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LONDON (Alliance News) - UK telecoms regulator Ofcom Friday unveiled a new auction for spectrum that it said could be used to meet growing demand for mobile broadband services, although it left in place a mechanism that restricted the amount raised in its last auction whilst trying to make the rules clearer.
The new spectrum being offered is currently used by the Ministry of Defence, and is being auctioned as part of a wider UK government plan to free up public sector spectrum for civil uses.
Ofcom expects the auction of spectrum in the 2.3 gigahertz and 3.4 gigahertz bands to take place in late 2015 or early 2016. It said that whilst "no specific uses" for the spectrum have been prescribed, it will be likely of interest to the mobile industry as the frequencies are suitable for high data capacity.
The 3.4 gigahertz band is currently in use for 4G wireless broadband in six countries, including the UK, Canada and Spain.
Ofcom plans to auction a total of 190 megahertz in the two bands, which it said is equivalent to around three quarters of the airwaves it released through the 4G auction in 2013. It proposes auctioning the spectrum in 38 lots of 5 megahertz, with bidders allowed a minimum bid of four lots per band.
The regulator said that it is limiting operators mobile spectrum holdings to 37% of relevant spectrum in order to promote competition. Although Ofcom noted this would impose some constraints on the amount of spectrum that EE and Vodafone Group PLC can obtain, it will "still allow them considerable flexibility."
Ofcom has proposed reserve prices for the 2.3 gigahertz band in the range of GBP2.5 million to GBP5 million per megahertz lot, and GBP1 million per lot for the 3.4 gigahertz band, based on the prices paid for 2.6 gigahertz spectrum in the previous spectrum auction.
At Ofcom's last spectrum auction it raised GBP2.34 billion, less than the GBP3.5 billion chancellor George Osborne had budgeted for. Ofcom came under criticisms of 'over-engineering' the bidding process, leading to less money being raised, as winners were only required to pay a little more than the offer from the second highest bidder due to a 'second price rule.'
For the new auction Ofcom is recommending a sealed-bid, single-round format with a second-price rule for the assignment stage. Ofcom however, indicated that it has taken into consideration some of the "lessons learned" from the 2013 auction, based on feedback, including enhancements to "reduce the uncertainty associated with the second price rule."
Winning bidders at the last auction were EE, Hutchinson 3G UK Ltd, BT Group PLC subsidiary Niche Spectrum Ventures Ltd, Telefonic UK Ltd and Vodafone, which walked away with the most spectrum.
In Ofcom's proposal Friday it noted that it views "more interventionist options" as not justified, as the risk that they could prevent outcomes that might be beneficial for customers "outweighs our competition concerns." It believes its proposed cap is a "proportionate safeguard against future potential competition concerns."
"Today marks an important step in ensuring that the UK has sufficient spectrum to support our wireless economy," said Ofcom's Spectrum Group Director Philip Marnick in a statement.
"It comes in response to the fast pace of change and innovation taking place in the communications sector, which is placing increased demands on how spectrum is used by all industries. One important way of meeting this demand is making new spectrum available and its use as flexible as possible, Marnick added.
Vodafone shares were up 0.7% at 208.90 pence Friday morning.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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