Ofcom angers mobile operators with spectacular price increases for 900MHz and 1800MHz spectrum annual licenses
British regulator, Ofcom, is proposing to increase the annual license fees for two key mobile spectrum bands by almost 500%.
Ofcom has published a consultation on revising annual licence fees for the 900MHz and 1800MHz spectrum bands, currently used by mobile network operators for 2G, 3G and some 4G services.
Ofcom wants to charge UK operators a combined total of £308.9 million for the two bands of spectrum in annual licenses, which is a massive increase from the combined total they currently pay of £64.5 million.
Mobile network operators currently pay a combined total of £24.8 million per year for 900 MHz spectrum and £39.7 million for 1800 MHz spectrum. Ofcom has proposed to increase those payments to £138.5 million per year for 900 MHz spectrum and £170.4 million for 1800 MHz spectrum.
Comparing prices being paid annually for the two spectrum bands to the cost that Ofcom is suggesting, Vodafone and O2 would experience the same price hike in their yearly bills, which would rise from £15.6 million each to £83.1 million each. EE would see its bill rise from £24.9 million up to £107.1 million, and Three would see its bill jump from £8.3 million to £35.7 million.
Mobile operators have stated the price hike is too severe, especially at a time when the major service providers in the UK are currently investing in expensive 4G network roll outs.
An EE spokesperson stated the proposed fee was excessively high: 'The proposed increase in licence fees is excessive at a time when we are investing heavily in the roll out of 4G.
'The industry has been aware of a Government-directed planned increase to spectrum licence fees, and Ofcom's proposal gives us further guidance. EE will engage in Ofcom's consultation process and reflect our view that there must be a balance between licence fees and the critical 4G network investment consumers and businesses are demanding to drive growth and jobs for the UK economy,' the EE spokesperson continued.
Ofcom is attempting to make the increases following a 2010 Government direction to revise the fees to reflect their full market value. The Government Direction required that, in setting these fees, Ofcom should pay attention to the sums bid for licences in the 4G auction for 800 MHz and 2.6 GHz spectrum, which Ofcom completed earlier this year.
To calculate the full market value of the spectrum, Ofcom has analysed the sums paid in the 4G auction, compared the amounts bid in overseas spectrum auctions and assessed the technical and commercial characteristics of the UK spectrum bands.
Subject to this consultation, new annual licence fees are likely to come into effect next year. The consultation closes on 19 December 2013.