It is 'almost inevitable' that the much-delayed 4G auction will be sent back to the drawing board and held up by more litigation from mobile operators who object to Ofcom's plans for the joint award of 800Mhz and 2.6Ghz spectrum, an analyst has predicted.
Analyst Matthew Howett, practice leader at Ovum, has criticised the government for not taking action to ensure the auction remains on track, and said that communications regulator Ofcom has created an auction process that is too complicated.
The auction was due to be held in the first quarter of 2012 to ensure the UK does not fall behind other countries in Europe who are already rolling out next generation networks. However, it was revealed in October last year that the auction will now be held in the final quarter of 2012 because of a number of complaints being brought forward by the UK's mobile operators.
Howett's comments come on the same day Everything Everywhere has launched a campaign to promote the importance of bringing 4G to the UK as soon as possible.
The company has unveiled a promotional website and some research that suggests the rollout of next generation mobile networks could add 0.5 per cent to the UK's gross domestic product (GDP) by the end of the decade, create 125,000 UK jobs and unlock £5.5 billion of direct private investment into the UK economy by 2015.
Initial proposals laid out by Ofcom have been altered through a series of consultations, but the main area of concern from industry players is the regulator's plans to allocate a minimum amount of spectrum to the UK's smallest player Three, in a bid to ensure effective competition in the market.
"The industry generally feels that the auction is very complex. The biggest opposition is still that Ofcom are guaranteeing Three access to some spectrum, and I can't see them scrapping that entirely," said Howett.
"Ofcom wants Three in the market. The problem is that the way Ofcom has done it with these minimum spectrum portfolios, is that they have made it a very complex auction, and that's not a good thing. You have got CEOs deciding whether or not to bid in a game that they may not fully understand," he added.
The only way that Ofcom would change the minimum reserve plans for Three, according to Howett, is if Three decided to buy some 1800Mhz spectrum from Everything Everywhere.
It was stipulated when Orange and T-Mobile merged to become Everything Everywhere that it would have to divest some of its 1800Mhz spectrum, which can be used for 4G services, in order to maintain effective competition in the market.
"If Three buy some spectrum from Everything Everywhere then we are looking at a different playing field. Ofcom has admitted that if Three did this then it would lose their protection in the award," said Howett.
"But whether Everything Everywhere would sell to Three, who knows, and whether Three wants 1800Mhz, I wouldn't like to say," he added.
Everything Everywhere is also pushing Ofcom to let it roll out 4G networks this year using its remaining 1800Mhz spectrum, which received initial support by the regulator, but faced heavy criticism from the other mobile players.
Howett suggested that Everything Everywhere's campaign should also serve as a wake-up call to the government who may need to step in and ensure the auction takes place sooner rather than later.
"Ofcom is already convinced that this should happen as soon as possible and they are doing everything they can to make that happen. However, unless there are some material changes to the current proposals (such as the removal of minimum spectrum portfolios), litigation seems almost inevitable," said Howett.
"I think the main player that needs to be convinced or lobbied is the government, and they need to be in a position to move if there is litigation. The industry wants to make it happen, they don't want to send it back to the drawing board."
He added: "I think that Ofcom is fully gearing itself up for further delays, but they have got to make sure that whatever final decision they come to that if it is litigated that they are confident that they will win. If they don't then this literally does go back to square one and it could be many years before we get to auction."