Although Chancellor George Osborne is unlikely to raise
anywhere near to Gordon Brown’s £21bn for 3G licences, I believe he may do
rather better than is being reported. Recent
auctions in Europe have raised £3bn which suggests that the UK 4G licences will
achieve £3.5bn. However, it is suggested
that Private equity firms, retail groups and banks as well as international
telecom players have entered the fray alongside the UK’s Big Four mobile
operators, EE, Vodafone, O2 and Three to win a slice of these 4G licences.
Ed Richards, chief executive of Ofcom, the telecoms
watchdog, said that it had “fired the starting gun” on an auction process that
would “release crucial capacity to support future growth, helping to boost UK
productivity”. Even in these recessionary
times, the total U.K. Internet traffic is currently projected to increase by an
average of 37 per cent each year until 2015. Although the majority of traffic
remains on fixed networks, traffic on mobile networks is growing at a faster
rate of 84% year-over-year and is expected to account for 11% of total traffic
by 2015.
Mobile access to the Internet accounts for even more time spent
browsing, communicating, and transacting than this traffic data suggests, with
fixed lines being used to consume bandwidth-intensive services such as video
and mobile used more for social media. Indeed, the Internet is increasingly
being accessed on mobile devices, whether through mobile connections or Wi-Fi
networks, and the next generation of mobile communications of 4G will continue
to shift this dynamic and economists have suggested could add as much as 0.5%
to GDP in infrastructure investment alone not to mention the enhanced
capability of the mobile web usage.
The superior quality of coverage and speed of performance
offered by 4G’s 800MHz network offers significant improvement over the current 3G
licences. This superior system will add
significantly to the opportunity for both network providers and service
providers to make significant revenue.
The UK is one the largest mobile internet markets and consequently the
opportunity to own a slice of this
market will in my opinion drive the value of these licences far beyond the
projected £3.5bn and along with the additional impact 4G will have on the UK
economy, the auction could bring a welcome additional windfall for Mr Osborne.
