The upcoming auction of 190MHz of spectrum to support 4G and 5G mobile networks, 40MHz in the 2.3GHz and 150MHz in the 3.4GHz bands, will unfold through a two-stage process beginning on Tuesday 20 March, telecoms regulator Ofcom has revealed.
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The regulator has now set out the process by which it will sell off the tranche of spectrum, parts of which were formerly controlled by the Ministry of Defence – and the sale of which was first tabled six years ago as part of a drive by the then chancellor, George Osborne, to raise money for the nation’s coffers.
The auction will increase the airwaves available for use by mobile devices by almost a third, with the 2.3GHz spectrum forming the basis of an immediate expansion of 4G long-term evolution (LTE) mobile network capacity, while the 3.4GHz spectrum, which is not yet supported on mobile devices, will form the core of the UK’s first commercial 5G networks.
As previously revealed, five companies are taking part in the auction after Hull-based wireless provider Connexin dropped out. These are Airspan Spectrum Holdings, EE, Hutchison 3G UK (Three), Telefónica UK (O2) and Vodafone.
As demanded by the two smaller operators, Ofcom will place a cap on the amount of spectrum any one operator can hold after the auction, and EE will not be permitted to bid for any spectrum in the 2.3GHz band.
The auction itself will unfold over a two-stage process, with the first, principal stage involving a number of rounds. In this stage, bidders will start from a reserve price – set at £10m for each of four lots of 10MHz in the 2.3GHz band, and £1m for each of 30 lots of 5MHz in the 3.4GHz band.
If demand is equal to, or more than, the number of lots available, the price for each band will rise through each round until such time as there are no new bids. At this point, demand across all bidders will have matched supply, and the winning bidders will know what they have bought at the price of their last bids.
The second stage, called the assignment stage, takes place over a single round and will see the bidders vie to locate their haul at particular frequencies within the two bands. At this time, bidders will pay the price set by the highest losing bidder, known as the “second price” rule.
The whole process is likely to take several days, and in the past, spectrum auctions have taken weeks to complete, with the length depending largely on how much demand there is for the spectrum being made available. Ofcom will publish data on pricing and demand measures each day throughout the process.