UK's £5B mobile coverage deal could end uncertainty over 2G licence fees: analyst

A UK government agreement with mobile operators to plug rural coverage gaps could end ongoing uncertainty over an Ofcom revaluation of 2G licence fees, a leading Ovum analyst has said.

Matthew Howett, Ovum practice leader covering regulation, said a commitment by Vodafone UK, O2 UK, EE and Three UK to invest £5 billion (€6.3 billion/$7.8 billion) to plug so-called mobile 'not spots' by 2017 may have an indirect benefit; namely freeing the regulator to issue a de-facto decision on 2G licence fee amendments.

UK Culture Secretary Sajid Javid announced the "landmark" deal with operators on Thursday. By 2017, operators agreed to pump £5 billion into mobile infrastructure improvements, provide 90 per cent coverage for voice and SMS services, and 85 per cent coverage for 'full' coverage--which is taken to refer to 3G and 4G services. The agreement also covers provision of reliable signal strength for voice services across all generations of mobile network (2G, 3G, and 4G), and a legal obligation to meet the goals that enables Ofcom to enforce the deal.

In a research note issued shortly after the Culture Secretary's announcement, Howett hinted that some flexibility on the updated 2G fees helped to swing the fresh coverage commitment by operators.

"The annual spectrum licence fees were always likely to be used as a bargaining chip. While not ever directly linked to the not-spots consultation, it has been an ongoing battle between government, regulator, and industry ever since the original 2G spectrum was liberalised for other uses back in 2009 and the fees needed to be readjusted to reflect the new value of that spectrum," Howett wrote.

Ofcom backtracked on plans to increase 2G licence fees in August, which Howett noted left the regulator's hands tied "in respect to bringing them [the fees] down any further."

The Ovum analyst adds that the new coverage deal means the UK government now looks set "to direct Ofcom to reconsider (hopefully for the last time), the value of that spectrum now that it comes with a higher coverage burden."

A UK government statement explained the sums invested by mobile operators will complement its own £150 million mobile coverage investment, which was announced in 2011 with the goal of achieving 99 per cent coverage.

Javid stated: "I am pleased to have secured a legally binding deal with the four mobile networks. Too many parts of the UK regularly suffer from poor mobile coverage leaving them unable to make calls or send texts."

The Culture Secretary added that the agreement "will give the UK the world-class mobile phone coverage it needs and deserves."

Howett noted the agreement is better than a proposed national roaming network that the government considered to plug coverage gaps. Such an approach "was a messy solution," he said, explaining that the "cost, complexity, and side effects of national roaming made it such an unworkable fix that it really should never have made it into the list of possible options."

The approach would only have tackled "problems with 2G voice services" rather than poor data coverage, Howett added.

An Ofcom consumer study conducted in March and April 2014 found that 59 per cent classed mobile voice or SMS services as essential, based on interviews with 1,997 people.

UK government information estimates that a fifth of citizens have little or no mobile coverage.

For more:
- see this Ovum statement
- read the UK government announcement
- view Ofcom's consumer research
- see this UK government coverage investment announcement

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