Who should we be rooting for in the 4G auction?
Last week, Ofcom announced what technology followers had been waiting to hear since last year, the 4G auction has begun. The government regulator has kept sternly tight-lipped on the proceedings commenting: ‘No updates on bidding activity will be provided until the conclusion of the auction’. This silence has curbed much speculation on which bidders will come out on top but surely we need to be asking: what will those that do win 4G spectrum do and what do we want from it?
The actions of the successful bidders will have a profound effect on the telecommunications industry and I don’t doubt that some scenarios will offer a much more favourable environment for the innovators in technology and business than others. So what would be the best outcome for the telecommunications industry and give a boost to UK plc. at the same time?
The three biggest mobile phone providers, namely Vodafone, Telefonica (O2), and EE, are expected to buy up most of the available spectrum as being left without a share in the new technology would put an end to their business in the UK. Once the auction concludes it is widely expected the mobile phone providers will act as quickly to roll out 4G, targeting customers with the hard sell. These prices will be high, as the cost of the auction is passed onto the consumer. Only if their pricing strategies falter and attract criticism (as EE’s have) and they fail to compete on prices and deals alone, we might witness more creative and innovative tactics.
To ensure that UK consumers continue to benefit from a competitive market, Ofcom has decided to reserve some of the available spectrum for a fourth national wholesaler other than the three largest mobile operators. With 28 sections of the spectrum on offer across two different frequency bands 800MHz and 2.6 GHz, the doors are open to Hutchinson 3G (Three) or, more excitingly, a number of new entrants with the potential to change the marketplace. It is with HKT (a subsidiary of PCCW Limited), Niche Spectrum Ventures (a subsidiary of BT) and MLL Telecom that the potential for a technology shake-up lies. Less caught up in the demand to deliver run of the mill mobile phone broadband for their data-hungry customers, these companies have the potential to create considerable impact on those who require fast internet speeds outside of consumers and personal usage.
MLL work closely with the public sector across Healthcare, the Emergency Services and Education, hinting that post-auction technology updates might reach industry areas other than private business. Strong connectivity and more efficient internet services could be a breath of fresh air for many of the public sector departments and encourage more of them to invest in better technology.
For PCCW, the Hong Kong telecom company, to win a portion of the spectrum may be an interesting win for UK business. 3UK was launched by investment from Hutchinson and both companies are ultimately controlled by the Asian magnate Li Ka-shing. This may be a new opportunity to bring further competition to the market through a new operator and if it focused on business customers, then with it’s established roots and strong connections throughout Asia it could open up potential affiliations with sought after UK commerce destinations including China. With a substantial business customer arm and business solutions, PCCW may also be a popular winner for businesses across the UK and allow the updated infrastructure to be available to businesses quickly.
Finally, BT is well known for its popularity amongst residential internet users and has a strong existing network in place. BT must surely regret the day it sold its stake in o2 so if it won sections of the spectrum, we should see much better integration between the UK fixed and mobile networks, and faster 4G connectivity for those who operate out of their homes in rural areas, either working for a business based elsewhere or as an entrepreneur/small start-up company. For those who do operate from home reliable and fast connections are essential in order to compete on the global stage.
Views on which of the potential outcomes are the most desirable will obviously differ based on the vested interests of the commentators expressing them and for my money anything that facilitates innovation, open competition and therefore growth is a big plus in my book. There are so many unknowns at this stage in the proceedings that speculators are starting to move away from what the companies will do with their new spectrum space and towards what the government will do with the accumulated cash.
The auction is expected to raise in the region of £3-4bn. While sceptics argue this will simply drop like a raindrop into the ocean of the country’s economic debt, prominent British scientists and technology experts are calling for the money to be reinvested exactly where it’s come from: technology and telecoms.
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