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What does the Ofcom 4G Auction Mean for UK Consumers?

Ofcom today revealed the results of the UK 4G mobile auction, announcing which providers have won access to the required mobile spectrum bands. The result of the auction is that operators Everything Everywhere Ltd (EE), Hutchison 3G UK Ltd (3), Niche Spectrum Ventures Ltd (a subsidiary of BT Group plc), Telefónica UK Ltd (O2) and Vodafone Ltd have all won blocks of the spectrum on offer, with Vodafone bidding the most to win five blocks of spectrum.

Notably, this announcement comes six months after Ofcom gave EE, formerly known as Everything Everywhere, the green light to offer 4G services on its existing 1800 MHz spectrum. EE’s commercial 4G service was first offered to UK consumers on 30 October, 2012 amid fears of the deal giving the company an effective monopoly over the initial 4G UK market. However, high pricing and lack of quality coverage has dissuaded many consumers thus far.

So what does the latest outcome of Ofcom’s 4G auction mean for the UK consumer? The simple answer: more choice. A larger number of operators offering 4G, expected in Spring/Summer of 2013, will mean that consumers will be able to pick and choose which services they buy, rather than be forced into a contract with the current sole provider, EE. A greater number of players present within the market will also lead to a higher degree of rivalry, forcing further downward pressure on EE’s 4G prices.

In fact, Hutchison 3G UK Ltd, which operates the mobile network commonly known as 3 in the UK, has already announced plans to charge existing 3G customers the same rate for 4G services, a stark contrast to EE’s initial strategy of applying a fairly hefty premium to 4G customers’ bills. Although other networks are unlikely to follow this same route exactly, 3’s low price strategy will surely enhance the affordability of 4G services for UK consumers, thus increasing the likelihood of improved consumer uptake in the near future. Price is certain to be a key factor in the success of 4G in the UK, which the government is hoping will become a major boon to the UK economy.

Interestingly, BT’s involvement through Niche Spectrum Ventures Ltd points towards another use for 4G: as a fixed line broadband substitute. It is likely that BT will utilize the spectrum won in the auction to provide high speed broadband services to rural areas that it will not be rolling out fiber to the home (FTTH) connections. Whether 4G as a substitute to fixed line services catches on amongst UK services will, again, depend on pricing and quality of coverage.

Although the UK has arrived fairly late to the global 4G party – such services have already been widely available in the US for over a year-  Ofcom’s latest announcement has surely given the UK market impetus as we enter 2013. A subsequent auction dubbed the ‘assignment stage’, where operators will bid for which blocks of spectrum they are allocated, will potentially establish which company will offer the best quality coverage for their new 4G services.

Regardless of which operator comes out on top during the assignment stage, 2013 is set to become the year that 4G services become widespread in the UK and, if prices are low enough, the market could be set to explode in the coming months.

Find out more on the UK mobile broadband industry in our Industry profile: United Kingdom – Mobile Broadband

For more updates on the technology and telecoms sectors, follow me on Twitter: @Matt_MarketLine

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