Mobile operators face five-fold increase in mobile spectrum licensing fees

Out-Law News | 10 Oct 2013 | 2:56 pm | 2 min. read

Mobile operators face an approximate five-fold increase in the licensing fees they pay Ofcom to use the 900 MHz and 1800 MHz radio frequency bands.

Ofcom has launched a consultation on increasing annual licence fees (150-page / 1.49MB PDF) that Vodafone, O2, EE and Three currently pay to deliver mobile services via the spectrum bands.

Under the plans, the fees that Vodafone and O2 each currently pay would jump from £15.6 million to £83.1m, whilst EE's fees would rise from £24.9m to £107.1m. Three would pay £35.7m in licensing fees, up from £8.3m currently, under the proposals.

"These [radio frequency] bands are used for voice calls, 3G and some 4G services," Ofcom said in a statement. "In December 2010, the Government directed Ofcom to revise these fees so that they reflect full market value. The Government Direction required that, in setting these fees, Ofcom should have particular regard to the sums bid for licences in the 4G auction for 800 MHz and 2.6 GHz spectrum, which Ofcom completed earlier this year."

"Spectrum is a valuable and finite national resource, and charging for it can incentivise the optimal use of frequencies. 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."

However, Vodafone expressed disappointment at the hike in the proposed licence fees it faces.

"We have received Ofcom’s proposals and will review the detail within the 370 pages of documentation before responding fully to the regulator as part of its consultation process," a Vodafone spokesperson told Out-Law.com. "We are, however, disappointed that Ofcom is proposing a 430% increase in the fees we pay for our existing spectrum at a time when we are investing more than ever in vital national digital infrastructure."

"Vodafone UK is spending more than £900m this year alone on its network and has pledged to bring indoor 4G coverage to 98% of the UK population by 2015. The regulator should be encouraging such private sector investment in infrastructure and new services like 4G, which will benefit consumers, businesses and the wider British economy for many years to come," they added.

Three also criticised the plans.

"We welcome Ofcom’s move to reflect the market value of legacy spectrum holdings, but the proposals fail to recognise the relative value of high and low frequency spectrum, despite evidence from around the world," a spokesperson for Three said. "The sums proposed by Ofcom over-value high frequency spectrum. We look forward to making the case for a clearer reflection of the true value for the benefit of competition and UK consumers."

An O2 spokesperson said that the approach followed by Ofcom "appears to be in line" with earlier guidance issued by the regulator and that the company would be responding "in due course" to the consultation after reviewing the detail of the proposals.

An EE spokesperson said: "Our view [is] 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 proposed increase in licence fees is excessive at a time when we are investing heavily in the roll out of 4G.”

Stakeholders have until 19 December to respond to Ofcom's proposals.