular operators use the military frequencies?

There is no doubt that the Ministry of Defence had done quite well in the various Whitehall carve-ups of radio frequencies. Many believed too well. They were sitting on many unused frequency channels. They felt vulnerable. This put them in a very obliging frame of mind when it came to some relatively small gestures to their civilian colleagues. He hit the right bell.

The MOD was willing to consider the matter. There was only one snag. The cellular radio equipment on sale to the public could not operate on the MOD frequency channels. But they were well within the design range of new mobile phones. Thus, the congestion problem could still be solved much faster than bringing into use new base stations.

I telephoned Bernard Mallinder. He was now working for John Carrington before taking up his appointment with the GSM permanent task team in Paris. I put it to him. Short-term pain for long-term gain? They could finish up with both the Ministry of Defence frequency channels and the GSM channels. He said he’d discuss it with John Carrington. I put the same proposition to Ted Beddoes to discuss with his managers at Vodafone. John Carrington came out strongly in favour. The Vodafone managers took more persuading. Eventually, they agreed.

The tidal wave Colin Davis had predicted swept on, but safely deflected. The GSM frequency channels remained safe and dry… for the moment.

Between the two companies, Cellnet probably paid most heavily for this solution. It had misjudged the growth and under-invested more than Vodafone. It also suffered as a result of using a Motorola switch designed for the US market, and the new, bigger version was late. For a brief period, this gave Cellnet greater congestion problems on its network. The word soon got around amongst the customers. Cellnet lost market share.

This was to come back and hit the GSM initiative with a vengeance when the ‘loan’ of the GSM frequency channel issue surfaced for a second time only eight months later.