Let's Try This Again: UK Regulator Revises 4G Auction Terms For Q4 2012

While some operators in some countries (like the U.S. and Japan) have already celebrated birthdays for their LTE services, 4G in the UK hasn’t even been born yet. But now at least it looks like we might have a due date. UK regulator Ofcom today set out new proposals for a 4G spectrum auction to take place sometime in Q4 2012, which could mean the first 4G services coming to market in mid-2013.

This 4G auction — covering unused spectrum in the 800MHz band, along with higher-frequency airwaves in the 2.6GHz band — had previously been scheduled for the first quarter of 2012, and for those keeping track was talked about as early as 2009. Ofcom had to delay that when major operators protested Ofcom’s proposals for how it would allocate spectrum (the combined JV of Orange and T-Mobile and their existing spectrum presented one issue; another was how Three, the smallest of them, would get a fair shake). The regulator’s priorities are to make sure that there are four strong competitors, but it also wants to ensure that it raises the highest amount of money possible from those operators in exchange for the licenses.

The 3G auction in UK in 2000 raised a ridiculous amount of money for the UK government: £22.47 billion ($35.4 billion), with Orange, Vodafone (NYSE: VOD) Airtel (now just called Vodafone), O2 (then owned by BT (NYSE: BT) and called Cellnet), One2One (now known as T-Mobile) and new entrant Hutchison Whampoa (now called Three) all winning spectrum. Operators in the UK and elsewhere in Europe ended up having to write down some of the value of those costly 3G projects.

The advantage of a delay is that it has given Ofcom a chance to revisit some of the requirements that it will put on would-be 4G operators. It should be noted that so far it is staying out of saying what kind of services should run on those 4G networks, although it looks like LTE is the most-preferred technology among those operators.

And the disadvantage of the delay? Despite the UK government’s constant claims of being a digital leader, the UK is not very trailblazing in this case. Ofcom notes that mobile data demand in Europe is expected to grow by more than 500 percent in the next five years. For those in the UK who like to use mobile services, hopefully this delay to 4G auctions and commercial rollouts will be the last.

Some of the highlights from the consultation released by Ofcom today (full documentation can be found here):

98 percent cover: Ofcom proposes that 4G services will cover “at least” 98 percent of the UK population. That’s higher than 3G today, and represents an increase on the 95 percent requirement originally laid out in Ofcom’s first consultation. The UK government is investing £150 in building out coverage to “not-spots”, and one option Ofcom lists is to potentially link up one of the bidders with this government scheme to support that rollout. It will effectively mean that more remote parts of the UK will be using mobile broadband in place of fixed broadband to be connected.

Competition: This time around, Orange and T-Mobile are bidding as one in their Everything Everywhere venture, bringing the existing mobile network operators down to four, not counting the possibility of another company emerging and bidding for spectrum. Ofcom said today that it believed “at least four” was the right number of operators in 4G to ensure effective competition.

What’s interesting is that Ofcom proposes keeping aside some of the 2.6GHz spectrum for a group of new entrants to use for new services (such as those on educational campuses). It’s not clear whether that group would count as one of Ofcom’s “at least four” operators and what other allowances they might get.

New deadline: Interested parties now have 10 weeks to comment on these proposals with a final decision coming in 2012 and the auction starting a few months later.