British Regulator Investigated Over Low 4G Auction Revenue

judgecorp writes "Ofcom, the British telecom regulator, raised £2.3 billion in the 4G spectrum auction when the government had hoped for £3.5 billion. Now Ofcom's auction is being investigated by the National Audit Office over whether it provided value for money for the British taxpayer. Ironically, the auction resulted in a low price but spread the bandwidth amongst rival firms, and so provided better value than if the auction had created a partial monopoly or (as happened in the 3G auctions in 2000) gouged as much money as possible from the operators leaving them unable to actually build a network."

Comments

Policy

[AmiMoJo]

The Tory party sold off publicly owned infrastructure for a fraction of what it is really worth. Is anyone surprised?

Re:Policy

[maroberts]

The Tory party sold off publicly owned infrastructure for a fraction of what it is really worth. Is anyone surprised?

Um its an auction, companies bid what they think it will take to get the goods and beat competitors. You can't blame the government if the price fetched at a competitive auction is lower than expected. A kneejerk "blame the Tories for everything" reaction is what keeps them in power, because people see how shallow the argument against them is. If you really want someone else in, you have to say how you could have done better.

Also the high auction price of 3G last time slowed its deployment and arguably the development of 3G services in the UK. Hopefully the fact that companies have not bid as much this time allows them to invest more. If the companies make more money, then they will presumably pay more tax in the form of Corporation tax in the long run, and perhaps have more employees also paying income tax.

Re:Policy

[Xest]

It wasn't the Tory party that sold it off, it was Ofcom, but you can guarantee it's the Tory party that instigated this investigation.

Osborne factored the income from the auction into his budget to mask a shortfall in his budget to try and maintain the facade that he is economically competent and reducing the deficit. The problem is now, as the money that has actually come in is over £1bn lower than expected, his books now will struggle to balance so he's more likely to end up failing to hit his target yet again of deficit reduction.

There was nothing wrong with the auction, but Osborne is just upset he's going to have egg on his face that his attempt to mask a shortfall in his deficit reduction plan with a one off windfall (rather than do something that will reduce the deficit perpetually) has failed.

For what it's worth though it's not as if it's just the Tories that do this sort of thing that's bad for our country- Brown for example gave away billions of our EU rebate under some misguided delusion that France would then give up some agricultural subsidies which of course they didn't, and have only sought to increase them. Both Labour and the Tories are equally guilty of throwing money away, so don't try and make it about this part or that, they're all just as incompetent.

Re:Policy

[Xest]

"Exactly what makes you think that an economy in the grip of a 4 year recession about to hit it's third dip, recovering less well than it did in the 1930s is the right time to continue with GDP shrinking austerity?"

Why assume austerity is the only method of deficit reduction? investment can increase growth which will in turn increase tax receipts which will in turn reduce the deficit.

Deficit reduction doesn't have to be just about making cuts.

Re:Policy

[FireFury03]

That being said I'm generally against selling off publically owned infrastructure since I have rarely seen it work out well and it tends to end with some form of cartel that effectively has a license to tax the public. In this case selling the spectrum was the thing to do, unless you want the govt. to' do what? Rent it out?

I think whether selling off infrastructure is a good idea depends on whether it can sensibly turn into a competing market.

A good example is the rail network - there is only one rail network, which means that you can't have competition (if I want to make a long distance journey between two cities, I don't get to choose between lots of competing operators - there is one company that operates that route and I'm stuck with them, which means no competition and that's bad for the customer). This has resulted in a very bad situation for the public - the British rail network is an unmitegated disaster these days.

Although, that said, despite the phone network being a similar situation, that seems to have worked out surprisingly well (despite the fact that we're mostly stuck with using BT for the local-loop, and they are utterly utterly incompetent).

Broken window falacy, again?

[Stolpskott]

Quoting from Ofcom on the suibject...
"Ofcom said that the aim of the auction was not to generate revenue for the government, but to promote competition that will ensure consumers will benefit from the rollout of 4G services."

However, I would be willing to bet my mortgage and my left testicle that the mobile carriers will say "this service is x% better than the 3G network, so we need to charge the consumer at least x% more than they paid for 3G services" irrespective of the relative cost of the 3G and 4G services to the provider.
Ofcom's approach is a nice idea, if the savings from reduced licence cost are passed on to the consumer, but in related news it has been discovered that the problems with the Curiosity rover on Mars are caused by the fact that the water we were hoping to find there is actually Champagne, and the rover is currently detoxing in a Martian Alcoholics Anonymous facility before resuming its place as a productive member of Martian society...

Reducing the cost to big business in the hope that there is a trickle-down effect will not see all of those savings go in Management bonuses at the mobile companies, but considering that the expected revenue will now have to be made up by the British taxpayer, the net result will be a win for the business and a loss for the man in the street.

Re:Maybe it'll end up being costing the customer l

[Anonymous Coward]

Five companies is not competition. That's a club.