'Disastrous' auction leaves half UK without broadband

The auction expected to give a quality boost to government coffers has turned out to be a failure, raising under half the money expected

The broadband fixed wireless auction ended in disaster Monday as only half of 42 licences were allocated, leaving swathes of the country without a connection.

As ADSL continues to attract bad press for slow rollout, high prices and limited range, broadband wireless has been heralded as a quick, cheap alternative to getting the UK wired to broadband. E-minister Patricia Hewitt looked forward to a "competitive" auction and anticipated its rollout would benefit both businesses and the "whole economy".

The reality has been somewhat different. Only 21 of the 42 licences were bid for leaving a long list of regions without coverage. Wales, Somerset, Devon, Dorset, Hampshire, Berkshire, Essex, Kent, Surrey and Sussex are among the areas unbid for.

Michael Wilton-Cox, principal analyst with Quotient Communications -- which advised government on its costly 3G auction -- believes people have been scared off by the threat of high prices. "The hype was that the overall income from these licences would be a billion pounds. Possible bidders were nervous about overstretching themselves and getting caught in a price war."

Worries that broadband is actually adding to the digital divide, concentrated as it so far is in metropolitan areas will not be helped by Monday's results. "The government wanted to get coverage for urban and rural areas and it is disappointing that only the large metropolitan areas have got licences," he said.

The government will be forced to rethink the way it distributes broadband licenses Wilton-Cox believes. "The government has to balance its desire to get wireless licences allocated with the need for fairness," he said. "It might now consider going down the beauty contest route but that might be considered unfair now especially as there was a ground swell of opinion wanting to go down the beauty contest path in the first place."

Wireless fixed broadband is aimed more at businesses than consumers but Ovum analyst Simon Dieppe believes consumers may benefit from the damp squib the latest auction has become. "The government was hoping this would be a let-off for the regions still waiting for ADSL. There will have to be a rethink now and it might well mean more pressure on Oftel to speed up the fixed line solutions," he said.

If the government hoped its latest auction would boost the £22.5bn it made from the 3G auction it will be disappointed, thinks Dieppe. "The money it has squeezed out of people is way below what they were hoping for. It is a bit of a disaster," he said.

The winners include Energis -- which won six licences in Greater London, Greater Manchester, the West Midlands, Yorkshire, Scotland and Northern Ireland -- Norweb Telecom, Broadnet UK and Eircom. E-minster Patricia Hewitt denies the auctions have been a disater, claiming in a press statement that "60 percent of the UK's population will have access to a new source of high speed Internet".

However she has commissioned a report on the outcome of the auction to look at how government can allocate the remaining licences. Thirty-eight million pounds was raised by the auction.

For more information see also the Broadband Access Guide

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