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Spectrum

SlideshowUK's £1.4B '5G' auction looks bad for industry

Spectrum Holdings in UK (MHz)
Source: Ofcom, Light Reading.
Source: Ofcom, Light Reading.

Gabriel Brown 4/9/2018 | 5:31:23 AM
Re: Compare UK with Sweden and Italy Agree that spectrum fragmentation in the 3.4 to 3.8 band will be an issue in the UK.
Gabriel Brown 4/9/2018 | 5:29:41 AM
Re: Updates I agree on the new entrant issue. Maybe the classic auction format has had its day and some new thinking is needed. 

Coverage targets seems like a good thing, and would in theory, moderate the price the auction achieves. One problem is that MNOs have proven adept at gaming these targets.

Beauty contests also have problems and there's certainly no guarantee that investment saved in spectrum will be invested in the network -- multinational operators are as likely to bank the gains and allocate capital elsewhere.
petercf 4/6/2018 | 8:51:04 AM
Compare UK with Sweden and Italy Both Sweden and Italy are taking different approaches and in Sweden there will be a combination of block allocation and a geographical split with 100MHz almost reserved on a first come basis.

Of more concern in the UK auction and the subsequent 3.6-3.8GHz auction in 2H '19 is spectrum fragmentation - not one operator is going to be able to achieve a 100MHz 5G channel - the optimum as far as the vendors of 5G are concerned.
BNorthstream 4/6/2018 | 6:30:17 AM
Re: Updates The orgin of spectrum auctions is that it became to cumbersome for regulators to manage beauty contests since they many time became court cases with delays etc.. I would speculate that it would still be the case if we fully went back to beauty contest again. I believe though that a hybrid model could work based on coverage/service requirements and caped fees.

My main argument against spectrum auctions is that mobile has become a mature industry where the the barrier to entry for new players is so high that it's a given that incumbents are buyers of the spectrum.It will more be a matter of how the spectrum will be allocated between the incumbents.

Taxes should be predicatable and fair and I have a hard time seeing that spectrum auctions meet any of those criteria. Since they are set up in sophisticated auction systems it appears the outcome is always a surprise for the analysts and experts. One could argue that auctions fees dwarfs in total revenue for operators but it's an outlay of cash when you have won the license so it's definately impacting investments around the time period for auction. It is also punishing mobile since fixed does not having corresponding fees or auctions. 
Gabriel Brown 4/5/2018 | 11:19:13 AM
Re: Updates You could equally look at this the other way around: operators in the UK are confident enough in future demand to invest £1.4 blillion in spectrum. 

Given UK mobile retail revenues are ~£15 billion annualy, it's not a vast sum.

Auctions are intended to allocate spectrum to the party that can gain most economic advantage. It's not neccesarily the case that beauty contests are better for consumers overall. You pay tax one way or another!
iainmorris 4/5/2018 | 9:09:54 AM
Updates This story has been updated to include a table and graphic, as well as details of spending per MHz per capita, since it was first published.
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