UPD UK Mobile Operators Face Huge Licence Fee Hike for 900MHz and 1800MHz

The Government has found a new way to squeeze extra money out of Mobile Network Operators (MNO) after it directed Ofcom to impose a huge annual licence fee hike upon the 900MHz and 1800MHz radio spectrum bands, which are used for voice, 3G and 4G based mobile services across the United Kingdom.

It’s no secret that some people had been expecting the recent 4G (800MHz and 2.6GHz) auctions to raise more than it did (here). The Government’s Chancellor of the Exchequer, George Osborne, had specifically hoped to rake in around £3.5bn from the auction and indeed the operators themselves made total “theoretical” bids of roughly £5.2bn. But in the end the final total came to just £2.368bn.

So it’s perhaps not surprising that Ofcom, under government direction, was instructed to revise its annual licence fees for the 900MHz and 1800MHz spectrum bands to compensate. This called upon the regulator to “have particular regard to the sums bid for licences in the 4G auction“. Ofcom also compared the amounts bid to similar overseas spectrum auctions and assessed the “technical and commercial characteristics” of the related bands.

As a result mobile operators, which currently pay a combined total of £24.8m per year for 900MHz spectrum and £39.7m for 1800MHz, will now find themselves having to fork out £138.5m per year for 900MHz and £170.4m for 1800MHz. Ofcom states that “spectrum is a valuable and finite national resource, and charging for it can incentivise the optimal use of frequencies.”

Revised Licence Fees Per Operator
Vodafone
Current: £15.6m
Proposed: £83.1m

O2
Current: £15.6m
Proposed: £83.1m

EE
Current: £24.9m
Proposed: £107.1m

Three UK
Current: £8.3m
Proposed: £35.7m

The changes are still subject to consultation, which closes on 19th December 2013, and the new annual licence fees are then likely to be introduced sometime in 2014. Naturally the usual fear is that some of this increase could end up resulting in higher prices for customers, although any hike would probably be quite small.

UPDATE 3:09pm

A spokesperson for Vodafone has responded, “We are 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. 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.”

It will be interesting to see whether operators can encourage Ofcom to lower the surprisingly high increase.