The UK’s National Audit Office (NAO), which scrutinises public finances on behalf of parliament, is investigating why the recent auction of 800MHz and 2.6GHz spectrum raised much less money than the UK Treasury had forecast.
According to a report by the Guardian, a UK newspaper, the NAO intends to conduct a value-for-money study of the auction process following a complaint made by Labour MP Helen Goodman, shadow minister for media and communications.
“By not making maximising the auction’s revenues an objective for Ofcom, the government has failed to get value for money on this project,” Goodman told Amyas Morse, NAO’s auditor general.
Ofcom, the UK telecoms regulator, completed the auction of 4G spectrum in February, raising £2.3 billion. That was £1.2 billion less than George Osborne, the UK Chancellor of the Exchequer, had budgeted for.
Apparently fuelling Goodman’s ire was Ofcom’s subsequent disclosure that the highest bids in the auction reached £5.2 billion. The regulator did add, however, that the figure was only theoretical since, according to the rules, the winning bid is modified to being only slightly more than the second-highest bid.
Goodman, as reported by the Guardian, said she welcomed the NAO’s intervention.
“It is entirely right that the National Audit Office has launched this investigation,” she said. “Serious questions must be answered as to why the Conservative-led government ended up £1 billion short of the estimate George Osborne had provided just months earlier.
“When the 3G auction took place, Labour ensured that maximising revenue was an objective. The Conservative-led government did not do the same for the 4G auction, which I believe was a serious mistake.”
For its part, Ofcom has defended the auction’s outcome. “The 4G auction was a success, which will deliver the maximum benefit to UK citizens and consumers – in line with Ofcom’s statutory duties,” said the regulator in an email to Mobile World Live. “It will create competition, with five companies able to launch competitive 4G services. This will lead to investment in new services, greater innovation and lower prices, plus enhanced coverage with a rule to cover almost all of the UK population by 2017 at the latest.”
Ofcom emphasised that the auction was designed to promote competition and ensure coverage, rather than to raise money. “These benefits will deliver significantly more value in the long term to the UK than simply the revenue raised in the auction,” the regulator added.
Olaf Swantee, chief executive of EE, a UK joint venture between Deutsche Telekom and France Telecom, also applauded the outcome of the UK 4G auction.
In a video interview with Mobile World Live, the boss of the UK’s largest operator said the pricing for the spectrum “was very much in line” with other European countries and is positive compared to the situation when 3G spectrum was allocated.
An enormous £22.5 billion poured into UK government coffers following the auction of 3G spectrum in 2000, making it an uphill struggle for operators to get a return on their 3G investment.
In sharp contrast to Goodman’s thinking, the Czech regulator recently halted the country’s 4G auction because bidding was too high.