Low sales prompt auction probe

Patricia Hewitt: to investigate airwave auctions

The Government is rethinking its plans for radio spectrum sell-offs to ensure that the next sale is a success.

The first auction of broadband fixed wireless spectrum ended on Monday with many over 60% of the available licences unsold.

To ensure that forthcoming sales of three more chunks of radio spectrum avoid the same fate the Government is now looking at other ways of allocating frequencies.

Results of 28ghz broadband fixed access auction

Raised: £36.16m

On offer: 42 licences in 14 areas

Most popular areas (3 licences sold):

London, Manchester, West Midlands, Northern Ireland

Least popular areas (no licences sold):

Wales and, in England, South Central, South West, East Anglia, East Midlands

Industry bodies are repeating warnings to Government about the dangers of auctions and are calling for a fairer way of distributing licences.

The first Broadband Fixed Wireless auction ended on Monday, raising only £36.16m for Government coffers - barely 4% of the £1 billion that the 42 licences on offer were expected to fetch.

Bidding closed with 26 of the 42 licences unsold and concessions for areas including Wales and the South West failed to attract a single bid.

Danger plan

"I have asked for a report on the outcome of the auction to help us plan for future spectrum auctions," Ms Hewitt said on Monday.

Industry bodies say auctioning off the spectrum for the fixed wireless services was always fraught with danger.

"It comes as no surprise to anyone who understands the industry that it has ended this way," said Stephen Lowe, chairman of the Broadband Wireless Association with represents many of the companies who took part in the auction.

Many other European countries have already sold off the portions of radio frequency that Britain is only now selling. This has left many of the companies that took part in the UK's auction with little spare cash to bid in auctions said Mr Lowe.

He said the Association and the government's own research had alerted it to the risks of an auction but it pressed ahead regardless.

"We expressed our concerns to the government that this would happen," said Mr Lowe adding that the premature end of the sale shows that auctions do not always put spectrum into the hands of the companies that value it the most.

Sale selection

Now the BWA is pushing for future sales to be run differently. The government is planning three more spectrum sales in the 3.4, 10 and 40Ghz bands.

The association wants these sales to be decided by comparative selection. This involves the government assessing who can provide the best service and then giving licences to those companies. Mr Lowe believes that only by this method will rural areas be served with broadband net connections.

Firms offering broadband services via the airwaves claim to offer internet access speeds of up to 2 megabits per second, about four times faster than the high-speed landline service offered by BT.

But the government will work with private and public sector organisations to ensure high-speed services, known as 'broadband', can reach all parts of the UK through the airwaves, she said.

Monday's result follows a series of auctions of spectra throughout Europe which have reaped decreasingly small returns since the UK's £22bn windfall in April.