Commenting on industry regulator Ofcom’s plans to sell off 4G spectrum Ovum analyst Matthew Howett says, “Ofcom is attempting to deal with many very complex issues and effectively sets out to correct distortions that have arisen from previous spectrum allocations. By ensuring at least four operators can obtain spectrum after the auction is a clear admission that Ofcom values Three’s disruptive nature and role in developing a competitive mobile market. However, to achieve everything Ofcom is proposing in such a tight timescale is highly ambitious and could be set back by at least 12 months should any operator legally challenge the final outcome.
“The use of spectrum caps is bitterly controversial since they effectively distort what is otherwise a market mechanism designed to allocate spectrum to those who value it most. However Ofcom is essentially stuck between a rock and a hard place. If they were to leave the auction open they risk a player leaving the market and further consolidation; possibly to the detriment of consumers.
“Whilst it will be the most significant auction for at least a decade, with 80% more spectrum available than during the 3G auctions of 2000, we are unlikely to see anything like the £22.5 billion bid during that time. A lot has moved on since then including the industry’s expectations of revenues from such data services.
“Given that the licenses could be indefinite in duration and not be taken back for spectrum management reasons for at least 20 years, the importance of getting things right now can’t be underestimated. Operators are likely to focus their response around the assumptions Ofcom has made on the minimum amount of spectrum needed to support the services they are planning to launch, and the overall caps these imply.”