• Networks bid £2.34bn for 4G spectrum, over £1bn less than government expected
  • Lower bids and increased competition means lower costs for all customers
  • Three, Vodafone, and O2 join EE to switch on 4G networks  

Ofcom has announced that the auction of 4G networks in the UK raised £2.34bn, far short of the £3.5bn it expected to sell the spectrum for.

The news comes as a surprise but does mean that 4G networking will be cheaper in the long run as the winning bidders will charge lower prices to pay for using airwaves.

The winning bidders are Everything Everywhere; Hutchison 3G UK; Niche Spectrum Ventures, a BT subsidiary; Telefonica (O2); and Vodafone.

Everything Everywhere is the only service currently running 4G networking in the UK and EE is charging a considerable premium for its exclusive service. Hutchinson 3G UK (which runs the Three network) has already stated its intention to run 4G networks at comparable costs to its 3G networks.

See also: Three promises cheap 4G/LTE for no extra cost

The combination of lower license fees and extra competition will encourage other networks to lower their costs too.

Ed Richards, Ofcom chief executive, told the BBC that "we are in very, very different times", but he insisted that maximising the size of the auction was not the objective it was set by the government.

"What we were trying to do was ensure that a valuable economic resource was brought into productive commercial use" he said.

The radio spectrum in UK airspace is in limited supply, and many of the more valuable airwaves are used by the army and emergency services. The 4G spectrum that is becoming available is a result of the switch to digital television. The license that companies are bidding on will run for the next 10 years.

See: 4G launch will affect millions of TV sets

A total of 250 MHz of spectrum was auctioned in two separate bands – 800 MHz and 2.6 GHz. This is equivalent to two-thirds of the radio frequencies currently used by wireless devices such as tablets, smartphones and laptops.

4G LTE

Ed Richards, Ofcom Chief Executive, said: “This is a positive outcome for competition in the UK, which will lead to faster and more widespread mobile broadband, and substantial benefits for consumers and businesses across the country. We are confident that the UK will be among the most competitive markets in the world for 4G services."

“4G coverage will extend far beyond that of existing 3G services, covering 98% of the UK population indoors – and even more when outdoors – which is good news for parts of the country currently unserved by mobile broadband."

Ofcom says 4G will provide £20bn of benefits for UK consumers over the next 10 years. But the culture secretary, Maria Miller, is even more bullish, saying: "Spectrum use is worth more than £50bn to the UK economy and 4G mobile broadband is a key part of our digital growth strategy, so I am delighted the auction has been completed."

Vodafone bid £791m, the most of all the bidders, for fives chunks of spectrum.The winning bidders now have until 23:59 on 21 February 2013 to pay any outstanding sums to Ofcom for the spectrum they have won.

Winning bidder Spectrum won Base price
Everything Everywhere Ltd 2 x 5 MHz of 800 MHz and
2 x 35 MHz of 2.6 GHz
£588,876,000
Hutchison 3G UK Ltd 2 x 5 MHz of 800 MHz £225,000,000
Niche Spectrum Ventures Ltd (a subsidiary of BT Group plc) 2 x 15 MHz of 2.6 GHz and
1 x 20 MHz of 2.6 GHz (unpaired)
£186,476,000
Telefónica UK Ltd 2 x 10 MHz of 800 MHz
(coverage obligation lot)
£550,000,000
Vodafone Ltd 2 x 10 MHz of 800 MHz,
2 x 20 MHz of 2.6 GHz and
1 x 25 MHz of 2.6 GHz (unpaired)
£790,761,000
Total   £2,341,113,000