Earlier today we reported on a study by IHS iSuppli that by 2016 the number of people using LTE service would close in on a billion. And now right on cue Independent UK communications regulator Ofcom has announced that bidding for the available 4G spectrum in the country has now finally begun. Currently only Everything Everywhere has LTE service which was achieved by refarming some of its existing 1800Mhz spectrum.
There are a total of seven UK bidders in this online auction which appears to be similar to a high stakes eBay bidding war. The players are as follows:
- Everything Everywhere (T-Mobile and Orange)
- HKT (UK) - a subsidiary of Hong Kong's PCCW
- Hutchison 3G UK
- MLL Telecom
- Niche Spectrum Ventures (a subsidiary of BT Group)
- Telef³nica UK
There are a total of 28 lots of spectrum in two separate bands 800MHz and 2.6GHz. The 2.6GHz band has the faster speeds while the 800MHz bandwidth was freed up when the UK's TV service went completely digital. Combined the bands add up to a total of 250MHz of spectrum in addition to the 333MHz which is already in use.
Ofcom has set up the auction so that no fewer than four different companies will have the ability to be legitimate national 4G wholesalers. Additionally the auction will take place on a "combinatorial clock" which will take place over several weeks:
"The auction proceeds through 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. There is then a supplementary round of bidding to ensure that all spectrum lots have been attached to combinations bid for and, therefore, that no spectrum is left. Having identified the winning combination of bids, Ofcom will then work out how much each winning bidder should pay using a so-called 'second price rule'," Each winning bidder will pay the smallest amount that they would have needed to bid in order to win - as on auction website eBay."
Pretty much what will happen is at the start of each round the governing body will set the starting price for each lot and the bidder will specify what they are willing to pay. These rounds will go on until supply meets demand. Ofcom has set a reserve price of £1.36 billion for the spectrum, with an expected £3.5 billion total coming in.
One last note: Unlike their previous 3G auction Ofcom will NOT be releasing daily bid totals.