Investigation Initiated by National Audit Office Regarding Shortfall in 4G Auction
In a bid to allocate spectrum for mobile broadband services, including 4G and 5G, the UK's telecommunications regulator, Ofcom, conducted a spectrum auction last year. The purpose of the auction was to facilitate competition, support network development, and enable efficient spectrum use.
Compared to previous auctions like the 3G auction, Ofcom reduced mobile spectrum fees significantly. For instance, the fees for the 900 MHz band were lowered by about 26% to £1.03 million per megahertz annually. This reduction was influenced by changes in spectrum valuation, benchmarked against international auctions, and falling spectrum prices globally.
The government had forecasted higher revenue from the auction, but the actual outcome led to lower income, illustrating a market adjustment as demand and valuations for spectrum licenses evolved since the 3G era. The 4G auction, conducted by Ofcom, raised £2.3 billion for the Treasury in January, falling £1.2 billion below the government's forecast.
The long-term benefits of the 4G auction, as stated by Ofcom, are expected to be significantly more valuable to the UK than the revenue raised in the auction alone. The auction involved Vodafone, EE, Three, and BT, each acquiring parts of the LTE spectrum in the 800MHz and 2.6GHz bands, enabling five companies to launch competitive 4G services.
However, the lower-than-expected revenue from the auction has sparked controversy. Labour MP Helen Goodman complained that the government failed to maximize the auction's revenues by not making it an objective for Ofcom. In response, the National Audit Office (NAO) has confirmed that it will launch an investigation into the value-for-money of Ofcom's 4G auction.
The NAO's investigation, prompted by a letter sent by Amyas Morse, the NAO's auditor general, in response to complaints from Helen Goodman, will focus on the value-for-money of the auction. The investigation is expected to announce on its website what it will cover and when it expects to report.
Interestingly, the Dutch government raised more than expected when it held a 4G auction in December last year, earning €3.8 billion, compared to the €480 million it had predicted. This contrast highlights the complexities and variances in spectrum auction outcomes across different countries.
As the UK awaits the results of the NAO's investigation, the 4G auction remains a significant milestone in the UK's digital infrastructure development, setting the stage for the rollout of 5G services in the coming years.
The reduction in mobile spectrum fees during the 4G auction was partially attributed to changes in spectrum valuation, benchmarked against international auctions, and falling spectrum prices globally. Consequently, the government's anticipated higher revenue from the auction was not realized, leading to £1.2 billion less than forecasted.
The National Audit Office's (NAO) investigation, triggered by concerns over the auction's revenue, will center on the value-for-money of the 4G auction, with a focus on technology and finance sectors, given the influence of these industries on the auction's outcome.
