Going, going, gone! Hammer comes down as UK 4G auction raises £1bn less than expected.

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Matthew Howett, telecoms regulation analyst, at Ovum comments:

“Despite all the noise being made about the UK’s 4G auction, what you can’t hear is the sound of champagne corks popping over at the Treasury as Ofcom’s 4G auction fails to raise George Osborne’s optimistic expectation of £3.5bn coming in at £2.34bn. For the mobile operators there must be widespread relief that the amount paid is a mere fraction of the £22.5bn they were asked to cough up during the 3G licencing process. For them, the fact they didn’t have to pay billions more is without doubt a positive thing. The costs of rolling out a network are significant. It could be argued that the relatively poor 3G coverage we have seen in the UK up until now is at least partially a result of operator’s being left out of pocket after the last auction that they had very little to actually spend on building the network. Things this time should be different, especially given the ability for the 800MHz airwaves to cover large distances and penetrate buildings well.
“Three’s ability to win valuable 800MHz spectrum coupled with the spectrum at 1800MHz it acquired from EE before the auction puts it in a strong position to roll out its 4G network. Many customers on Three will have had problems at one point with reception inherent of the propagation characteristics of the 2.1GHz spectrum it currently uses. Other key highlights include the commitment BT has made to rolling out its own 4G services, and O2’s lack of higher value spectrum which is needed to meet growing data demands.
“Much has been made of the UK’s late start in the 4G race. In our view, everyone deserves at least some of the blame, from the regulator, through to the government and the operators themselves. However Ofcom should be praised for allowing EE to launch using its existing spectrum. Despite much criticism at the time, the decision was the right one. Without it, we could very well still be arguing about how to design the auction rather than awaiting a host of additional 4G services in only a matter of months. Had it not intervened in the way it did, Britain could very well have been condemned to the slow lane for years to come.
“Despite five years of planning and tens of thousands of pages of consultations, in many ways today is just the beginning. The hard part for operators now comes in convincing us to upgrade and take out 4G mobile subscriptions once services are launched by EE’s competitors in late spring/early summer of this year. A lack of detail from EE on how many customers they have tempted over to 4G has led some to believe that consumers just aren’t willing to pay more for faster speeds.”