I suspect the issue was the cross-subsidy involved. There's no problem with making coverage a requirement of *that* license: the government did exactly that for both 3G and cable TV when those were on offer - I think the problem is trying to tie 4G licenses to 2G coverage, because firstly they are different products, and secondly it would discriminate against both new entrants and Three's non-2G network.
100% might be unrealistic too - individuals on tiny little islands, down valleys etc - but requiring 90%+ population coverage, maybe even 99%, for *service* - which could be met by a roaming agreement with 2/3g operators where needed, exactly as Three did with both Orange and T-Mobile to get a mix of 2 and 3 G service when outside Three's own coverage. As I recall, Ofcom (or Oftel then?) set regulated prices for O2 and Vodafone doing this fill-in roaming, being dominant providers.
I'd like to see the operators working together to fill gaps in coverage - reciprocal roaming (so O2 customers in a gap can roam onto Vodafone's network, and vice versa) - or cost-shared base stations to fill total voids in coverage, perhaps. To be fair, they have actually been shuffling in this direction, starting to share masts, power supplies etc in parts, so they may get there eventually.
Loudspeaker, because out here in the Scottish valleys half the time it's more likely to reach another town than any mobile...