Industry cautious over 4G auctions

Following reports that spectrum auctions for '4G' technology could raise billions for the Treasury, the mobile industry says it won't repeat mistakes made with 3G
Written by David Meyer, Contributor

Spectrum auctions for so-called 4G telecommunications will not raise anywhere near the amount of money that the Treasury made from 3G in 2000.

That’s according to a variety of industry players, speaking following weekend reports that Ofcom’s upcoming spectrum auctions will make billions for the Treasury.

"The 3G era of paying billions is gone," said Steve Andrews, BT’s Group Chief of Mobility & Convergence, on Monday.

Speaking to delegates at the Wireless Broadband Access Forum in London, Andrews pointed instead to the money paid for GSM spectrum in the early nineties as an example of "sensible prices".

BT itself paid billions for a 3G licence for its mobile arm, BT Cellnet (now Telefonica’s O2), as did all the other UK operators. In total, the Treasury made £22.5bn from the 2000 auctions, a sum which to some extent reflects the dot-com boom of the times.

But the operators lost a lot of money in that deal, particularly due to the time it took for the technologies involved to reach commercial maturity.

"People are now a lot more intelligent about the timing of when they can launch," Dean Bubley of Disruptive Analysis told ZDNet UK on Monday.

"There was an assumption that 3G would have immediate returns… operators getting licences this time will have to build a five-year delay into when they can use the network properly," he said.

Referring to the "awfully long time" it took for operators to see a return on their investments in 3G, Bubley added: "People know how long it takes to get networks rolled out and standards nailed down".

Last week, six of the world’s top operators (including Vodafone, Orange and T-Mobile) formed a consortium to tackle such issues, dubbed the Next Generation Mobile Network (NGMN) Forum.

According to its Web site, the Forum seeks to "provide a set of recommendations for the creation of networks suitable for the competitive delivery of mobile broadband services and cost-efficient eventual replacement of existing networks".

Those networks constitute what is starting to be referred to as 4G, although the definition of that term remains nebulous, apart from the fact that it will operate at what are currently seen as very high speeds.

"4G will inevitably be used as a marketing slogan… You will see, in the same way you had GPRS being ‘2 point 5 G’, a lot of 3 point something Gs," said Bubley on Monday.

"Before [developing 4G], the operators need to step back and work on the network," Bubley added, continuing: "We’re going to get to [super-3G technologies] HSDPA and HSUPA and will have to stop to allow the plumbing of the network to catch up".

Bubley also argued that progress on 4G "depends on who’s got patents on what technology", suggesting that "European manufacturers do not want to be beholden to Qualcomm" — a reference to the chipmaker's recent court battles over its GSM-related patents.

Ovum analyst John Delaney called the definition of 4G "a matter of opinion".

Speaking to ZDNet UK on Thursday, he said there was some consensus that 4G would "involve WiMax in some way", but it would "definitely involve IP".

Deutsche Telekom’s Dr Volker Binder said on Monday that "a 4G network is more or less the best combination of different networks".

Telecoms regulator Ofcom is keen to point out that it is "technology neutral" and will be selling off spectrum — as it intends to do with the 2.6GHz band by the end of 2007 — without prescribing what it is to be used for.

"We’re not going out there saying this particular auction should be used for 4G-type services," an Ofcom spokesperson told ZDNet UK on Monday.

"We haven’t set any expectations on how much money we will generate. It’s entirely up to the market to decide how to price that spectrum [and] it’s up to the companies to develop their own business plans around that spectrum".

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