Wireless broadband auctions: Round 2

After last year's failure to auction off the 42 broadband fixed wireless licences last year, the DTI is determined to do better this time. Auctions will start after new legislation comes into force next week

Legislation due to come into force next week will pave the way for the auction of the remaining broadband fixed wireless access licences, after last year's auction ended in failure.

The Wireless Telegraphy Regulations 2001 will allow companies to bid for the right to construct and operate high-speed wireless communications services in various parts of Britain. This could increase the currently disappointing take-up of broadband Internet services in the UK.

Only 16 of the 42 licences were awarded after the earlier bidding process, which ended in November 2000. E-commerce Minister Douglas Alexander has now announced that the remaining licences will be made available again. This process will begin later this month and run for up to a year, depending on how much interest the cash-strapped telecom industry shows.

The licences give a company the right to offer high-speed Internet connections to consumers and companies within a certain geographical area for the next 15 years. These connections should provide data rates in excess of 2Mbits per second -- fast enough to support video conferencing and streaming video.

Unlike the forthcoming 3G mobile phone networks, users won't be able to move around while using the service -- the receiving equipment will need to be pointing at a base station, and probably bolted to the side of a building.

Analysts believe that the licences could be an attractive long-term business proposition. "If the telecommunications industry wasn't in such a bad way then I think the licences would be bought very quickly," said Tim Johnson, principal analyst at research group Ovum. "I still think they will be taken up".

According to Johnson, technical challenges mean that the infrastructure needed to operate 28GHz networks is prohibitively expensive. "Today, companies can't buy the equipment they will need at a reasonable enough price to offer services at a commercially attractive price," he said.

Industry experts predict that these costs will come down over the next couple of years, helping to make 28GHz a commercially-attractive alternative to ADSL.

For this reason, companies shouldn't be put off from making a long-term investment in broadband fixed wireless. "If it takes three years to get a network built then you've still got 12 years in which to offer high-speed Internet services to customers," Johnson said.

Twenty six licences covering ten different regions of the UK are available. For example "Region D" is made up of the Isle of Wight, Hampshire, Berkshire and Oxfordshire, while "Region J" is made up of Lancashire, Cumbria, Tyne and Wear, the Teeside area, Northumberland and Durham. Some regions have three licences available, while others have only one or two.

Bids must be in excess of either £1m or £2m, depending on the region. Companies will be able to place an opening bid any time between mid-October 2001 and October 2002. If, after 20 business days, no other company has expressed an interest, then the licences will be awarded.

If there is a second bid within the 20 day period then this will trigger an auction. Companies will then have to compete against each other in a series of bidding rounds.

By offering a twelve-month window of opportunity, the DTI hopes that companies will make opening bids when they think the market conditions are right.

In the past, the government has expressed the hope that broadband fixed wireless could offer high-speed Internet access in those areas that are unlikely to be served by ADSL, even in the long term. These areas include rural districts, and places with low population density.

Click here to read information from the Radiocommunications Agency about the 28GHz spectrum.

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