Ofcom Confirms 4G Auction Underway

The Ofcom 4G auction has finally started, after repeated delays and legal bickering over how the sale of spectrum would be carried out.

Seven bidders are currently fighting for airwave space, tabling their offers online over secure connections, Ofcom announced today. It will take several weeks until the winners are known, and no updates on bidding activity will be provided until then.

As announced in December, the list of bidders includes the top four mobile players – Vodafone, Telefonica O2, Everything Everywhere (or EE, as it is now known) and Hutchinson 3G UK, which owns the 3 brand. Niche Spectrum Ventures, a subsidiary of BT, backhaul specialist MLL Telecom and HKT (UK) Company, owner of wireless specialist UK Broadband, are also in the running.

Ofcom auction finally begins

These companies are bidding for 28 lots of spectrum in two separate bands – 800MHz and 2.6GHz. Together, the two bands will add up to 250MHz of additional mobile spectrum, compared to 333MHz in use today.

“This combination of low and high frequency spectrum creates the potential for 4G mobile broadband services to be widely available across the UK, while offering capacity to cope with significant demand in urban centres,” said Ofcom.

EE is the only provider currently running a 4G service in the UK, after Ofcom let it experiment with the slice of 1800MHz it already owns.

How it will work

The spectrum sell-off will be a “combinatorial clock” auction, where each bidder attempts to win a combination of spectrum lots from across both the 800MHz and 2.6GHz bands. “The auction lets people tell Ofcom what they would pay for specific combinations,” Ofcom said.

The opt-in stage took place on 18 January, when bidders eligible to win reserved spectrum (i.e. not Vodafone, O2 and EE) could choose whether they wished to bid for that spectrum.

Today, the clock stage started, which will involve a number of rounds. “At the start of each round Ofcom announces a price for each lot and each bidder then specifies what combination of lots they would most like to win at those prices. In each subsequent round Ofcom increases the prices for lots that have excess demand, until eventually demand matches supply. At this point the clock stage ends,” Ofcom explained.

Another round of bidding will see unsold lots going up for auction. Then each winning bidder will pay the smallest amount they would have needed to bid in order to win.

The total reserve price for the spectrum has been set at £1.36 billion, but the government is banking on a £3.5 billion windfall.

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