Ofcom raises £2.34bn in 4G auction, less than forecast

 
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Telecoms regulator Ofcom has raised £2.34bn from its auction of 4G mobile spectrum, less than expected.

The Office for Budget Responsibility (OBR) had forecast that the auction would raise £3.5bn for the Treasury.

The winning bidders are Everything Everywhere; Hutchison 3G UK; Niche Spectrum Ventures, a BT subsidiary; Telefonica (O2); and Vodafone.

4G mobile broadband should provide smartphone and tablet computer users with superfast download speeds.

The auction netted far less than the £22bn raised from the 3G auction in 2000.

Ed Richards, Ofcom chief executive, told the BBC that the figure was lower because "we are in very, very different times", but he insisted that maximising the size of the auction was not the objective it was set by the government.

What is so great about 4G?

  • 4G promises superfast mobile broadband with speeds of up to 100Mbps - roughly five to ten times faster than current 3G networks.
  • This should mean you'll be able to watch TV, videos and movies on your smartphone or tablet computer without any annoying glitches in the picture quality.
  • You'll also be able to make HD video calls more easily and upload photos and videos to social networking sites in a flash.
  • People in rural areas with poor mobile connectivity should benefit from 4G's wider coverage, giving them mobile broadband for the first time.
  • But the jury is out on how much of a quality difference we will actually notice, especially if those "up to" speeds are rarely achieved, particularly in peak periods of high usage.
  • The jury is also out on how necessary 4G actually is - and whether it will be worth paying more for - given the proliferation of wi-fi networks at home, work and in high-street outlets.

"What we were trying to do was ensure that a valuable economic resource was brought into productive commercial use," he said.

The shortfall has important political implications, because Chancellor George Osborne included £3.5bn worth of 4G auction receipts in his Autumn Statement in December.

BBC political producer Andrew Fagg says this allowed Mr Osborne to play the "trump card" of predicting that the UK's budget deficit would fall in 2012-13.

However, economists have now pointed out that without that full amount, borrowing would have been going up.

"The lower-than-expected windfall means that all bets must now be off on whether the deficit will in fact come down," says our producer. "Next month's Budget will reveal the answer."

Responding to the announcement, a Treasury spokesperson said: "The £3.5bn number at Autumn Statement 2012 was certified by the independent OBR and based on external expert independent analysis based on similar auctions, including the last 3G one.

Start Quote

Even if the Treasury is disappointed, the auction may be good news for the 4G rollout. We can now expect plenty of competition to offer fast new mobile services across the UK”

End Quote Rory Cellan-Jones BBC Technology Correspondent

"The final auction revenue will be accounted for at Budget in the usual way."

The OBR in its turn said it had described the £3.5bn "Government's estimate" as "an area of particular uncertainty" in its December 2012 forecast.

But Rachel Reeves MP, Labour's shadow chief secretary to the Treasury, said: "This is yet another blow to George Osborne's failing economic plan. It shows how foolish and short-termist the chancellor was to bank this cash in the Autumn Statement to make his borrowing figures look less bad.

"He couldn't bring himself to admit that borrowing was up so far this year, but his trickery has now badly backfired."

Even senior Tories took the opportunity to criticise Chancellor George Osborne's figures.

John Redwood, MP, said: "The figure for the 4G auction was optimistic, just like most of the numbers in George Osborne's strategy. This is a dent, but there are far bigger dents in the public finances."

Radio frequencies

Ofcom says 4G will provide £20bn of benefits for UK consumers over the next 10 years.

But the culture secretary, Maria Miller, is even more bullish, saying: "Spectrum use is worth more than £50bn to the UK economy and 4G mobile broadband is a key part of our digital growth strategy, so I am delighted the auction has been completed."

Everything Everywhere chief executive Olaf Swantee: 'Auction pricing fair'

The regulator auctioned the spectrum in two bands, 800MHz and 2.6GHz, equivalent to two-thirds of the radio frequencies currently used by wireless devices, such as tablet computers, smartphones and laptops.

This "will allow 4G networks to achieve widespread coverage as well as offering capacity to cope with significant demand in urban centres", said Mr Richards.

"4G coverage will extend far beyond that of existing 3G services, covering 98% of the UK population indoors - and even more when outdoors - which is good news for parts of the country currently underserved by mobile broadband", he said.

Vodafone bid £791m, the most of all the bidders, for five chunks of spectrum; EE, the T-Mobile and Orange joint venture formerly called Everything Everywhere, paid £589m for four chunks.

EE was the first to launch a 4G service in late 2012, but has struggled to attract users, leading it to run a cut-price special offer in January.

Its chief executive, Olaf Swantee, said: "One in four consumers and businesses are already buying this service when they are in a 4G area."

 

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  • rate this
    +3

    Comment number 215.

    sparkymc, building penetration has to do with frequency of signal, 800 mhz will penetrate most buildings, does'nt matter if its 3g or 4g signal type.
    there are a lot of cretins out there commenting about a subject they obviously know very little about and understand even less.
    one of the reasons the uk is only just getting 4g is precisely because uk telcos paid so much for 3g, with borrowed money

  • rate this
    +3

    Comment number 214.

    A lot more successful than Gordon Brown's sale of the country's gold reserves!

  • rate this
    +2

    Comment number 213.

    207.Some Lingering Fog
    Tax rises for all will be the only option.
    -------------
    Tax rises are ALREADY the only real option - it's just that politicians - of ALL parties - are too cowardly to admit it.

  • rate this
    0

    Comment number 212.

    No1 cares about this 4G business... No1 can afford the phones to operate it anyway...

  • rate this
    -1

    Comment number 211.

    I think it is good news that they raised so little. The Telcos will not be indebted forever which will free-up money for infrastructure development and growth; who knows we may even pay less for such services. The government would have only squandered it on some useless scheme. The current government are only public schoolboys who believe they understand business but, quite frankly, have no idea.

  • rate this
    -1

    Comment number 210.

    Unless the pricing for 4G Services is considerably lower than the EE offerings I have no interest at all.

  • rate this
    -1

    Comment number 209.

    Right now that's sorted can we start the 5G process please?

  • rate this
    0

    Comment number 208.

    oooo so now we can stream films at £1000 per time LOL

  • rate this
    0

    Comment number 207.

    I don't know what Labour are being so smug about as when they return into Government in 2015 they will need all the money they can get their greedy little hands on.

    Tax rises for all will be the only option.

  • rate this
    +1

    Comment number 206.

    Seems that the only way forward in the UK for Mobile communications, is one that still takes us Backwards!!!

    It could have been £234 Billion raised by the auction, yet by the time that *most* of the UK gets 4G, the rest of the world will be on LTE Advanced & getting 1GB+ speeds!!!

    How about sorting out the (NOT) Fast Broadband, promised for home/businesses users, with the money raised... 1st!

  • rate this
    0

    Comment number 205.

    199. GP
    All comments proclaiming Osborne to be incompetent (when it's the OBRs figures we're talking about), lots of + ratings.
    __
    I am sure that had the bids come good, or gone over the amount already spent, it would have been a 'triumph for the Chancellor'.
    They didn't, so it's some else's fault (the OBR, aka his underlings).
    As I said before, teflon politics at its best....

  • rate this
    +1

    Comment number 204.

    The government should have made a condition of bidding that operators provide some mobile coverage - even if only the most basic coverage - for those of us who live miles from any mobile signal.

    That would saves lives.

  • rate this
    +1

    Comment number 203.

    "186.bro3886

    We do not need faster broadband. No matter how fast your internet connection you still function at 1x real time speed."

    Like Bill Gates saying no-one needs more than 640K memory.... It comes down to useful application of the technology. In the early days of 3G there was little demand for mobile data, now many take it for granted. 4G will open up more capacity and possibilties.

  • rate this
    +1

    Comment number 202.

    What a lot of people dont seem to realize is the 4G signal has much better penetration so you will get a much stronger signal indoors than 3G.
    Its not just about the speed.

  • rate this
    -2

    Comment number 201.

    oh what a shock, the government sell off something for peanuts to their rich mates who will go on to rape the wallets of the consumer.

    This isnt forgetting all the subsidies the governemnt will also throw out to their chums over the years to set up the infrastructure.

  • rate this
    +3

    Comment number 200.

    Some quite "black and white" people posting, don't post when you have no idea what your talking about. "Just fill in the gaps first" its not a colouring book, its a political and commercial mine field of planning permission, residents not wanting sites near them, 1 person living in the middle of no where wanting the teleco to spend 100k on a site just for them etc etc.

  • rate this
    0

    Comment number 199.

    All comments proclaiming Osborne to be incompetent (when it's the OBRs figures we're talking about), lots of + ratings.
    All comments reminding people that labour left a ludicrous budget deficit by criminal overspending and borrowing while the going was good, lots of - ratings.
    You can't have it both ways, criticism for critcism's sake has no credibility.

  • rate this
    0

    Comment number 198.

    When does 'this lot' stop blaming the 'last lot' for whatever they find unpalatable. A certain Mrs Thatcher, for those with memories rather better than a fish has, might be accused of starting off the whole shebang with her selling off the family jewels, creating an exploitative private grab everything culture and generally turning us into what we are today. You get what you vote for!

  • rate this
    -2

    Comment number 197.

    "The Office for Budget Responsibility"
    Haha, I do laugh every time I hear someone from OBR talking.

    I can't think of a single prediction they have got right. Not 1.
    In all seriousness, you'd have more accuracy from an Ancient Roman Augur interpreting future market trends based upon the flight path of a flock of birds.

    If you want make easy money, do the opposite of what the OBR recommends.

  • rate this
    0

    Comment number 196.

    189.old guy - this is in hand. The 4G signal filters - plug between the aerial socket and the cable - will be rolled out free of charge in affected areas, with budgets for engineeers to assist those who are unable to fit the filter themselves.

    191. Matt - We are at a juncture where more speed offers very little gain in terms of consumer benefits. 4G will likely be superceded in due course.

 

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