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Finns fail to warm to 2.6GHz auction

Ofcom: 'Gulp'

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Ofcom may be sweating at the news that the Finnish auction of 2.6GHz raised only €3.8m. The regulator is hoping to raise a lot more when the same spectrum is auctioned off in the UK next year.

Earlier auctions in Sweden and Norway raised €230m and €29m respectively, with the Norwegian figure reflecting the limited application of such a high frequency in a sparsely populated country. Those were a year or two back, but even changing economic times can't completely explain why the Finnish auction raised so little.

It seems several factors contributed to the low valuation of the Finnish airwaves: the lack of incoming competition, the history of beauty contests and a cultural reluctance to get involved in auctions.

The most important factor seems to have been the lack of competition. The band auctioned off this week was wide enough for all of the existing mobile operators to grab a share - with no newcomers bidding against them there was simply enough spectrum to go around, and the abundance reduces value.

Historically Finland awarded radio spectrum on a beauty contest basis: the regulator sets a price and companies come forward and explain their plans, and the regulator then awards the licence to the company it feels will offer the best service. That's "best" for the citizens, not the treasury coffers or company's shareholders.

Auction systems are less open to bias, or outright corruption, and much cheaper to organise, but not something to which the Finns are used and that may explain the reluctance to bid higher.

UK companies are well used to bidding for spectrum, but the abundance could well impact on prices paid in next year's super-auction which is intended to include the 2.6GHz spectrum that Ofcom has been trying to get shot of for the last few years, as well as the Digital Divided spectrum at 800MHz - selling a lot of spectrum in one go is going to reduce scarcity considerably.

The nice chaps over at PolicyTracker have done the maths: based on the price paid for 2.6GHz in Sweden Ofcom can expect to get just shy of €1.5bn, but using the Norwegian numbers the treasury gets less than €48m.

Officially Ofcom doesn't care how much an auction raises - the purpose is to ensure efficient use of spectrum not raise money for the exchequer. But in an election year you can be sure someone would find a use for that additional €1bn. ®

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