Operators' 4G bidding war begins as Ofcom launches UK auction

By summer, the UK should have several operators offering 4G

An auction to determine how the UK's fourth generation (4G) mobile spectrum is shared among operators has begun.

Seven operators are involved in what communications regulator Ofcom has described as "a very significant milestone" for the UK.

The bidding will process take place online and last a number of weeks.

Ofcom has been criticised about how long the process has taken, with the UK lagging behind other countries that have already rolled out 4G.

4G offers much faster download speeds than 3G connections making it possible to stream high quality audio and visual content while on the move.

Industry leaders have also said 4G should significantly boost the country's economy.

Newly-available spectrums

The auction has been continually pushed back having originally been slated to begin at the start of 2012.

The delay was blamed on a need to consult further with operators.

In a statement to the BBC, Ofcom said: "Delays have been caused by a number of legal challenges and threats of future litigation from various companies seeking to defend their own commercial positions.

"These started as early as 2008 when we had originally planned to auction the 2.6GHz band of spectrum. However, regardless of this, the spectrum that we are auctioning could never have been used for 4G until this year, not least because the digital switchover needed to complete first to create the 800 MHz capacity."

However, Ofcom did give the go ahead for one operator, EE, to launch 4G in several UK cities last year.

It was able to use its existing spectrum to provide the service.

This auction, which EE is taking part in, is to determine how the newly-available spectrums will shared out - with operators hoping to be get large parts in order to offer greater capacity, and therefore gain more potential customers.

"It will release the essential raw material for the next wave of mobile digital services," said Ofcom chief executive Ed Richards.

"This will change the way we consume digital media in both our personal and working lives and deliver significant benefits to millions of consumers and businesses across the country."

The bidding process for the extra spectrum will be conducted in secret.

As well as EE, the other companies taking part in the auction are:

• PCCW, a major Hong Kong telecoms conglomerate, operating through its subsidiary HKT

• Hutchison Whampoa, another Hong Kong conglomerate and operator of the 3 network

• MLL Telecom, a telecom network supplier founded in 1992 and based in Marlow, Buckinghamshire

• BT, via its subsidiary Niche Spectrum Ventures

• Telefonica, the Spanish incumbent telecoms company that owns the O2 network

• Vodafone

Blame game

Matthew Howett, from the Ovum consultancy, strongly criticised the length of time it had taken Ofcom to get the auction underway, but said "everyone" was to blame.

"Firstly at one point Ofcom appeared to neglect how operators were likely to use the spectrum and initially failed to package it accordingly," he said.

"It was then the government who took their eye of the ball and didn't intervene at a crucial stage to keep things on track, and finally the operators themselves have at least been partially complicit in threatening to derail the whole affair.

EE launched its 4G service with tremendous aplomb - but rivals complained of an unfair headstart

"In the end it was quite simply a stroke of luck, a series of fortunate events that meant a way forward could be found."

That "stroke of luck" was largely in relation to EE's head start.

The remaining operators, annoyed at the possible commercial advantage EE would enjoy by having 4G first, threatened legal action against Ofcom.

After negotiations they agreed to back down - on condition that the auction process picked up pace.

Whether or not EE has enjoyed a boost in sales thanks to 4G is still up in the air - earlier this week it announced it was temporarily lowering its tariff prices, after criticism about their cost.

The winners of the 4G auction will be expected to launch their services by summer this year.