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UK smartphone users grew by 70% in 2010 (see chart 1), the fastest growth globally, according to data provided by Ofcom, the UK telecommunications regulator. Increased smartphone take up and penetration has driven greater demand for data intensive mobile content, following similar industry trends around the world. However, the UK has been relatively slow compared with other countries in adapting technology to increase the capacity and efficiency of existing wireless networks to address current and future consumer data intensive requirements. Therefore, Ofcom’s announcement that the UK’s 4G spectrum will take place in the first half of 2012, allowing for significant gains in capacity, should have been welcomed by the industry, but the date of the auction has been pushed forward to allow greater consultation with the industry.
For larger service providers, such as O2, the planned terms of the auction have come under criticism, as they are designed to ensure smaller operators such as Everything Everywhere are provided with a more balanced share of the required spectrum, reducing the competitiveness of the process. The auction process embeds spectrum floors, safeguard caps, and low reserve prices to allow the UK’s four mobile service providers (Everything Everywhere, O2, Vodafone, and 3) and potentially new regional entrants to have a balanced share in new capacity. This auction is for 80% more spectrum than the last 3G auction in 2000, which raised some £22.5bn. Yet the new auction is expected to only raise £2bn, in part due to the investment requirements from providers, but also because of the bidding process.
O2 estimates that 3 and Everything Everywhere (who have no sub-1GHz spectrum) could pay £1bn less in the auction process than if open bidding was allowed. Ofcom argues that the net beneficiary remains the consumer, helping the UK remain one of the most competitive telecoms markets in the world, but the debate, should it reach the EU, could significantly slow the take up of new technology.
It is unlikely that 4G technology will be available to the consumer until 2013 or 2014 at the earliest. Despite this, some providers have already planned to start investment. For example 3, which will seek to start investment in the second half of 2011. Although 4G technology will provide significantly more capacity for UK mobile phone operators, meeting future wireless demand will require additional improvements and expansion of current technologies, all contributing to large investment requirements for the sector in the coming decade. Globally, spending by wireless internet providers on infrastructure is expected to rise by 7.7% in 2011 to $43.2bn and will stay level over the next three years, according to research conducted by IHS iSuppli.
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Longview Winter 2011-2012, 25/01/2012