Ofcom Revises Huge UK 3G and 4G Mobile Operator Licence Fee Hike

The UK telecoms and media regulator has, following concerns from some of the major Mobile Network Operators, today launched another consultation on their controversial and Government-backed plans for a massive hike in annual licence fees for the 900MHz and 1800MHz radio spectrum bands. But the revised fees are still high.

The issue, which reared its head as part of Ofcom’s initial consultation during October 2013 (here), appeared to stem from the fact that the regulators auction of 4G (LTE) spectrum (800MHz and 2.6GHz) had not raised quite as much money for the treasury as perhaps hoped. But prior to all of this the Government had already directed Ofcom in 2010 to revise the fees “to reflect full market value, after the completion of the 4G auction“.

As a result mobile operators, which currently pay a combined total of £24.8m per year for the 900MHz band and £39.7m for 1800MHz, were initially told that this licence fee would now be increased several fold to £138.5m per year for 900MHz and £170.4m for 1800MHz.

Needless to say the operators were not happy and some have already slowed their 4G deployments until the matter is settled (we have a separate story on that after this one – here). Meanwhile others are said to be considering legal action over the move and in the meantime Ofcom has reviewed their decision and updated their analysis, which has today resulted in the following changes.

Revised Licence Fees Per Operator
Vodafone
Current: £15.6m
Proposed October 2013: £83.1m
Revised Proposal: £65.8m

O2 (Telefonica)
Current: £15.6m
Proposed October 2013: £83.1m
Revised Proposal: £65.8m

EE
Current: £24.9m
Proposed October 2013: £107.1m
Revised Proposal: £86.4m

Three UK
Current: £8.3m
Proposed October 2013: £35.7m
Revised Proposal: £28.8m

It’s noted that the figures for Three UK and EE relate to their respective holdings after EE’s planned divestment of some 1800MHz spectrum, which began last year and is due to be completed in October 2015. The revised proposals also use the Consumer Price Index (CPI) as the inflation index to calculate annual licence fees, whereas the figures proposed in October 2013 used the Retail Price Index (RPI).

Philip Marnick, Ofcom’s Group Director of Spectrum, said:

“We expected substantial responses to our initial proposals, which are based on complex analysis. We’ve listened carefully to the arguments and evidence put forward during the consultation, which has helped refine our proposals.

We’re conducting a further consultation to ensure we reach an appropriate view about the best approach to setting the annual licence fees. We expect to publish our final decision on mobile licence fees around the turn of the year.”

The fees are a clear improvement but some mobile operators suggest that they’re still unhappy, and indeed it’s easy to see why from the level of increase proposed. Never the less Ofcom still anticipates that, subject to the outcome of this consultation that closes on 26th September 2014, the new fees should come into effect sometime during 2015. But we wouldn’t be surprised to see more delays.