Plan C for failed broadband auction

The UK government is planning to hold a third auction of broadband fixed wireless licences, despite its second auction process having ended earlier this week without attracting a single bid.

The Radiocommunications Agency announced on Tuesday that it hoped to begin the new award process at the start of 2003. It is proposing that this time the licences -- which use the 28GHz spectrum -- will have less stringent conditions attached to them.

By removing the earlier "purpose of use" restriction and the ill-fated "use it or lose it" clause from the licence, the government believes it will encourage telcos to take part in the auction, which is likely to run for 12 months.

Experts believe, though, that significant interest in this third auction will come from 3G and DSL operators, rather than companies looking to provide broadband wireless access to consumers, as the government had hoped.

The restriction on the purpose of use meant that licence-owners could only offer services to end-users -- either homes or businesses, while the "use it or lose it" clause meant that licences could be revoked by the government if companies didn't roll out services. Licences acquired in this forthcoming third auction could be used for any legal purpose.

The Department of Trade and Industry has said that removing these clauses was in line with the recommendations of the review of spectrum management conducted by Professor Martin Cave earlier this year.

"We're looking to enhance the business case by allowing operators a more flexible use of the spectrum, and by letting licence winners offer services at a time when they think there is a demand," a DTI spokesman told ZDNet UK News.

Interested parties have until mid-November to respond to the government's plans.

Jan Dawson, an Ovum analyst, believes that the government's proposed changes will encourage interest in the 28GHz licences.

"You can't write this third auction off by saying that it will fail just because the first two auctions did, because the changes being proposed are actually quite important," Dawson said. "There are likely to be bids from firms who want a 28GHz licence for reasons other than to offer a broadband fixed wireless, such as 3G operators and companies who offer DSL-based broadband," he added.

Dawson explained that these companies could use the 28GHz band for their backhaul connections. For example, a DSL operator could use it to link a local exchange, rather than using BT's backbone network.

The removal of the 'use it or lose it' condition could also encourage firms to buy a licence even though they have no immediate plans to offer broadband fixed wireless. "A company who thinks that it might offer broadband fixed wireless in the future could buy a licence now just in case, if there's no danger of losing it by doing nothing in the short term," Dawson said.

One company who could use 28GHz for broadband fixed wireless is BT. It is currently conducting a trial of mesh radio, which could be used to supply broadband in areas where telcos are not prepared to offer DSL or cable-based broadband.

The "use it or lose it" condition had meant that a licence could be revoked by the government if the holder had not rolled out services to 10 percent of the population in its area within 18 months of receiving the auction.

However, this clause has already proved to be little more than a paper tiger. As ZDNet UK reported last month, most of the companies who won licences in the original broadband fixed wireless auction of autumn 2000 have still failed to achieve this minimum rollout, forcing the government to extend the timeframe by another 18 months.

This was just one of several problems to afflict the government's attempts to auction off the 28GHz band. The first auction process was slammed as a disaster when only 16 of the 42 licences on offer were taken up, leading to criticism of e-minister Patricia Hewitt from those who believed an auction process was the wrong way to allocate the licences.

After "discussions with industry", e-commerce minister Douglas Alexander decided in July 2001 to hold a second auction in an attempt to dispose of the remaining 26 licences. This process ended on 14 October without a single bid having been placed.

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