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NAO claims UK missed out on £160m in 4G spectrum auction

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The UK National Audit Office (NAO) has claimed that the country missed out on an extra £160m in revenue by reserving spectrum during the 4G spectrum auction in February last year.

In the auction, the UK’s four mobile network operators: Vodafone, O2, EE and 3, and a subsidiary of BT won LTE spectrum. The auction raised £2.34bn, a figure that the NAO has found to be within the range achieved in other European auctions.

But Ofcom had reserved part of the spectrum for the smallest operator, 3UK to ensure the operator could acquire the spectrum it needed to challenge its rivals. While 3UK went on to successfully acquire this spectrum, the NAO cited research from think tank The Smith Institute, which calculated that the proceeds were £159m lower than they would have been had that spectrum not been reserved for 3UK or a new entrant to the market. This assumption was made on the basis that bidders would have bid in exactly the same way had spectrum not been reserved for a new entrant.

Vodafone paid close to £800m for 85MHz worth of spectrum in total, including 2x20MHz of 2.6GHz. EE paid £588m for its 85MHz of spectrum, which included 2x35MHz of 2.6GHz spectrum. Meanwhile O2 spent £550m for 2x10MHz of 800MHz, the lot of spectrum to which Ofcom attached a coverage obligation to provide a mobile broadband service for indoor reception to at least 98 per cent of the UK population by the end of 2017. 3UK obtained 2 x 15MHz of 800MHz spectrum, for which it paid £225m.

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The NAO said in a statement that while regulator Ofcom achieved its objective of maintaining a competitive market in its first spectrum auction in over ten years, the regulator cannot yet conclude that the auction was economically efficient. This, the NAO states, is because it is not yet possible to assess whether those who won spectrum during the auction are able to make the most effective use of it.

Yesterday, the UK government stated that it will further investigate the prospect of encouraging spectrum sharing among operators.

Ed Vaizey MP, UK minister for culture, communications and creative industries wrote in a report issued this week that the government wants the UK to become a global leader in driving better value from spectrum and aims to work with regulator Ofcom and with spectrum users to “adopt a holistic approach to managing spectrum”.

He explained that the government will encourage the use of spectrum by those who deliver best value from it, adding that the government wants to double the annual contribution to the economy from spectrum by 2025.

Last month, telecoms trade association the GSMA warned against an over-reliance on spectrum sharing, suggesting that it could act as a disincentive to operator investment.

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One comment

  1. Morosoph 14/03/2014 @ 1:24 pm

    I’m not altogether convinced that this is a bad thing. If the telecoms pay less for spectrum, that surely allows space for price competition, making the spectrum cheaper for the user.

    Data might be a matter of pure rent, but there is plenty of capacity for lower phone and texting charges in the market.

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