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Government and Ofcom reject O2 4G auction protest

O2 claims move will cost tax payer £1billion

O2's attempt to stall the forthcoming 4G spectrum auction has been rejected by the government and regulator Ofcom.

The Financial Times reports that the UK government has "warned" mobile operators not to embark on legal action that would delay the 4G auction.

The UK's culture department said it was important the mobile radio spectrum was released "as soon as possible".

Telefonica-owned O2 said last week that the auction - planned for early next year - was potentially "anti-competitive" under European competition law, as it would allow rival operators to grab spectrum under the 1GHz waveband at a cheaper price.

"We believe that the proposed spectrum floors are a state aid and are therefore illegal under EU law. The spectrum floors would distort the auction process, allowing all bidders, except Vodafone and O2, to potentially acquire spectrum at discounted prices. Ofcom's own figures suggest this effect could cost taxpayers £1bn." O2 claimed..Both O2 and Vodafone already hold some bandwidth under the 1GHz range, and Orange and T-Mobile are eager to buy 4G space in the sub-1GHz range too.

Ofcom published its bidding rules earlier this year, and O2 claimed they would allow competitors to grab the spectrum for £1bn cheaper in total, as those rules are designed to make it easier for all major operators to acquire sub-1GHz bandwidth for 4G services.

Ofcom said the main objective of its auction was to promote competition rather than maximise revenue for the government.

It told the FT, "We would of course stand ready to defend robustly our final decisions. But we consider that it is in the best interests of citizens, consumers and the companies operating in the sector that we move on, without additional delays, so that the frequencies can be put to good use."

The UK culture department said, "It is essential for consumers, the communications market and our wider economy that this spectrum is released as soon as possible."

Ofcom recently published research that says 4G mobile technology will deliver more than 200 percent of the capacity of existing 3G technologies, on the same amount of spectrum.

"4G mobile technologies will be able to send more information than 3G, for a given amount of spectrum. This increased efficiency means that 4G networks will be able to support increased data rates and more users," said Dr Stephen Unger, chief technology officer at Ofcom.

The next generation of mobile spectrum is due to be rolled out in the UK from 2013. It is expected to deliver broadband speeds close to those of ADSL home broadband.

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