U.K. Consumers Underwhelmed By LTE Spectrum Auction

U.K. government was able to fund major social programs with the cash from its last big airwave auction, but expectations are much more muted as it prepares to open up LTE availability.
The bidding has just been officially opened for LTE spectrum space in the U.K. The state is excited, with national telecoms regulator Ofcom (the body organizing the sale) describing it as "the U.K.'s largest-ever mobile spectrum auction" and "the way citizens will acquire superfast mobile broadband services."

The government not only loves the idea, it has already marked the billions it expects to come into the Exchequer on what head politician for finance George Osborne, the Chancellor, told Parliament in December was a raft of "new capital spending" on things like education institutions. Presumably, the seven bidders for bandwidth are raring to go to.

The only group that isn't expressing any enthusiasm -- which could prove fatal to all plans and expectations -- is the U.K. consumer, which is basically saying 'meh' to LTE, or 4G as it's known in the U.K.

As stated, seven vendors have filed interest with Ofcom. These are Everything Everywhere (EE), a recent merger of France's Orange and Germany's T-Mobile U.K. businesses; HKT (U.K.), a subsidiary of PCCW; Hutchison 3G U.K.; MLL Telecom; Niche Spectrum Ventures (a subsidiary of the biggest U.K. telco, BT Group); Spain's Telefónica U.K.; and U.K.-German giant Vodafone.

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The vendors want to pay for a new set of frequencies that will almost double the amount of airwaves currently available for mobile broadband services on smartphones, tablets and laptops in the U.K. Ofcom's chief executive describes the plan as a way to "release the essential raw material for the next wave of mobile digital services." He says it will "change the way we consume digital media in both our personal and working lives and deliver significant benefits to millions of consumers and businesses across the country."

Meanwhile, Mr. Osborne is looking on from the sidelines, hoping that the seven vendors will essentially duplicate the last generation of spectrum price wars for 3G. In the late 1990s Tony Blair's New Labor government enjoyed a surprise 3G windfall of $35 billion (in 2000 dollar-pound conversion rates).

This time, however, not even Osborne is talking about that level of contribution to paying the national debt. Commentators and most policy makers see the likely check coming in more like $5.5 billion (£3.5 billion). That's partly by design; Ofcom says the emphasis is less on gouging the biggest price for the airwaves than on gaining at least four viable LTE suppliers able to make money at the end -- or, in its words, to gain "credible national 4g wholesalers" to ensure U.K. mobile Internet and phone service users get "better services at lower prices than most other countries in the world."

But fears are dogging the process, which is expected to take at least a few weeks, as it involves various rounds where bidders who find the table too hot can withdraw. The fears are over the real market impact LTE suppliers may find post-auction (services are expected to be launched by winners from as early as late spring/summer 2013). The fact is, the U.K. already has an LTE service -- and it's not doing so well. Last October, EE slipped under the radar, surprising its competitors and most of the market with the first 4G consumer offering.

But those customers were less than impressed with a pricing plan with no unlimited (eat-all-you-like) data consumption options, something they'd become very fond of with their 3G packages. Instead, users were offered a basic plan with an entry-level tariff of $57 (£36) a month and access to just 500 MB of data (equal to about one HD download of one TV program), rising to a capped monthly bill of $88 (£56) with an 8 GB limit.

The fact that less than 3 months later the firm is revising those plans -- with options ranging from 500 MB of data at $49 (£31) over two years with a cellphone priced at $47 (£30), to 20 GB of data with no handset for $73 (£46) -- suggests that consumer take-up has been lukewarm for these new services.

To be fair, some commentators say that the sale may be more about securing a bigger LTE/4G bridgehead in the U.K.'s fiercely combative mobile phone market ahead of rivals coming in post the auction. But despite a high-profile EE 4G campaign faced by Hollywood star Kevin Bacon -- who shows the kind of humor Brits lap up by being ironic about his roles and alleged "six degrees" super-connectivity status -- the move doesn't suggest rampaging U.K. take-up of LTE.

It could be a tense few months for the mobile Internet business in the U.K. -- and CIO plans to support such services or to prepare for the rising Bring Your Own Device move -- until the real appetite for British LTE becomes clear.

It could also put even more pressure on a government that really does need all the money it can get at the moment.

Mobile applications are the new way to extend government information and services to on-the-go citizens and employees. Also in the new, all-digital Anytime, Anywhere issue of InformationWeek Government: A new initiative aims to shift the 17-member Intelligence Community from agency-specific IT silos to an enterprise environment of shared systems and services. (Free registration required.)

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