The U.K. telecommunications regulator, Ofcom, has unveiled plans for an auction of bandwidth for the next generation of mobile phones and computing devices.
Planned to start in the first quarter of 2012, with the hope that services will be able to commence a year later, the auction will enable the U.K. to finally get started with so-called fourth-generation, or 4G, mobile communications technology.
With the massive growth in popularity of smartphones, iPads, and the like, extra bandwidth is desperately needed, and 4G technology will cater for download speeds of up to 100Mbps -- which seems lightning-fast today, but I expect in another 10 years or so, we'll be complaining about how slow it is.
Biggest so far
It will be the U.K.'s biggest auction of the airwaves to date, and will sell off large chunks of bandwidth used by the rapidly disappearing analog TV network. In total, approximately 180Mhz of bandwidth will be up for grabs, around the 800 Mhz and 2.6GHz frequencies. That's nearly twice the 100MHz offered for 3G networks in 2000.
It really doesn't seem like 10 years since the U.K. took a lead in the 3G business by auctioning the bandwidth for that generation. But it really is that long since 22 billion pounds was raised for the government of the day.
That was a huge amount of money to pay (stupidly huge, according to many commentators), but at the time, and with the technology boom in full swing, the major telecommunications providers felt they had no option but to cough up whatever it took to get their slice, or fall hopelessly behind the competition.
But 22 billion pounds spent on licenses was 22 billion pounds that couldn't be spent on building the actual networks. And that, together with near-intractable arguments over the ownership of future bandwidth, has seen the U.K. has fall behind in the technology race since those heady days of a decade ago; 4G networks are already installed and working in the U.S. and Japan, and parts of Europe are well on the way.
Bidding restrictions
But this news means we can play catch-up now, and the U.K.'s four mobile network operators, Vodafone (NYSE: VOD), O2, 3, and Everything Everywhere (the snappy name chosen for the merged Orange and T-Mobile networks), are likely to go after as much as they can get.
But this time round, there should be no fears of anyone being left empty-handed -- a fear voiced by the smallest operator, 3. To maintain competition, which it believes will be damaged if the number of network operators falls below the current four, Ofcom will bundle the newly available bandwidth into packages, imposing minimum and maximum limits on the amount that any one network can bid for.
And, crucially, the regulator will ensure that all bidders can get a portion of the 800Mhz chunk, which will be essential for longer-distance rural 4G penetration. The 2.6GHz spectrum will be used for short-distance, high-traffic, urban areas.
Of course, some will complain that things should be left open to the free market, but ultimately, Ofcom is charged with maintaining competition in the industry, and any kind of monopolistic dominance would hurt consumers.
In addition to the bidding restrictions, with the new licenses will come obligations to commit to rural coverage, and it is hoped this will bring 4G networks to around 95% of the country.
No massive windfall
Although the chancellor would no doubt be gleeful to see such a huge sum once again fall into government coffers, Ofcom will be keen to avoid a repeat of the crippling sums paid last time round.
The proposed packaging and limitations should avoid the overheated bidding we saw before, and a number of commentators are suggesting we will be unlikely to see a total sum of more than 10% of the 22-billion-pounds 3G total -- which would be pretty much in line with the experience of Germany's 4G auctions last year, which raised a bit more than 4 billion pounds.
Is this a new and more affordable kickstart to the U.K.'s mobile phone businesses? Is it time to buy telecom shares? Do let us know what you think, below.
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