UK LTE auction comes under spotlight over weak return

The UK's National Audit Office will investigate the recent LTE spectrum auction, which was completed in February after much delay and raised just £2.34 billion, £1.16 billion short of government forecasts.

According to a Guardian report, the NAO's auditor general, Amyas Morse, told the Labour MP Helen Goodman, shadow minister for media and communications, in a letter: "I intend to conduct a value-for-money study of [UK regulator] Ofcom's recent auction of 4G spectrum."

Goodman had complained that the government failed to get value for money from the project, "by not making maximising the auction's revenues an objective for Ofcom," according to the Guardian.

The Guardian noted that the NAO does not have the power to order a rerun of the auction. However, a report will go to the Commons public accounts committee, which in turn can censure the government and demand a response from the UK's chancellor of the exchequer, George Osborne.

An NAO spokesman told FierceWireless:Europe that the Office has made no public statement about its forthcoming examination of the 4G auction. "We are at present exploring what its scope should be and the timetable," the spokesman said. "When those points have been agreed by the Comptroller & Auditor General, we will make a short announcement on our website on the Work in Progress page."

One of the aspects the NAO is expected to investigate is the design of the auction, known as a "combinatorial clock auction" or CCA, which it believes did not deliver what it should have done.

Ofcom has defended the auction, meanwhile, saying it was designed to promote competition and ensure coverage rather than to raise money.

"The 4G auction was a success, which will deliver the maximum benefit to UK citizens and consumers--in line with Ofcom's statutory duties," an Ofcom spokesman told the Guardian. "It will create competition, with five companies able to launch competitive 4G services. This will lead to investment in new services, greater innovation and lower prices, plus enhanced coverage with a rule to cover almost all of the UK population by 2017 at the latest."

Indeed, Ofcom is already looking ahead to services beyond 4G: at the end of last year the regulator outlined plans to avoid a mobile "capacity crunch" and said it is "preparing plans now to support the release of spectrum for future mobile services, possibly '5G', when the spectrum becomes available."

A spokesman for the regulator downplayed a report in the Financial Times that suggested an industry consultation would be launched this week. "We expect to begin a review shortly, however," he confirmed to FierceWireless:Europe.

From a wider perspective, the planned investigation of the 4G auction by the NAO is one of a number of events that indicates increasing concerns over spectrum auctions, according to Coleago Consulting. For example, the Czech Telecommunications Office recently cancelled the Czech spectrum auction over "excessively high spectrum prices", and the U.S. Department of Justice Antirust Division made a submission to the FCC questioning whether spectrum auctions deliver the greatest societal value.

"While these events come from three different angles, they in effect question whether auctions are the best method of allocating spectrum to mobile operators," commented Coleago Consulting CEO Stefan Zehle. "Are we witnessing the beginning of the end of spectrum auctions?"

For more:
- see this FT article (sub. req.)
- see this Guardian article
- see this WSJ article (sub. req.)

Related Articles:
Analysys Mason: What the UK spectrum auction bid data reveals
Czech Telefónica's O2 sparks price war, drops phone subsidies
Czech regulator revamps spectrum auction, reserves 800 MHz block for newcomer
Report: Tele2 eyes LTE spectrum as Austria preps auction
Mallinson: Spectrum auctions need to generate investment, not just government revenue
UK LTE spectrum auction draws £2.34B, below government expectations

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