Communications regulator Ofcom has announced five winners at the much anticipated 4G spectrum auction, which will allow for the widespread rollout of next generation mobile broadband services across the UK.
However, the value of the auction fell short of the government's estimates by a massive £1.2 billion.
The winners - Everything Everywhere, Three, Vodafone, O2 and BT - will collectively pay Ofcom £2.3 billion by the end of the week.
"This is a positive outcome for competition in the UK, which will lead to faster and more widespread mobile broadband, and substantial benefits for consumers and businesses across the country. We are confident that the UK will be among the most competitive markets in the world for 4G services," said Ed Richards, Ofcom Chief Executive.
"4G coverage will extend far beyond that of existing 3G services, covering 98 percent of the UK population indoors - and even more when outdoors - which is good news for parts of the country currently underserved by mobile broadband."
A total of 250 MHz of spectrum was auctioned in two separate bands - 800 Mhz and 2.6 GHz. The lower frequency 800 MHz band is part of the digital dividend that was freed up when analogue TV was switched off, and is ideal for delivering widespread mobile coverage, as it travels further and can easily penetrate buildings.
The higher frequency 2.6 GHz band is well suited for delivering fast mobile broadband in urban areas.
Upon announcing the auction, Ofcom attached a coverage obligation to one of the 800 MHz lots of spectrum, where the winner would have to provide a mobile broadband service for indoor reception to at least 98 percent of the UK population, and 99 percent when outdoors. O2 has won this lot and will be expected to fulfil the obligation by the end of 2017 at the latest.
A breakdown of the winning lots is as follows:
- Everything Everywhere won 2 x5 MHz of 800 MHz and 2x35 MHz of 2.6 GHz at a total cost of £588 million.
- Three won 2x5 MHz of 800 MHz at a total cost of £225 million.
- BT won 2x15 of 2.6 GHz and 1x20 of 2.6 GHz at a total cost of £186 million.
- O2 won 2x10 MHz of 800 MHz at a total cost of £550 million.
- Vodafone won 2x10 MHz of 800 MHz, 2x20 MHz of 2.6 GHz and 1x25 of 2.6 GHz at a total cost of £790 million.
On paper, those that won larger lots, for example 2x10 MHz versus 2x5 MHz, will be able to provide a faster 4G network. So, the likes of Three may have a slower network than O2 or Vodafone. Although this is still very much dependent on other factors, such as how close users are to the base station.
Victor Basta, managing director of Magister Advisors, a company that advises technology companies on their IPOs, was underwhelmed by the results.
"The disappointing revenues from the 4G auction, well below Government forecasts, are a reflection of the challenges that mobile operators face in growing revenues from their users in the social media age. Data-heavy social media services are causing huge growth in data traffic across mobile networks," said Basta.
"Mobile operators increasingly find themselves in a role that is about supporting end users' social networking habits, with little, if any, commercial benefit. Social networking has effectively turning mobile network operators into digital drug mules."
Although the auction has now concluded, Ofcom still has to determine where in the 800 MHz and 2.6 GHz bands each winning bidder's new spectrum will be located. This 'assignment stage' will take place shortly, and once this is completed and licence fees have been paid, Ofcom will grant licences to the winners to use the spectrum.
Ofcom has also announced that it will be carrying out research towards the end of the year, with the results due to be published in spring 2014, to measure the performance of 3G and 4G networks. This research will be broken down by operator and will assess the average mobile broadband speeds received by 3G and 4G customers.
It is expected that the winners of the auction will begin launching 4G services within the next six months.
Ofcom has also said today that by 2030 demand for mobile data could be up to 80 times higher than today, and to help meet this demand, it is now planning to support the release of further spectrum for possible future 5G mobile services.
Everything Everywhere is the only mobile operator to already offer 4G services, after Ofcom ruled last year that it could use its existing 1800 MHz spectrum, which had been previously used for 2G services, for next generation mobile broadband services.