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Ofcom announces auction of UK spectrum in first half of 2012

Photograph of Mark HeathIn his wireless blog, Mark Heath reviews Ofcom’s proposals for a UK auction of new mobile spectrum in 2012.

Ofcom today announced plans for the largest-ever auction of spectrum for mobile services in the UK, with its latest consultation. It is planning to hold the auction as soon as practicable, which it currently anticipates to be the “first half of 2012”.

Over the coming weeks, we will produce a number of blog articles on various important aspects of the forthcoming spectrum auction.

The last major UK spectrum auction, held in April 2000, raised a massive £22.5 billion for licences to operate 3G networks. It’s not surprising that there is significant interest in the forthcoming auction, particularly as the amount of spectrum being auctioned is 80% more than that in 2000. However, given the current economic environment, we do not expect the forthcoming auction to raise anywhere near the level generated in 2000. We estimate that the auction will raise something in the region of £2–8billion, which is still a significant sum. There is such a large variability in the expected outcome due to the uncertainty over the extent to which there will new entrants, such as BT, bidding. Existing mobile network operators will be keen to minimise spectrum costs.

The new spectrum will be used for next-generation mobile services, using the very latest LTE technology. LTE will provide much higher data speeds than the current HSPA technology, with peak download speeds in excess of 100Mbps and average download speeds in excess of 10Mbps. Perhaps even more importantly, LTE will provide much-needed network capacity. With the rapid take-up of smartphones, such as the iPhone, together with the strong take-up of mobile broadband services, using USB dongles, the UK mobile industry is facing a capacity crisis. Without the additional spectrum, mobile operators will be forced to downgrade the quality of their mobile broadband services.

After reading the consultation document, I’m disappointed by the new Government’s lack of ambition for rural areas. (The same is true of their latest plans – or rather lack of plans – for bringing superfast fixed broadband networks to rural areas).

Although the 3G spectrum auction raised £22.5 billion for the UK Government and increased the number of UK mobile networks to five, the provision of rural 3G coverage has been a washout. What a shame that some of this large Government bounty was not sacrificed in return for ensuring widespread 3G mobile broadband availability through more stringent licence conditions.

In its latest consultation, Ofcom is proposing a minimum coverage obligation for 800MHz licences. This would require a minimum downlink speed of 2Mbps for 95% of the UK population. Ofcom believes that will result in coverage of future mobile broadband services that “approaches” today’s 2G coverage by the end of 2017. So, by 2017, LTE coverage will not even match today’s 2G coverage levels and the minimum downlink speed of 2Mbps is much lower than LTE is capable of delivering. These targets show the same lack of ambition as previous proposals.

Ofcom expects mobile operators to start rolling out 4G networks from the start of 2013, and to start offering 4G services to consumers perhaps later in 2013. LTE services have already been launched in the USA, Japan, Finland, Sweden, Norway and Denmark. In Sweden, TeliaSonera plans to offer 99% LTE population coverage by 2012 (when the UK spectrum auction will have only just taken place).

Another missed opportunity.

Dr Mark Heath co-founded Unwired Insight in 2001, to provide analysis and market intelligence for the mobile telecommunications industry. Previously he contributed to the standardisation of GSM, UMTS and DECT and held senior roles for a mobile network operator and equipment manufacturer. Mark has written over 40 industry reports and has advised investors, network operators, equipment vendors, lawyers and government bodies.

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