ZDNet UK / News and Analysis / Business of IT / IT Strategy

Government moves goalposts in broadband licence debacle

By Graeme Wearden, ZDNet.co.uk, 4 September, 2002 14:08

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Topics

Delays, Rollout, Licences, 28GHz, broadband fixed wireless, use it or lose it, Auction

NEWS
The chances of the 28GHz spectrum being used for commercial broadband fixed wireless services in the near future look increasingly bleak following a government decision not to penalise companies who have failed to achieve rollout targets laid down by the DTI. Of the six firms who were awarded 28GHz licences in the auction process held in November 2000, only Your Communications (formerly known as The Norweb Telecom Group) can now offer broadband services to 10 percent of people in the areas covered by three of its four licences. In the fourth licence area, Your Communications has also almost reached the target, according to the Radiocommunications Agency. The other five companies have all failed to hit the 10 percent rollout target, which the government specifically included in the licence conditions. As such, their licences could be revoked and offered to other companies under the "Use it or lose it" condition that is meant to prevent companies winning licences and then failing to make use of them. However, Patricia Hewitt, secretary of state at the DTI, has decided to give these five until 31 December, 2003, to achieve this minimum requirement of 10 percent rollout. A DTI spokesman told ZDNet UK News that the government is confident that the 28GHz licence-holders are all committed to using their licences to offer broadband services. "There was always a clause within the 28GHz licences that stated the secretary of state could extend the time limit for compliance with the rollout condition," said the DTI spokesman. "This was, and still is, a new market and we don't want to damage the business plans of companies by insisting on unachievable conditions." "The DTI spoke to all the companies before making the decision, and we're convinced that they are all committed to rolling out services," he insisted. However, since the decision was made, one licence -- covering Northern Ireland -- has already been handed back by its former owner Eircom. The gastropodic pace of rollout of 28GHz services is only the latest problem to afflict the government's broadband fixed wireless access project, which had been billed as a good way of making broadband available in parts of the country not covered by ADSL and cable broadband. Problems began in November 2000, when the Radiocommunications Agency conducted an auction of 42 licences that would permit companies to operate high-speed wireless broadband services in various regions of the UK using the 28GHz part of the spectrum. Interest in the process was low, and only 16 of the 42 licences were awarded -- to Norweb, Energis, Faultbasic, Broadnet, Chorus Communications and Eircom. The remaining 26 unsold licences covered almost half the UK population -- and the vast majority of Britain geographically, including many of the same areas that were not covered by BT's ADSL network. The auction -- which only raised £38m compared to predictions of up to £1bn -- was slammed by one expert as "a bit of a disaster." In July 2001, Douglas Alexander, e-commerce minister at the time, announced that the remaining 26 licences would be made available again in a 12-month long auction that began in mid-October that year. Alexander said that the decision to launch a second auction process had been taken "following discussions with industry". But almost 11 months later not a single bid has been received. With this second auction process due to finish in October, the government is likely to be left with 26 unsold licences yet again. Such an outcome would call into question the government's decision to distribute the licences by auction. Even before the first auction some in the telecoms industry were suggesting that a beauty contest -- where licences were distributed to companies who put forward the best business case rather than the most money -- would have been a superior method.
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