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Ofcom lines up multi-billion pound 'digital dividend' auction

But analysts warn against pure market-led approach

  • Guy Dixon
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Ofcom has unveiled plans to auction off the UK's radio spectrum to make way for a new wave of digital services that will be freed up following the analogue TV signal being turned off in 2012.

The multi-billion pound auction of the airwaves could usher in a raft of new services that include mobile and local TV, ultra-fast wireless broadband, more digital terrestrial TV channels, and low-power Wi-Fi appliances.

The 'digital dividend' auction is reminiscent of the 3G spectrum auction which netted £22.5bn from mobile phone companies in 2000. This time round auction winners will be allowed to trade the licence at a later date.

According to Ofcom, a 'market-led approach' is the most effective way to maximise the value of the freed-up spectrum to society, offering users the freedom to decide how spectrum is used and clear incentives to use it efficiently.

Ofcom singled out 'one compelling case' where the spectrum will be reserved to mitigate 'market failure' in an auction. The regulator has announced a 'beauty contest' over who will be awarded bandwidth in the programme-making and special events sector, which will use the spectrum primarily for wireless microphones.

Some industry watchers, however, have expressed concern that the market alone may not be able to ensure the best use of the spectrum.

Chris Williams, media and telecoms partner at Deloitte, has called on Ofcom and the government to consider an alternative model where public funding complements the regulator’s market-led approach.

"Broadcasting as well as other potential uses of the spectrum also produce socially desirable outcomes that would not be taken into account in the price bid in auctions unless there is explicit public funding," said Williams.

"Arguably, allocating the spectrum on the basis of a market-led approach, when combined with appropriate public funding, is the most effective way to ensure that the opportunity cost of using the spectrum is taken into account while the desirable social outcomes are delivered at a transparent cost."

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