UK operators miss out in wireless broadband auction

As the UK's latest spectrum auction draws to a close, it is becoming clear that most of the British firms taking part are facing disappointment.

Hong Kong-based Pacific Century Cyberworks (PCCW) has seen off almost all its fellow bidders in the 3.4GHz wireless broadband auction, which kicked off on 6 June. This gives the company a clear run at offering high-speed wireless services to many of the UK's homes and businesses, but some say a costly mistake may have cost it the chance of offering a nationwide service.

By Monday afternoon, when round 35 of the auction had been reached, nine of the original 12 bidders had retired from the auction after being outbid.

In 11 of the regions, PCCW has been the only bidder since round 23 or earlier, meaning it has won control of these licences unless it decides to withdraw. It has already withdrawn from the Scotland licence after effectively winning it, which means it reverts back to the government to be disposed of later.

PCCW is still involved in a battle with another company, Red Spectrum, for the London licence.

The Southern licence, covering rural Southern England, is currently under the control of another company bidding under the name Public Hub. The Northern licence, covering Manchester and Liverpool, is currently back in the hands of the government after Red Spectrum, which was the leading bidder at the time, decided to concentrate its efforts on the London licence.

PCCW has been widely expected to try and win all 15 licences. This, though, is no longer possible.

Under the complicated rules governing the auction, bidders are allocated a certain number of eligibility points, which determine the maximum number of licences that a company is allowed to win. At the start, PCCW had 15 eligibility points after indicating that it was interested in bidding for all the licences and paying the necessary deposits.

Now, though, it is down to just 13 eligibility points.

According to one insider, PCCW erred during the bidding process. To keep their eligibility points, companies have to make a minimum number of bids in each round, and that number rises as the auction progresses.

Results that can be downloaded from the Radiocommunications Agency's Web site show that at round 24 PCCW -- bidding under the name Poundradio -- only made 13 bids. This means the company now cannot make more than 13 bids in one round.

This explains why Public Hub has not been forced to raise its bid for the Southern licence since round 23, why PCCW surrendered Scotland after effectively winning it, and why Red Spectrum surrendered Northern in an attempt to keep hold of London.

The Department of Trade and Industry was unable to confirm the suggestion that mistakes may have been made during the auction process. A DTI spokeswoman said that the DTI could not comment on the strategies used by the bidders.

PCCW could not be contacted, and has also did not respond to earlier requests for comment on the 3.4GHz auction.

It is possible that PCCW only ever planned to win 13 licences. However, without control of all 15 regions the company will not be able to offer nationwide wireless broadband services.

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