U.K. 4G/LTE Spectrum Bidding Gets Underway, Networks Expected To Launch By Late Spring/Summer

It’s taken a long time for the U.K. telecoms regulator to be in a position to fire the starting gun on the auction for 4G-suitable spectrum but bidding to acquire the up to 250 MHz of additional mobile spectrum in the 800Mhz and 2.6GHz frequencies has now got underway.  The total reserve price for the spectrum has been set at £1.36 billion — but the U.K. Treasury has already factored £3.5 billion from the spectrum sale into its policy decisions.

Bidding is taking place online, using specially developed software and a ‘combinatorial clock’ auction format. The winners won’t be named for a “number of weeks”, as Ofcom notes the bidding will continue over several rounds, and no updates on bidding activity will be provided during the process so that bids remain confidential to reduce the risk of strategic bidding distorting the outcome.

Once the winners are determined, and fees are paid, licences will be granted — with carriers then able to start rolling out new 4G networks. Ofcom is expecting that services will be launched by a range of providers from late spring/summer 2013.

The full list of bidders are:

  • Everything Everywhere Limited
  • HKT (UK) Company Limited (a subsidiary of PCCW Limited)
  • Hutchison 3G UK Limited
  • MLL Telecom Ltd
  • Niche Spectrum Ventures Limited (a subsidiary of BT Group plc)
  • Telefónica UK Limited
  • Vodafone Limited

Everything Everywhere — now rebranded to EE — already has a 4G network up and running, in refarmed 2G spectrum from its existing spectrum holdings, but the company may feel it needs to acquire more spectrum to bolster and build out this network. Or EE may simply wish to participate in the bidding process to ensure its rivals pay a competitive price for the spectrum they need to build their own 4G networks. It generally benefits carriers to hold spectrum in a range of frequency bands — as some bands can travel longer distances so are suited to rural coverage, for example, while others are high capacity meaning they are suited to dense inner cities areas.

Telefónica, the parent company of the O2 carrier brand, and Vodafone are both bidding for spectrum needed to run 4G networks. Smaller carrier Hutchison 3G is also bidding — despite acquiring a portion of spectrum from EE that is suitable for 4G services.

Another bidder — Niche Spectrum Ventures Ltd — is a subsidiary of telco BT Group, which operates a Wi-Fi hotspot network in the UK so may want to supplement that with 4G cellular access.

Ofcom said it has designed the auction to ensure that at least four different operators have sufficient spectrum to be “credible national 4G wholesalers” — arguing that this level of competition is more important for consumers and the UK economy as a whole than any “immediate financial benefits from revenue raised by the auction”. More than four bidders could achieve spectrum holdings from the auction when it concludes — indeed all seven bidders could acquire some spectrum — but of that number four bidders would hold enough spectrum to be able to launch a “credible” national 4G network should they choose to.

Bidders are competing for 28 lots of spectrum across the two separate bands (800 MHz and 2.6 GHz) — and specifically for a combination of spectrum lots from across both bands, so that no one bidder can walk away owning the lion’s share of one of the bands.  The auction process involves bidders telling Ofcom what they would pay for specific combinations of spectrum lots.

Ofcom notes that the lower frequency 800 MHz band is part of the ‘digital dividend’ freed up when analogue terrestrial TV was switched off — which Ofcom describes as “ideal for widespread mobile coverage”. While it says the higher frequency 2.6 GHz band is “ideal for delivering the capacity needed for faster speeds”.

“This combination of low and high frequency spectrum creates the potential for 4G mobile broadband services to be widely available across the UK, while offering capacity to cope with significant demand in urban centres,” Ofcom adds.