4G auction failure – is it a blessing in disguise?

I have been reading about the recent 4G auction and why it is now being investigated by the National Audit Office, as it failed to raise the anticipated amount the Government expected, in fact 3.5 billion less than they thought. To me that is astonishing, especially as the Treasury's forecast of £3.5bn from the auction was included in the Government finances in the autumn economy statement last December, which allowed it to claim that borrowing was falling.

We firstly need to ask why expectations were so out of line with the actual result. Well this could have been down to the fact that many of the mobile operators were unwilling to pay for what was offered to them, as the market is now just limited to the four major operators (Vodafone,3,02,EE) whilst in 2000 there were more than six bidders for the 3G auction.

That 3G spectrum was the only way for operators to provide consumers with the real opportunity to stream videos, use social media, share pictures, etc. It was a clear cut choice for operators in 2000 either join them or be left out, since many were unable to offer what was then high-speed mobile data on their existing network.

The auction structure for the 3G bidding deliberately pushed operators’ bids up and the Treasury happily pocketed £22 billion. But the industry suffered as a result of this and left many operators with huge debts.

Will the 4G scenario turn out the same? We are still in the early stages of seeing how 4G networks will develop and the UK’s mobile network infrastructure will no doubt need building on again just like it did for 3G in order for 4G to run smoothly.

In today’s market 4G isn’t the only offering available to consumers.  With Wi-Fi hotspots and 3G, consumers now have more choices to be connected.  Besides this, the market for mobile data services is now well-established, and the major four operators are now in an exclusive club which only argues to entertain an audience, and keep Ofcom from treading on their toes.

The very fact that the major operators got the 4G spectrum cheaper than the Treasury would have wanted them to, should actually come as good news for operators and hopefully consumers. Lower spectrum costs will mean that mobile data services should eventually be offered more effortlessly and at a cheaper cost.