Ofcom makes final decision on UK spectrum fee hike

Ofcom has reached a decision on how much UK mobile operators should pay for spectrum in the 900 MHz and 1800 MHz bands, ending a process that has dragged on since 2010 and also raising fears that consumer mobile prices will be increased as a result.

The UK regulator defended the move, saying that mobile service providers have never had to pay market value for access to the spectrum before and that the price now reflects the value of the service.

According to the latest and apparently final decision, the total amount to be paid will be £199.6 million (€273 million/$304 million) per year, of which £80.3 million will be for the 900 MHz band, and £119.3 million for the 1800 MHz band.

The good news is that the final fee is less than the figure put forward in February this year, when Ofcom proposed  £109.3 million per year for 900 MHz spectrum and £137.5 million for 1800 MHz spectrum. What's more, the original proposals outlined in January 2014 had suggested fees of £138.5 million for 900 MHz spectrum and £170.4 million for 1800 MHz spectrum.

The bad news is that the UK's four mobile network operators will still be paying more than three times the current level: Vodafone UK, Telefónica (O2 UK), EE and Three UK currently pay a combined total of £24.8 million per year for 900 MHz spectrum and £39.7 million for 1800 MHz spectrum.

Current and revised annual licence fees for 900 MHz and 1800 MHz spectrum

All figures £m

Vodafone

Telefonica

EE*

H3G*

Total

Current

15.6

15.6

24.9

8.3

64.4

Proposed Feb 2015

62.6

62.6

77.3

25.8

228.3

Final decision

49.8

49.8

75.0

25.0

199.6

* EE and H3G figures relate to holdings after EE's divestment of 1800 MHz spectrum to H3G, to be completed in October 2015.

FierceWireless:Europe contacted all four mobile network operators for their reactions to the final decision. A spokesperson for O2 UK said: "We're examining the decision in detail before deciding how best to proceed."

A Vodafone UK spokesperson said: "We will be reviewing Ofcom's proposed spectrum fees over the coming days as they represent a significant increase when we are already investing around £1 billion on our network and services this year."

Three UK declined to comment for the time being and EE had not responded by the time of publication.

If reports in the British media are anything to go by, there are considerable fears that consumer prices will increase as a result of the hikes in fees.

Defending its decision, Philip Marnick, Ofcom's group director of spectrum, said: "We have listened carefully to the arguments and evidence put forward by industry, and conducted a complex and comprehensive analysis to determine the new fees. The mobile industry has not previously had to pay market value for access to this spectrum, which is a valuable and finite resource, and the new fees reflect that value."

The new fees come into effect in two phases: one half of the increase, from the current to the new rates, will come into effect on Oct. 31, 2015. The second half will come into effect on Oct. 31, 2016, with full fees payable annually from that point. The move will bring to an end a process started in 2010 when the UK government directed Ofcom to revise fees paid for the 900 MHz and 1800 MHz spectrum bands to reflect full market value.

In other UK spectrum news this week, Ofcom also approved plans by Qualcomm to transfer L-band spectrum holdings in the 1452 MHz to 1492 MHz frequency range to Vodafone UK and Three UK. Qualcomm acquired the spectrum for £8.3 million in 2008, but the value of the deals with the two operators has not been disclosed.

For more:
- see this Ofcom release
- see this separate Ofcom release on the Qualcomm decision

Related articles:
Qualcomm agrees €139M L-band spectrum deal with Vodafone UK and Three UK
Ofcom opens consultation on revised spectrum licence fee hike
Ofcom varies mobile operator licences following national coverage deal
UK's £5B mobile coverage deal could end uncertainty over 2G licence fees: analyst
Ofcom will allocate 700 MHz frequencies to mobile operators by 2022

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