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Going for a song. UK 4G spectrum auction raises a lot less than the government expected and leaves Finance Minister exposed to ridicule.

In his last Autumn statement, the Chancellor included on the positive side of the nation's balance sheet the sum of £3.5 billion that he confidently expected would be raised from the auction.

In the event just £2.3 billion was raised leaving the Exchequer with a shortfall of £1.2 billion, a sum that will now have to be raised in extra taxes to be levied on the British people. And Britons are already experiencing ever-rising prices even as their standard of living is being further eroded by an inequitable "austerity" programme so severe and inflexible that is in danger of tipping the country into an unprecedented 'triple dip' recession.

As had been expected, EE, Hutchison 3G, Telefonica (O2) and Vodafone got 4G licenses, as did a newcomer to the scene, Niche Spectrum Ventures, which is a subsidiary of BT. The UK's incumbent operator has been kicking itself since it exited the mobile arena all those years ago and has been seeking a cheap and cheerful way back in ever since. Now it has done it.

The auction went to more than 50 rounds of bidding but there was no repetition of the insane feeding frenzy that characterised the 3G spectrum auctions of 13 years back when operators overpaid massively and the government went laughing all the way to the bank with an unprecedented and utterly unexpected windfall of more than £22.5 billion.

This time around, in vastly different market conditions, wiser and cooler heads have prevailed in the bidding for the 250MHz of spectrum available in the 800MHz and 2600MHz bands.

EE (the company that is an amalgam of Orange and T-Mobile UK) paid £588.88 million for two 5MHz tranches of 800MHz and two 35MHz tranches of 2600MHz spectrum.

Hutchison 3G UK Limited stumped up £225 million for two slices of 5MHz bandwidth in the 800MHz range whilst Telefónica UK (which includes O2 and giffgaff) coughed up £550 million for two 10MHz chunks in the of 800MHz range.

Vodafone paid the most, reaching down into its capacious pockets and coming up with £790.76 million in small change for two 10MHz sections of 800MHz space, two chunks of 20MHz bandwidth in the 2600MHz range and one 25MHz slice of unpaired 2600MHz bandwidth.

The aforementioned Niche Spectrum Ventures (i.e. the BT Group in disguise) paid a mere £186.4 million for two 15 MHz slices 2600MHz bandwidth and a single unpaired 20MHz piece of 2600MHz spectrum.

Reacting to the news, some industry analysts are bemoaning what they regard as low bids, but the point surely is that the operators having been bitten once have proven themselves, sensibly, to be twice shy and the market has undergone what the chaps in The City refer to as "a correction."

The fact is, as even Margaret Thatcher had to admit, the market is the market and governments trying to second guess what it will do are on a hiding to nothing - as Mr. Osborne has discovered to his political cost this morning.

The successful bidders in the 3G auctions completely believed that they were vying for a licence to print money, so sure were they that consumer uptake of expensive new services would be huge and instantaneous. In the event, the rollout of 3G was both more difficult and expensive than they had been anticipating and the consumers didn't flock to sign-up and pay a premium for new and untried services and applications. It took a decade and more for the operators to write the licence losses through and off their books. 4G costs won't take anywhere near as long.

Ed Richards, the CEO of the UK telecoms regulator Ofcom, commented, "This is a positive outcome for competition in the UK, which will lead to faster and more widespread mobile broadband, and substantial benefits for consumers and businesses across the country. We are confident that the UK will be among the most competitive markets in the world for 4G services. 4G coverage will extend far beyond that of existing 3G services, covering 98 per cent of the UK population indoors - and even more when outdoors - which is good news for parts of the country currently under-served by mobile broadband."

Now the only questions are, "when?" and "how much will infrastructure deployment cost?" and "how much of a premium do the operators think consumers will bear in an era of declining living standards, rising prices, stealth taxes and high unemployment?

Meanwhile, the government's financial strategy, such as it is, remains under the titular control of a pompous clown who can only count to twenty by taking his socks off, George Osbore will deserve all the scorn, sarcasm and opprobrium that will be thrown at him in the days, week and months to come. He made himself hostage to fortune and was warned about it and he only has himself to blame. If he was the CFO of a company he would be out on his ear this morning - and rightly so.

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