NAO Praises Smooth Ofcom Auction of 4G Mobile Broadband Spectrum

The National Audit Office (NAO) has given its approval to Ofcom’s recent auction of 4G (LTE) based Mobile Broadband spectrum (800MHz and 2.6GHz), which some had criticised for only being able to raise £2.368bn (about £1bn less than the government had initially hoped for).

The report reveals that the winning five Mobile Network Operators (MNO) placed a total deposit of £4.091bn, which is almost twice the amount that they eventually ended up paying. But even that is well below the notoriously over-inflated 3G auction that netted a staggering £22bn in 2000 and left operators seething for years.

Ofcom has also faced some criticism from those whom questioned its decision to employ a second bidder rule, which means that the winning operator only had to pay slightly more than the next highest bidder in order to obtain their slice of the spectrum. By contrast others see this as being a good method of preventing attempts to rig the bidding process.

But the NAO’s independent verification of the process and results concluded that Ofcom’s auction, aside from a brief technical glitch on 23th January 2013 during the first round of bids, had run “smoothly” and “met its planned objectives“.

NAO Statement on Ofcom’s 4G Auction

“Ofcom was not set an objective by government to maximise the value of auction proceeds, and made no forecast of anticipated proceeds in advance of the auction, although it did state that the reserve price for the spectrum to be auctioned was £1,360 million. Ofcom was, however, tasked with delivering an auction outcome that would maximise the benefits to be delivered for consumers, and estimates that £20 billion of consumer benefits will be delivered through the competitive 4G market.

The auction met its planned objectives, and the overall project timetable set out in paragraph 5 of my report.”

The report did however caution that it was “still too early to say” whether the auction would ultimately deliver the estimated £20bn in consumer benefits. The first indications should come over the next few months when operators begin their national deployments of 4G via the 800MHz and 2.6GHz bands.

It’s worth noting that EE’s own roll-out of 4G in the 1800Mhz band, which has had a significant head-start, hasn’t exactly delivered the market shake-up that some expected or possibly even feared.