Ofcom has set out plans for the 4G spectrum auction, scheduled for the end of 2012, stipulating that some of the available spectrum will be reserved for a fourth national wholesaler other than the three largest mobile operators - O2, Vodafone and Everything Everywhere.
The 4G auction will offer spectrum in at least two frequency bands - 800MHz and 2.6GHz. The 800MHz band is part of the 'digital dividend', and is ideal for providing mobile coverage over wide areas, while the 2.6GHz band offers high capacity.
The regulator said that UK consumers are likely to benefit from better services at lower prices if there are "at least four credible national wholesalers" of 4G mobile services. While the fourth player could be a new entrant, it is most likely that the spectrum will go to the UK's smallest operator, Three.
Three, which was founded in 2002 aand claims to carry 50% of the UK's mobile data traffic, currently only holds spectrum at 2.1GHz. The company is keen to get its hands on some sub-1GHz spectrum, which would give it greater coverage and penetration.
The spectrum bands will be auctioned to bidders as a series of lots. Ofcom has not specified which lot the fourth operator will get, which means there is no guarantee that Three will get any of spectrum in the 800MHz band.
"Ofcom's decision on the structure of the spectrum auction will have a lasting effect on the choice of services and value available to mobile consumers," a Three spokesperson told Techworld. "We are working through the detail of this very substantial document to evaluate what it means for both consumers and competition in the UK mobile market."
The communications regulator said the mobile spectrum being freed up in the 800MHz and 2.6GHz bands amounts to 250MHz - equivalent to three quarters of the spectrum in use today. This should allow 4G services to be rolled out to at least 98% of people in villages, towns and cities across the UK, according to Ofcom.
"The 4G auction has been designed to deliver the maximum possible benefit to consumers and citizens across the UK," said Ed Richards, chief executive of Ofcom.
"As a direct result of the measures Ofcom is introducing, consumers will be able to surf the web, stream videos and download email attachments on their mobile device from almost every home in the UK."
One of the 800MHz lots of spectrum will carry an increased obligation to provide a mobile broadband service for indoor reception to at least 98% of the UK population by the end of 2017 at the latest.
The same operator will also be required to provide the same indoor service to at least 95% of the population of each of the UK nations - England, Northern Ireland, Scotland and Wales.
Ofcom expects the auction process to start before the end of this year, with prospective bidders required formally to apply to take part. Those applications will then be assessed by Ofcom before the bidding phase starts, likely to be in early 2013.
Mobile operators are expected to start rolling out 4G networks using the auctioned spectrum from the middle of 2013, and to start offering 4G services to consumers later that year.
"Despite 80% more spectrum being available in this auction than during the 3G licensing of 2000, which famously raised Â£22.5 billion, this time it's likely to generate a mere fraction of that amount given both the use of spectrum caps (which limit how much each spectrum one operator can obtain), and a realisation from the industry that revenues aren't there to support such large outlays," said Matthew Howett, practice leader for regulation and policy at analyst firm Ovum.
"However given the insatiable appetite for data from consumers in the UK, we can be quite certain that it will be a hotly contested auction with all players keen to ensure they get adequate spectrum to support further growth in demand."