Ofcom Finalise Reduced 3G and 4G Mobile Spectrum Licence Fee Hike

The United Kingdom’s national telecoms regulator has today published its final assessment on their much delayed plans to hike the annual licence fees for the 900MHz and 1800MHz radio spectrum bands, which has seen the costs come down again.. but only a little.

It’s now been around five long years since the Government first directed Ofcom to revise the fees that mobile network operators, such as Vodafone, Three UK, EE and O2, pay for the relevant bands in order “to reflect full market value, after the completion of the 4G [800MHz and 2.6GHz] auction“.

As it is the 4G auction, which was itself significantly delayed by bickering and threats from the mobile operators, didn’t complete until 2013 (here) and by all accounts failed to raise quite as much money as the Government might have hoped (here).

In that sense few were surprised when Ofcom last year announced a MASSIVE hike in licence fees for the 900MHz and 1800MHz bands that are also used by both 3G and 4G services, which meant that the total paid by all operators for both bands would have jumped from £64.4m to £246.7m per year.

Needless to say that the operators weren’t happy and Ofcom was forced to issue another revision in August 2014 (here), which only made a small reduction and didn’t resolve the situation.

Since then the Government has nudged operators to agree a new £5bn deal that will extend geographic network coverage to 90% (here) and part of that involved asking Ofcom to look again at the fees, although the regulator warned in February 2015 that it was “unlikely to have a material effect” and today’s final assessment confirms that outcome.

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

The total fees payable by operators will now be £199.6m per year, which is 13% lower than Ofcom’s February 2015 proposal. The new fees will come into effect in two phases: one half of the fees increase, from the current to the new rates, will come into effect on 31st October 2015. The second half will come into effect on 31st October 2016, with full fees payable annually from that point.

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.”

No doubt the operators will welcome a reduction, although the final levels are still well above the current £64.4m and that’s somewhat more of a problem for the big boys. At the end of all this are the consumers and we’re usually the ones who have to pay for such increases through higher bills.