UPD Ofcom UK Reveal 5 Winners of Superfast 4G Mobile Broadband Spectrum

The UK communications regulator, Ofcom, has today confirmed that BT, Vodafone, O2, Three UK and EE have all won slices of the 800MHz and 2.6GHz radio spectrum bands as part of its 4G (LTE or WiMAX) superfast Mobile Broadband auction. Sadly ISP MLL Telecom and HKT UK (PCCW / UK Broadband) didn’t win anything.

The reserve price for the related spectrum originally came to a “combined total” of £1.36 billion and some estimates suggested that the auction itself could rake in anything from £4bn to £6bn (well below the overpriced 3G auction that created £22bn in 2000). But so far the main part of Ofcom’s auction, which has just completed, only raked in £2,341,113,000 as a “base price” and there’s still another stage left.

It’s interesting to note that O2 won the coverage obligation lot for the 800MHz band (originally Three UK were expected to win this before they shunned it), which obliges them to roll-out Mobile Broadband for “indoor reception” to at least 98% of the UK population (i.e. 99% when outdoors) and “at least” 95% of the population of each of the UK nations – England, Northern Ireland, Scotland and Wales – by the end of 2017 at the latest.

Ed Richards, Ofcoms CEO, said:

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

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

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.”

But the auction isn’t quite over yet and the final assignment stage involves determining where, in the 800MHz and 2.6GHz bands, each winning bidder’s new spectrum will actually be located. Bidding in this final stage is expected to “take place shortly” and, once payment has been received, the regulator will then be able to grant the new licences.

Matthew Howett, Analyst at Ovum, said:

“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.”

The first consumer 4G services over 800MHz and 2.6GHz should now begin to surface during the spring or early summer 2013 as originally anticipated. Ofcom estimates that the value of this new spectrum to consumers could be at least £20bn over the next 10 years.

Ofcom confirmed that it would also be carrying out research to measure the performance of 3G and 4G networks in the United Kingdom, which will be conducted during December 2013 before being published in spring 2014. However we expect that the regulator might release a similar 3G focused study within the next few weeks or months.

It should be noted that BT doesn’t plan a national network for its slice of the 2.6GHz band and will instead use it to supplement their existing wireless and fixed line broadband networks, although we don’t yet know precisely what they have in mind (e.g. white space, fixed LTE etc.).

UPDATE 7:55am

BT has stated that the spectrum will be used to “provide its business and consumer customers with an enhanced range of mobile broadband services” and should build on “its existing strength in wi-fi“.

Ian Livingston, BT’s CEO, said:

“We are pleased to have secured this spectrum. We have said that we do not intend to build a national mobile network. Instead, this spectrum will complement our existing strategy of delivering a range of services using fixed and wireless broadband. We want our customers to enjoy the best possible connections wherever they are and this spectrum, together with our investment in fibre broadband, will help us achieve that.”