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Shadow media minister flags cost of 4G auction delay

Government is missing out on £300 million a year in 4G licence fees, claims Labour minister

Labour's shadow minister for media, Helen Goodman, has slammed the government's handling of the 4G spectrum auction, claiming that repeated delays are costing the taxpayer hundreds of millions of pounds in lost revenue each year.

According to Goodman, the Labour Party had the auction ready to go in 2010, but the Coalition government decided it was not able to support Ofcom's sale of 4G spectrum in the 800MHz and 2.6GHz bands at that time. The auction is currently scheduled to take place in the fourth quarter of 2012.

Goodman, who is also MP for Bishop Auckland, said the auction could raise between £2 billion and £4 billion in capital, and generate about £300 million a year in licence fees. She expressed disappointment that it has taken the government 18 months to get on with the auction.

"At a time of deep cuts to the public sector the government is in effect losing almost £1 million of revenue a day," she said. "We will be one of the last major countries in Europe to get 4G coverage, which is shameful because Britain is one of the largest producers of mobile phone technology."

The auction was originally supposed to take place in 2008, but a legal challenge by T-Mobile and O2, demanding clarification of any refarming of the 2G bandwidth for 3G use, delayed the process. The auction has since been repeatedly set back, as Ofcom tries to devise a strategy for distributing spectrum without giving any network operator an unfair advantage.

Ofcom's latest consultation document on the 4G spectrum auction, published yesterday, aims to extend 4G coverage in areas of the UK where mobile signal is particularly poor, or non-existent. It also reveals that none of the 800MHz spectrum will be reserved for the UK's largest network operator Everything Everywhere.

Ofcom's first consultation document guaranteed that Everything Everywhere would get a portion of sub-1GHz spectrum, to ensure it could provide 4G services after the auction. However, it has since been brought to the regulator's attention that Everything Everywhere already holds a significant amount of spectrum at 1800MHz, which can also be used for 4G, so Ofcom has withdrawn the guarantee.

Everything Everywhere has voiced its dissatisfaction with the new proposal, claiming it puts the company at a competitive disadvantage to O2 and Vodafone, because 1800MHz is less suitable for 4G than 800MHz spectrum.

"Ofcom is missing a huge opportunity for the UK to address the imbalance in sub-1GHz spectrum holdings, which has damaged consumer interests for the past 20 years - and is a situation which is now threatening to continue," the company said in a statement.

Everything Everywhere's new strategy is to steal a march on other operators by launching 4G services in the 1800MHz band, (currently used for 2G), ahead of the auction later this year. The company has formally asked Ofcom for permission to refarm its 1800MHz spectrum for 4G services, and the regulator says it is considering this application.

Meanwhile, Everything Everywhere is preparing for its own auction. The operator is required to sell a quarter of its spectrum holding in the 1800MHz frequency band, in line with conditions imposed on it as part of the regulatory approval for the merger of Orange and T-Mobile in 2010.

According to a report the Financial Times, Everything Everywhere's auction could raise up to £400 million, which the operator intends to reinvest back into the mobile network.


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