Ofcom threatens fivefold increase in UK spectrum fees starting in 2014

UK mobile network operators Vodafone, Telefónica's O2, EE and Hutchison Whampoa's 3 UK face a possible fivefold hike in the fees they pay to use 900 MHz and 1800 MHz spectrum for 2G, 3G and now LTE services, if proposals by regulator Ofcom are implemented next year.

The move will come as a further blow to the operators, already under pressure from the investment requirements of new LTE networks, and could see the additional costs passed on to consumers in the form of higher mobile bills.

"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," EE said in comments emailed to FierceWireless:Europe. "The proposed increase in licence fees is excessive at a time when we are investing heavily in the rollout of 4G."

EE operates an LTE network in the UK and is also the parent of 3G operators T-Mobile UK and Orange UK.

Vodafone UK has also said it was "disappointed" with Ofcom's stance and is reviewing the details of the proposals before responding to the regulator, Reuters reported.

Ofcom, which also faced criticism from the government after the LTE spectrum auction in February this year raised less revenue than expected, said it was responding to an earlier government directive issued in December 2010 to revise fees for the 900 MHz and 1800 MHz bands so they "reflect full-market value".

Currently, the operators pay a combined total of £24.8 million ($39.5 million) per year for 900 MHz spectrum and £39.7 million for 1800 MHz spectrum. Under the new proposals, they would pay £138.5 million per year for 900 MHz spectrum and £170.4 million for 1800 MHz spectrum.

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

Ofcom said it calculated the full market value of the spectrum by analysing the sums paid in the LTE auction, comparing the amounts bid in overseas spectrum auctions and assessing the technical and commercial characteristics of the UK spectrum bands.

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

It is now carrying out a consultation on the proposals, and said comments should be submitted by Dec. 19.

Meanwhile, the UK's National Audit Office will carry out a report into the LTE auction early in 2014. The report will benchmark the conduct and outcome of the auction against good practice and the results of similar auctions in other countries, the NAO said in a statement.

For more:
- see this Ofcom report
- see this Guardian article
- see this Reuters article

Related Articles:
UK LTE auction comes under spotlight over weak return
Analysys Mason: What the UK spectrum auction bid data reveals
UK LTE spectrum auction draws £2.34B, below government expectations