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
    +2

    Comment number 735.

    The mobile companies overpaid for the 3G spectrum, only a blind man would fail to see that they would pay as little as possible for the next spectrum auction.

    The OBR wants to take a good look at the predictions that is makes.

  • rate this
    +2

    Comment number 734.

    The landowners who own the Mast sites which the companies operate from should force these parasites companies to pay huge rents for the use of their valuable land!!

  • rate this
    +2

    Comment number 733.

    Well I can honestly say that I'm pleased with getting nothing but negative reaction to my comments on this because they were all based of actual facts! It also proved to a degree that the ups or downs don't really mean a dammed thing & that quite a few are very blinkered & brainwashed, I don't mind that at all ;) in fact it's even given me some ideas for further exploitation of the human race!:)

  • rate this
    +3

    Comment number 732.

    The UK used to be ahead of the game, but we are now rapidly falling behind, mostly due to the farce that was the 3G auction, which consumers are still paying for today. Lets not forget that 2.34bn equates to 40 quid for every man, woman and child resident in the UK - you'll be paying for that in your phone bills.

  • rate this
    +1

    Comment number 731.

    1 Day, we'll be able to climb a mountain in Cumbria, take
    2 special lenses in our spectacles to look at a
    3D presentation of the scenery that is sent to us via
    4G and which scores
    0 in comparison with the real thing.

  • rate this
    -4

    Comment number 730.

    728.David H
    Lot of comments about no signals at home..!!
    I have "Barely to None" of a signal at home
    Still use my mobile in the normal way to make and receive calls.
    I just use an "EE" provided app for Android to connect via WiFi.
    =======
    My son did just that using an app to connect via our Wifi but now I get warnings from BT that the service will be cut off because of excessive usage!

  • rate this
    -2

    Comment number 729.

    @728.David H
    It's not really a mobile if you have to 'plug it in' though is it? It's a bit like being sold a car that you have to push! :)

  • rate this
    +1

    Comment number 728.

    Lot of comments about no signals at home..!!
    I have "Barely to None" of a signal at home
    Still use my mobile in the normal way to make and receive calls.
    I just use an "EE" provided app for Android to connect via WiFi.

    The other operators provide options that plug into your BB router,
    but I think they charge for those boxes. The app was already on
    my EE SGS-II.

  • rate this
    -7

    Comment number 727.

    I said I wasn't going to waste my time with this again but although I don't normally read the DM here's a clip for the fans of 4G, please take note of the words you read! http://www.thisismoney.co.uk/money/markets/article-2252151/Mobile-networks-face-600m-year-fees-spectrum-auction-4G-services.html

  • rate this
    -4

    Comment number 726.

    Easy to see the Tory Trolls are out in force downgrading any government criticism. Looking at some of the comments moderated on here really does look like the BBC is now Cameron's poodle.
    I really don't understand the vitriol on here between Labour and Tories given that both parties have been pursuing the same policies of destroying the UK over the last 50 .

  • rate this
    +4

    Comment number 725.

    510. Dr Bob Matthews seems to have intentionally missed the point. Whether the revenue generated from the sale of 4G was £2.34bn or £22.5bn, it's relatively trivial to the amount of debt accumulated in the Labour years. Remember that the banks bailout cost a staggering £134bn but that's only a fraction of the trillion debt the country is now in. FYI, I don't have any political party affiliation

  • rate this
    -2

    Comment number 724.

    The thousands of mobile phone masts that are out there are nice little earners for land or property owners where they are sited.

    The problem is that there appears to be no partnership or cooperation between the mobile phone companies to share these masts

    Perhaps in the future every home would have a mini transmitter / receiver, connected to the telephone landline. Our network cover solved

  • rate this
    +3

    Comment number 723.

    for Whippet #580
    98% coverage of population is an Ofcom target.

    Paying your taxes does not get you a mobile phone signal as all mobile phone operators are private companies. You have to be a subscriber. I would like a cable connection but live in an area of low population density so no cable companies interested. Also poor TV and mobile reception, so paying tax does not fix any of this.

  • rate this
    +1

    Comment number 722.

    @715.CURTAINS 2012

    "A term much used by the late Terry Thomas "An absolute shower"."

    You dirty rotter!

  • rate this
    -2

    Comment number 721.

    I have my 3g in front of me right now & it's flicking from 3g to gsm as it usually does here, how can anyone try & sell me an upgrade when in the last 5 years they couldn't even sort out the promises they made selling me this phone & service for 3g in that time? Errmmm...4g?..Nah, I'll stick with my 'dinosaur' phone thanks!

  • rate this
    +2

    Comment number 720.

    The remark the jury's out just means that the left wing is jumping up and down shouting it's usual disagree, disagree, disagree but nothing else to put in it's place. Ignore them and they will go away.

    It does mean of course that this Government is up there with the movers and shakers and not stuck in negative like the loopy left who are stuck in the last years of Labour with no way out..

  • rate this
    -1

    Comment number 719.

    I have visited many parts of the Uk, town or country, where I cannot even get a phone signal, yet I hear nothing about the Government doing anything about this. For many people I suspect have no chance of getting a 4G signal. I have better phone and Internet signal in the mountains of Slovenia than in the UK, a third rate country run by fourth rate politicians

  • rate this
    +1

    Comment number 718.

    Vast swathes of rural Britain have no 3G coverage and many rural areas have no usable mobile coverage at all. It's high time the Government forced the operators to deliver to the digitally deprived instead of grabbing cash so the digital haves can have even more.

    Why on earth they were not forced to build one shared national network and compete over it is beyond me.

  • rate this
    -2

    Comment number 717.

    Sounds like a good idea and shows that we are keeping up with the latest technology.

    How it was aquired and hysterical questioning of the OBR's forecast is a smokescreen for the usual BBC, Labour, Sky, Channel 4 anti Government stance..

  • rate this
    -1

    Comment number 716.

    would be quite nice if they could get the current networks reliable, so you can make a call and not loose signal ! But if being able to watch TV and You Tube on my phone is the answer to this countries economic problems, then lets get on with it !! Smart Phones ? Sad status symbols, in reality !

 

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