British 4G spectrum auction disappoints Treasury

The British appear less than keen on 4G, with yesterday’s spectrum auction raising much less cash than expected and takeup for the country’s first 4G service sluggish.

While mobile operator EE was able to launch its service late last year using existing spectrum, another tranche was auctioned off yesterday.

EE won more spectrum, along with Hutchison 3G UK, BT subsidiary Niche Spectrum Ventures, Telefonica (O2) and Vodafone.

“This is a positive outcome for competition in the UK, which will lead to faster and more widespread mobile broadband, and substantial benefits for consumers and businesses across the country,” says Ed Richards, chief executive of regulator Ofcom.

“We are confident that the UK will be among the most competitive markets in the world for 4G services.”

A total of 250 MHz of spectrum was auctioned in two separate bands – 800 MHz and 2.6 GHz, with the lower-frequency 800 MHz band freed up when analogue terrestrial TV was switched off. Ofcom predicts that by 2017, the vast majority of the population will have access.

“4G coverage will extend far beyond that of existing 3G services, covering 98 percent of the UK population indoors – and even more when outdoors – which is good news for parts of the country currently underserved by mobile broadband,” says Richards.

“We also want consumers to be well informed about 4G, so we will be conducting research at the end of this year to show who is deploying services, in which areas and at what speeds. This will help consumers and businesses to choose their most suitable provider.”

However, the price is a big disappointment for the government. While Office for Budget Responsibility (OBR) had forecast that the auction would raise £3.5 billion, the actual figure was just £2.34 billion – vastly lower than the £22 billion raised from the auction of 3G spectrum in 2000.

However, Matthew Howett, telecoms regulation analyst at Ovum, sees a silver lining to the cloud.

“For the mobile operators there must be widespread relief that the amount paid is a mere fraction of the £22.5 billion 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,” he says.

“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.”

However, the latest figures from EE show that the British public may not be all that bothered. While EE doesn’t list its 4G customers separately, its latest financial results reveal that it’s actually lost customers overall during the last quarter. Fewer than a third of customers, it seems, have made the switch.