The forthcoming auction of 800MHz and 2.6GHz spectrum, and the associated licence conditions, will have a profound impact on the mobile industry in the UK. In its latest consultation and proposals, Ofcom highlights that the auction is “likely to be the last significant opportunity to obtain prime mobile spectrum for many years” and that the distribution of spectrum after the auction “is therefore likely to shape the competitiveness of the mobile sector for at least the next decade”.

It is crucial that the auction process leads to the cultivation of top quality coverage, high speed data and service innovation. The last major auction of mobile spectrum in the UK, held in 2000, failed to provide these and it could be argued that the UK networks have done little more than tread water for the last ten years. As we have commented previously, 3G coverage is, even now, much worse than 2G coverage.

Ofcom is of the view that the UK needs at least four “credible national wholesalers”, by which it means four network operators with spectrum portfolios that are strong enough to offer competitive services nationally, with regard to capacity, quality of coverage, peak data rates (immediately after the auction) and availability of LTE (immediately after the auction).

Ofcom is of the view that this level of competition is essential to achieve low prices, high quality coverage and innovation of services. However, experience of 3G shows that, while competition can help to reduce prices, it does not necessarily enhance coverage (particularly in rural areas) or increase innovation. It is striking how similar all of the UK operators are, in terms of their pricing and services, and I have lost count of the number of overseas visitors who have expressed their surprise at the limited coverage and quality of the UK networks, compared with other markets.

So how do we ensure that these important points are addressed this time, given that competition alone is not enough? Ofcom is still evaluating the options, but it is good to see that at least some aspects are being addressed. In his recent post, Mark Heath has already talked about the positive introduction of demanding coverage targets, for at least one of the licences. However, another important issue is the cultivation of new ideas and service innovation. One of the problems with relying on the established industry players is that they will tend to do things the way they have always done them.

Ofcom already anticipates that three of the “credible national wholesalers” will be Everything Everywhere, Telefónica O2 and Vodafone. It is good that Ofcom intends to reserve spectrum to ensure that a fourth player (either H3G or a new entrant) has a strong enough portfolio to compete with these long-established players. However, personally I would like to see some new blood in the industry, to inject some new ideas and different approaches.

Over ten years ago, during the preparation for the 3G spectrum auction, I worked closely with the SpectrumCo consortium, led by Virgin. The consortium worked with telecom experts and a wide variety of major retail brands to develop a number of radical new ideas, including:

• a wholesale operator with a number of strongly branded MVNOs
• ambitious roll out plans to provide high-quality coverage as soon as possible
• an exciting vision for the future of terminals and the mobile Internet.

As it turned out, the high cost of the licences deterred many new entrants, including SpectrumCo, during the bidding process, so we ended up with the existing players plus H3G, all of which paid huge sums. H3G focused primarily on pricing innovation (e.g. bigger bundles) rather than innovation in services or business model.

In retrospect, the technology of the day may not have been ready for some of the exciting ideas and service concepts promoted by Virgin and its partners. However, ten years on, the pieces of the jigsaw are coming into place and the availability of high speed data and advanced smartphones could now make these visionary ideas a reality. Early 3G technology was unable to deliver high data rates, but LTE is fully able to do so, especially when bolstered by microcells, femtocells, WiFi and smart antennas. Also, we anticipate that exciting new mobile devices, such as the forthcoming iPad 3 and iPhone 5, will support LTE. Furthermore, although there is a substantial amount of new spectrum on offer, the economic environment is such that the cost of the licences may be substantially lower than 3G.

Hopefully this exciting opportunity will encourage new players to enter the UK mobile market, either on their own or perhaps in partnership with H3G. It would be good to see some of the ideas of ten years ago finally come to fruition.