Précis On 24 July, Ofcom announced that the largest ever auction of spectrum for mobile services in the UK is likely to get under way by the end of this year, with prospective bidders required formally to apply to take part. Those applications will then be assessed by Ofcom before the bidding phase starts, which is likely to be in early 2013.
What? The 4G auction will offer at least two spectrum bands (800 MHz and 2.6 GHz) and will be auctioned to bidders in a series of lots. The lower frequency band is ideal for widespread mobile coverage, whereas the higher frequency band will provide the capacity needed to deliver faster speeds. These two bands add up to 250 MHz of additional mobile spectrum; three-quarters of the mobile spectrum currently in use and some 80 per cent more than released in the 3G auction, which took place in 2000.
Not only will the combination of low and high-frequency spectrum create the potential for 4G mobile broadband services to be widely available across the UK, they will also offer the capacity to cope with significant demand in urban areas.
Ofcom also believes that UK consumers are likely to benefit from better services at lower prices if there are at least four credible national wholesalers of 4G mobile services. As a result and in the interests of competition, Ofcom has decided to reserve a minimum amount of spectrum in the auction for a fourth national wholesaler (i.e. a provider other than O2, Vodafone or Everything Everywhere). This could be either Hutchison 3G or a new entrant altogether.
Importantly, Ofcom is yet to determine whether or not the 1800 MHz spectrum allocation that Everything Everywhere is required to divest as a condition of the merger between Orange and T-Mobile will form part of the auction. In addition, Ofcom has not yet determined whether or not it will allow Everything Everywhere to vary its remaining 1800 MHz spectrum licence for use with 4G services.
The minimum sum from the proposed reserve prices for the whole 4G auction is £1.4 billion. The auction is not expected to raise as much revenue as the 3G sale, having pulled in a staggering £22.4 billion from mobile companies.
So what? The auction will result in at least 98 per cent of people across the UK being given access to the fourth generation, or 4G, network, which will allow users to download data such as music and high-definition films at much faster speeds.
Ofcom chief executive Ed Richards said:
"The 4G auction has been designed to deliver the maximum possible benefit to consumers and citizens across the UK. As a direct result of the measures Ofcom is introducing, consumers will be able to surf the web, stream videos and download email attachments on their mobile device from almost every home in the UK.”
Despite Ofcom's proposals, the auction process still promises 4G services to arrive later than in various other European countries. Whilst some aspects of Ofcom's proposals will please some network operators, there may still be further objections and delays to the auction process.