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4G auction raises £1 billion less than expected

Today was the day that Ofcom, the telecoms regulator for networks in the UK, auctioned off the 4G service which was previously only made available with new network EE, through an exclusivity deal. However, when George Osborne had predicted that the auction would raise the Treasury an estimated £3.5 billion, he hadn’t envisioned that the auction would only pull in £2.34 billion, over £1 billion less than he had hoped for.

It is good news for consumers however, as the 4G services will shortly be available through networks such as Three, O2 and Vodafone, who were some of the winning bidders in the auction. This competition will mean that providers will be fighting for consumer interest, with the likely result being a price war. Costs of contracts could potential come down from the prices EE had previously been offering when they had an effective monopoly on the spectrum. Of course, EE do still keep the right to the 4G services, meaning customers on Orange and T-Mobile (who form part of EE) will still be able to keep the speeds they have become accustomed to.

Although the initial budgetary figures laid out by Osborne seem to be optimistic, one of the factors that was taken into account was the figure raised at the last auction, when 3G was made available. That figure was £22 billion. Even with an estimate of £3.5 billion, that was still a huge cut in estimation for a superior service. But as Ed Richards, chief executive of Ofcom commented “What we were trying to do was ensure that a valuable economic resource was brought into productive commercial use”, insisting that gaining the highest bids possible was not the strategy the Government had set.

This is a bold move, but one that Ofcom believes will have many more financial benefits to follow. Due to the increased capabilities of the spectrum speeds, which is faster than the average UK household broadband, it is estimated that it will provide over £20 billion of benefits to UK consumers over the next 10 years. As far as the Government and Ofcom were concerned, auctioning off the spectrum to get it into commercial use was the most important part of the future UK telecoms strategy. Maria Miller, culture secretary said “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”.

Fingers crossed.

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