After all the speculation the pundits got it wrong. General expectations had been that there might be four or perhaps five bidders in Britain's upcoming auction. In fact there are seven - the usual suspects plus a couple of surprises. Martyn Warwick reports.
This morning the UK regulator, Ofcom, officially announced the names and identities of those companies bidding for 4G licenses in next month's bandwidth auction. They are Everything Everywhere (or EE as it now likes to call itself), Vodafone, Telefonica (Spanish parent company of O2), BT (which has been kicking itself since it foolishly sold off its mobile interests back when God was a lad and chips were cheap), PCCW of Hong Kong, Hutchison Whampoa (also of the ever so slightly mis-named Fragrant Harbour), and the comparatively unknown MLL Telecom, a company founded in 1992, that is backed by private equity and is headquartered inthe town of Marlow, deep in the English county of Buckinghamshire. It provides fixed and wireless services.
Announcing the contenders, Ed Richards, the chief executive of Ofcom said, "The 4G auction will be a competitive process that will dictate the shape of the UK mobile phone market for the next decade and beyond." He added that auction will herald in a new era of "better, faster and more reliable mobile broadband connections" for the UK. Well, it will for the percentage of the population that will get so-called 4G coverage. But not everyone will. Indeed, even after all this time not everyone in our crowded little island can get 3G!
The seven bidders will compete for licenses to operate services in two ranges of spectrum - one at the low-ish frequency of 800 MHz that has become available because of the switch from analogue to digital TV. The other one is in the high-frequency 2.6 GHz range. In total Ofcom is making 28 parcels of bandwidth available.
According to Ofcom, next month's auction will increase mobile spectrum availability in Britain by more than 75 per cent. The regulator has imposed a minimum a reserve price on the spectrum that is for sale of £1.3 billion but it is expected that considerably more than that will be raised when the bidding starts.
Indeed, in his Autumn Statement of a couple of weeks ago, George Osborne, the current Chancellor of the Exchequer (Finance Minister) indulged in the sort of creative accounting that would result in businessmen being hauled before the courts if they tried the same financial trickery. In essence, for political advantage the Chancellor anticipated that the 4G spectrum sale would provide him with a £3.5 billion contribution to help balance the government's books even though the auction is still to happen. Naughty George.
How many rounds the auction will run to and how much money the interested players will be willing to pony-up remains to be seen, but we will not see a re-run of the insane bidding frenzy that characterised our 3G spectrum auction back in 2000.
Then, at the height of the dotcom boom, the bidders believed that getting their hands on 3G bandwidth would, almost literally, provide them with a licence to print money and so they spent the astonishing sum of £22 billion and it crippled them.
The government was laughing all the way to the Bank but the successful bidders found themselves lumbered with massive debts that took getting on for a decade to clear their balance sheets even as the deployment of new infrastructure and services took much longer than they expected and was nowhere near as easy or as lucrative as they expected it to be.
And now here we go again with 4G - and it is to be hoped that lessons have been learned. The successful bidders will be granted their licenses in March with services to be launched in May and June. EE of course managed to jump the gun on its competitors and already a has a "4G" service up and running. However, it is very, very, very limited and apparently plagued with technical problems
Ofcom says it wants a competitive environment of "at least four credible national wholesalers of mobile services" and I am sure it does, but, as Mervyn Kelly from the network specialist company Ciena observes, "While the entry of new players into the spectrum arena will undoubtedly benefit the economy, it will be interesting to see how these companies go about installing their network infrastructure.
In a market that will only become more competitive, a robust and resilient network that can offer maximum capacity, low latency and maximum bandwidth will be essential to the success of all new entrants. This network will not only provide a solid differentiating selling point for new entrants, but will also be at the heart of providing the UK with a truly best in class 4G network.
With this in mind it will be interesting to see how the new parties proceed. The option to build their own state of the art networks to deliver a best in class 4G offering will take longer, but will benefit the country, particularly rural Britain, in line with Ofcom’s expectations.
Alternatively the companies could decide to lease their network and focus instead on building and maintaining their own mobile base stations, which would bring the competitive 4G market to fruition faster ensuring overall connectivity improves.
Whatever choice the new entrants make, ensuring their core network and mobile backhaul abilities are built using the latest and greatest network infrastructure technology must be at the centre of their plans. This will be critical to the UK developing a world beating 4G market place that can rolled out in an adequate timeframe and deliver effective solutions to every last corner of the UK."
Mr. Kelly is spot on with his analysis. A partial 4G solution is not an option if the myth of "Broadband Britain" is ever to be made fact.
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