Ofcom announces 4G licence auction

Jonathan Morris
March 22, 2011

Ofcom is to hold auctions in early 2012 for operators wanting to run 4G networks in the United Kingdom, with a requirement to have 95% population coverage by the end of 2017.

It will represent three quarters of the mobile spectrum in use today, and 80% more than the 3G auction that took place in 2000 and netted the Government a cool £22.5bn.

The former Labour Government was very fortunate to be able to attract a bidding war that saw networks paying over the odds for licences, which had the side effect of many networks having little money to spend on the building of the 3rd generation networks themselves.

With Germany raising an equally crazy ‚¬50bn, the networks eventually realised that they should bid less. Subsequent auctions around the world attracted less money, suggesting that the bidding for 4G licences won’t be anything like as profitable for the current Government.

4G networks are seen as vital to cope with the increase in mobile data usage on the move, for everything from video streaming to the use of social networking sites. To offer 4G services, Ofcom is auctioning off spectrum in two bands; 800MHz and 2,600MHz. The former is offered by reusing spectrum freed up from the switchover from analogue to digital TV.

Ofcom also wants to ensure that there are at lest four national networks, imposing limits on the minimum and maximum amount of spectrum any individual bidder can win. Other safeguards will be introduced to protect against longer term risks from any one licence holder having a disproportionate amount of spectrum.

Following the successful issuing of licences and the launch of 4G networks after the auction in Q1 of next year, each licensee will have to agree to reach 95% population coverage for mobile broadband by the end of 2017.

Although the promise of super-fast broadband will be enticing to consumers, not everyone is convinced that 4G will be the utopia that data hungry users are hoping for.

Stephen Rayment, CTO of BelAir Networks, a broadband network specialist, said: “Ofcom’s plans to auction the new spectrum is great news but this will not be the panacea for addressing the problems of data capacity faced by mobile operators. The £22 billion raised from auctioning of the 3G licences was largely a speculative move as operators weren’t completely sure how the spectrum would be used. It took nearly seven years and the launch of devices like the iPhone before demand for mobile data really started to take shape.

“Now, the vast surges in data consumption are wreaking havoc across 3G networks, particularly in areas of high user concentration. In fact, mobile data traffic is already on track to exceed the capacity that will be available in forthcoming LTE and 4G networks. Consequently, buying new spectrum is no longer a speculative move for mobile operators it’s an absolute necessity.

“The real elephant in the room is how operators ensure their networks can continue to cope with the increasing appetite for mobile data. Whilst the upgrade path from 2G to 3G consisted primarily of swapping base stations from their tower and rooftop mounting locations, this macro-cellular approach will barely touch the sides when it comes to data capacity. Operators know that smaller cells are the only sure fire way of deploying future networks capable of delivering high quality mobile broadband. The problem then is finding ways to mount, power and backhaul the additional base stations required for small cell architectures.”

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