Ofcom's spectrum auction this summer, is the biggest the regulator has ever carried out. It will kick off the next revolution in mobile voice and data - to so-called 4G services. But it might not be quite as hot as some people expect.

There is 205MHz of prime spectrum around 2.6GHz available in Ofcom's auction, and it is wanted by 3G operators for the move to their 4G standard, known as LTE (long term evolution). It is also wanted by operators who are planning to roll out mobile WiMax services, and who currently have very little licensed spectrum to play in.

Ofcom stays neutral

Ofcom isn't backing any one horse. The band was originally earmarked for expansion to 3G services, but, despite arguments from operators, the regulator has consulted and stuck with its current policy of making all auctions technology neutral, and tradable. So anyone who buys this spectrum can decide what to do with it - and if they have no current use for it, can sell it on for whatever its market value turns out to be.

Ofcom's technology-neutral stance has some limitations, but it looks like mobile WiMax can innovate around these. Part of the spectrum will be allocated to frequency division duplex (FDD) technologies, which have a separate frequency for up and down links. A smaller area, will be for TDD (time division duplex) tecnnologies. LTE has been defined to be FDD, but WiMax will very likely have an FDD version.

Likely bidders line up

Likely bidders obviously include all current mobile operators, who will be looking to add LTE to their offerings. There will also be an unknown number of operators bidding for spectrum for mobile WiMax.

It's very likely that WiMax bidders will include BT. Meanwhile, Nortel has joined with operator Urban Wimax, to promote Wimax in the Mobile WiMax Acceleration Group. Pipex currently has a 3.5GHz licence for fixed Wimax, which it is using to slowly roll out services; it may be part of a bid for mobile WiMax in the 2.6GHz auction.

LTE wins out?

Wimax vendors and potential operators have argued strongly that Wimax is well-placed to be the upgrade for 3G networks. Although 3G networks carry voice as well as data, the move to 4G will coincide with a move to digital voice, so the networks need a data-oriented upgrade. Wimax is designed for data, and may be better for operators than LTE they say.

Despite this, WiMax has had a disappointing roll-out in high-profile cases such as Sprint-Nextel in the US, squandering the lead it appeared to have over LTE. Meanwhile, early trials of LTE have been positive - though, note, we are comparing a roll-out with a trial here.

"It is quite clear what the majority of operators will go for," says Chris Larmour, chief marketing officer of network optimisation company Actix. "LTE will be dominant. Mobile Wimax will have a hard time convincing operators, because it comes from an IT background, while LTE comes from traditional vendors

In its favour, Wimax uses the same underlying signal technology as LTE, called OFDMA, and it has been suggested that it may be cheaper to buy Wimax equipment, as patent fees could be lower, but the difference seems to be lower now than predicted and, in any case, only affects a small part of the cost of building a cell tower: "The main cost is in metals and concrete," says Larmour.

How high will it go?

In 1998, the first 3G auction generated more than £20 billion. This auction will include more spectrum, and the price will go high, but most people expect much less money to change hands than in the 3G auction.

"The big operators can't afford not to be in this," says Larmour. "Big companies will bid billions to get in."

This time round, the spectrum is actually going to be used more quickly. People have devices which can use mobile data, and many more of us are using the Internet regularly at home and at work than was the case in 1998.

Operators that do get spectrum licences should find it cheaper to build networks out this time. 3G networks were heavily overprovisioned, with some operators building twice as much capacity as they needed, but coverage is now better understood. Operators also have other tools to hand, including femtocells to provide indoor coverage.

"In the 3G era we saw networks overprovisioned by 100 percent," says Larmour. "They were just oversold. A 3G operator needs about 15,000 sites, each with three cells, to cover the UK." Optimisation could cut that by about 30 percent, he says, but 2.6GHz doesn't carry as far as existing 3G spectrum, so the figure will come out again, at 15,000 sites for 4G. So networks could come quicker - albeit with equipment vendors selling less equipment than they might have hoped.

There are predictions that mobile broadband could overtake fixed-line broadband by 2012. and creative people are coming up with all sorts of ways to entice people to use mobile data, including mobile search linked to GPS, mobile Facebook and other social networking sites. Most of these are still pretty un-compelling at the moment, but at least they exist, which is more than could be said for 1998.

Paradoxically, the near-reality of mobile data may make it harder to push unrealistic expectations, causing operators to be cautious in their bidding, and in their build-outs. Also, we are in an economic slow-down and the operators, who have only just recovered from their overpayments at the last auction, will find it harder to raise the capital.

Finally, the fact that there is more bandwidth may reduce the urgency with which operators bid for any part of it. There is more spectrum on the way, as after the 2.6GHz auction, other spectrum will be released, when analogue TV is turned off, and from "re-farming" parts of today's 2G mobile spectrum. Ofcom has said there will be 400MHz of prime spectrum released to the market over the next few years.

If operators miss out this time round, they may feel they can catch up later.