NAO report estimates that Ofcom could have made £160m more from UK 4G auction

The National Audit Office (NAO) has delivered its verdict on Ofcom’s job with the 4G spectrum auction in the UK, and while it broadly approved of the funds raised, the watchdog had caveats – and noted money was lost due to Ofcom’s treatment of network Three.

In a report to Parliament, the NAO’s headline statement was that Ofcom had “achieved its objective of maintaining a competitive market with a number of competing providers in the first major sale of radio spectrum in over ten years.”

The NAO also said that the cash the auction brought in – £2.4 billion – was comparable and generally in line with the sums achieved in other European 4G sell-offs. But the NAO then made it clear that it isn’t possible to judge the actual success of the economics here, not until we see how the network providers who picked up the spectrum actually put it to use.

That was caveat number one – the second caveat was regarding Ofcom’s move to reserve spectrum to ensure that operator Three (or other minor players) wasn’t totally pushed out by its three bigger rivals. Three did indeed nab this spectrum, but the NAO reckons that proceeds were £159 million lower than they could have been without Ofcom’s intervention in this manner. (That’s according to figures provided by The Smith Institute).

Ofcom, of course, would doubtless have been aware of this anyway – and made the move looking at the broader picture of ongoing competitiveness in UK networks. And that will of course have a bearing on the future economics of the market.

In response to the NAO’s report, an Ofcom spokesperson said: “We are pleased the NAO recognises our auction achieved its objective of promoting competition in the 4G market. Consumers are now enjoying the benefits, with coverage rising fast and operators competing on price. 4G take-up in the UK is among the fastest in the world, with around four million people already using the technology.”

Ofcom's original target for the 4G auction was £3.5 billion, mind you...