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January 23, 2013 10:06 pm
The launch of superfast mobile broadband will benefit the public by £20bn during the next decade, according to the communications watchdog.
The auction for the spectrum to run 4G services formally began on Wednesday, with confirmation that seven companies would compete for the scarce bandwidth necessary to carry fast mobile internet services over mobile phones.
Ofcom calculates that £20bn benefit will come in the form of the saving consumers will make by having access to superfast mobile services. The regulator said the advantage to the public and the economy would “very significantly” exceed the immediate financial windfall raised by the auction.
Ed Richards, chief executive of Ofcom, said: “Ofcom’s 4G auction is designed to deliver the maximum benefit to the UK. We believe that this is likely to be at least £20bn over the next 10 years for consumers alone who will be able to access new digital services across the country.
“It will also make a very significant contribution to the UK GDP [gross domestic product] through new mobile revenues, employment opportunities and software development.”
There has been controversy over how much would be raised by the 4G auction. The government credited its books in December last year with the £3.5bn it expected to raise in the sale. However, Ofcom, which is running the auction process, would not confirm that figure.
That £3.5bn is broadly in line with analysts’ expectations, although is much less than the £22bn raised in the auction of 3G spectrum in 2000, at the height of the dotcom boom.
In response to an FT request, Ofcom said that its economists had calculated a £20bn consumer benefit during the next 10 years from the provision of 4G services. The regulator has used a ‘consumer surplus’ figure – a measure of the benefit that people gain from consuming goods and services – which is often adopted when analysing the impact of government intervention in markets.
The start of the auction will pit the four mobile operators – Vodafone, O2 , Three and EE – in competition to secure the prime lower frequency spectrum capable of carrying mobile internet services. The other three companies – BT, PCCW and MLL – are expected to bid for higher frequencies more suitable for local area mobile broadband.
The spectrum will almost double the airwaves available for mobile broadband services on smartphones, tablets and laptops. The complicated auction process will be carried out through secret online bidding during the next month.
“Today’s [Wednesday’s] 4G auction is a very significant milestone for the UK’s communications sector,” Mr Richards said.
“It will release the essential raw material for the next wave of mobile digital services. 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.”
At a conference in Oxford on Wednesday, Ed Vaizey, culture secretary, said that the 4G auction would “maximise the value and benefit of scarce spectrum resource”.
He added that there would be further spectrum made available to be better used in future, including that used by the public sector, which would be addressed in the forthcoming communications white paper.
The outcome of the 4G auction will mean competition for EE, the only group so far able to offer superfast mobile broadband services, which this week revamped its tariffs ahead of rival offers expected in spring.
The group cut the price of its basic 4G service, with a low data package of 500mb a month for £31 as well as a new tariff for “super users” at £46 a month for 20GB. There had been questions about the previous caps on data levels given that the use of 4G often greatly increases the amount of data used on a mobile device.
EE has not revealed how many people have taken up the service since its launch in November, which has caused some telecommunications commentators to question the success so far for 4G in the UK. EE has said that it is pleased with take-up so far.
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