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Funds raised by Ofcom 4G spectrum auction deemed acceptable by NAO

Watchdog's report concludes 4G auction was fair and competitive, but the jury's still out on its efficiency.

The National Audit Office (NAO) has concluded the amount raised by last year's 4G spectrum auction was acceptable, but stopped short of declaring the process economically efficient.

The Government spending watchdog launched a probe into the Ofcom auction in April 2013, which saw O2, Vodafone, EE, Three and BT stump up hundreds of millions of pounds to secure 4G spectrum in either the 800 MHz and 2.6 GHz bands.

The auction raised 2.34 billion. This was lower than the 3.5 billion the Office for Budget Responsibility predicted it would raise.

As a result, industry watchers were quick to condemn Ofcom's handling of the auction, despite the mobile regulator declaring at the time that the primary aim of the initiative was not to raise money.

The NAO published its report into the process yesterday, and said the amount raised was acceptable and in keeping with what other European countries achieved at auction.

It also reiterated Ofcom's earlier point that the auction's proceeds were not expected to hit a particular level.

"We compared the proceeds achieved with those obtained in other European auctions. After adjusting for population sizes, proceeds were within the range achieved in other European auctions," the report states.

However, the report does acknowledge that 159 million more could have been raised if the spectrum purchased by Three had been sold for more than its reserve price.

The report's aim was to clarify whether the outcome of the 4G spectrum auction will encourage competition between mobile providers, and investigate if the overall process had been economically efficient.

The latter point is something the NAO admits it is unable to clarify at present, because it's too early to assess whether the providers who were allocated spectrum via the auction have made good use of it.

"Whether or not the auction succeeded in allocating spectrum to those who can make best use of its will only start to become apparent as the spectrum is brought into use by the winning bidders," the report reads.

"As one of the conditions of the licenses awarded in the auction, Ofcom can monitor operators' use of the spectrum and operators themselves can now buy and sell spectrum to match their business requirements."

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