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Dismay, anger and threats of litigation Ofcom's best-case scenario

We didn't always auction off radio spectrum; allocations used to be by beauty contest. Companies would present a business plan and the one that made best use of the frequencies got the licence. The problem lies with beauty being in the eye of the beholder, and judging such competitions became increasingly difficult and prone to litigation when the losers took it badly. There were some attempts at a lottery-based system, but no one really takes that seriously, preferring to muck about with the packaging rather than the way in which it is awarded.

When the UK sold the 3G licences – an auction of such excess that the whole industry now finds it slightly embarrassing – the spectrum was parcelled into paired chunks (required for 3G telephony) and the parcels were then bundled into five lots: one for each of the existing operators and one for a new entrant. That model was echoed across Europe, which saw 18 new entrants, with seven of them still operating independently.

But these days Ofcom's policy is to let the free market decide, and rely on the flawed premise about auctions to ensure efficient spectrum utilisation (which is Ofcom's remit: competition is to be encouraged, but only because it encourages greater exploitation). The regulator is prepared to consider caps on ownership, ensuring that no monopoly exists, but that's as far as it will go in fiddling with the auction model.

The general consensus of the debate was that caps could work, as long as they are applied to low and high frequencies independently. This would ensure everyone gets a stab at some of that 800MHz goodness when it comes up for auction. Which is all good in theory, but when the actual numbers come out, the companies involved are unlikely to be so accommodating.

Ofcom's best-case scenario has its proposals greeted with dismay, anger and threats of litigation from everyone in the industry; that way we'll know the regulator isn't playing favourites, or that the favourites are complaining just as loudly as everyone else. ®

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