No bonanza for the government, but that might be no bad thing
Just under 13 years ago the fax machines at the Radio communications Agency were humming. For weeks they spewed out bids for five licences to run third-generation (3G) mobile-phone services. The sums went up and up: in the end 22.5 billion pounds ($35.9 billion) poured into Gordon Brown’s Treasury. For both companies and governments, these are more sober times. On February 20th Ofcom, the telecoms regulator (into which the agency was subsumed in 2003), said that an auction of spectrum to be used for much faster 4G services had raised only 2.3 billion pounds.
No one had expected another bonanza, but George Osborne, a chancellor of the exchequer who needs the cash much more than Mr Brown did, had been counting on 3.5 billion pounds. The outcome might be less welcome to the Treasury, but it is better for the industry—and perhaps its customers, too.
Ofcom declared five winners: the four companies with 3G networks plus BT, Britain’s biggest fixed-line operator. One of the four, EE, which is jointly owned by Deutsche Telekom and France Telecom-Orange, has been running 4G services since the autumn, having won permission from Ofcom to use spectrum it already had. BT has no plans to build a national mobile network, but intends to enhance its existing broadband and Wi-Fi services. Ofcom expects services on the new spectrum to begin in the spring or early summer.
The 3G auction came at the height of the dotcom frenzy, when inflated prices were being paid for assets in telecoms and information technology. The agency also reserved a block of spectrum for a new entrant: that intensified competition and raised prices across the board. Moreover, mobile operators reasoned that without 3G they would have no business at all. “The operators were paying for their survival,” says Matthew Howett of Ovum, a research firm. They were left without the money to deploy 3G quickly, to the disgruntlement of customers and shareholders. Others have proved more adept at providing other mobile services, such as search and music, than the operators were themselves.
Last time, points out John Delaney of IDC, another research firm, the British spectrum auction was one of the first. This time bidders have been able to gauge the going rate from sales in France and Germany. As a group, they have ended up paying a little less—although, in a complicated process, some seem to have done better than others.
Britain was slower to start deploying 4G than many other countries, but its ministers, regulator and operators are keen to make up the ground. Having avoided overpaying, the operators can now get cracking.