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Regulator Ofcom has given the green light to the UK’s 4G auction plans, kicking off the first round of bidding that will see networks including Vodafone, O2 and EE splashing the cash in order to secure new chunks of spectrum.
If you’re imagining a crowded auction chamber with lots of gavel-banging, your fevered imagination is a little wide of the mark. Ofcom explains that the process will involve a ‘combinatorial clock’ format, in which would-be buyers say how much they’d be prepared to pay for combined chunks of spectrum at set prices.
The ‘clock stage’, which starts today, takes place over a number of rounds, with the watchdog raising prices for bits of spectrum that are in-demand in each subsequent round.
The bidding stops when ‘demand matches supply’, or in other words, when the amount bidders are happy to pay has stopped climbing. Ofcom then goes through a round of supplementary bidding, in which prospective owners can give a ‘best and final offer’ on any bits of bandwidth on the table.
Ofcom decides how much each bidder will ultimately pay for spectrum, with each party paying the minimum amount necessary to trump competitors. Just like with eBay bidding, you wouldn’t necessarily pay as much as you are ultimately prepared to pay.
In the final stage, winners bid for precise frequencies of spectrum and then finally competitors get to take home some glossy new bandwidth, with which to launch 4G services. Ofcom expects it to be “a number of weeks” before the final winners are known.
The key question currently is how much cash the auction will raise for the UK. £3.5bn is expected to be raised, but we may be in trouble if the final sum is less, as the government has already factored a £3.5bn payout into its budget predictions.
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