EE UK Lose Court Battle Over 900MHz and 1800MHz Licence Fee Hike

Mobile operator EE (BT) has suffered a blow after the High Court rejected their challenge against Ofcom’s proposed hike to annual licence fees for the 900MHz and 1800MHz radio spectrum bands. The outcome could result in price rises and threaten the Government’s £5bn deal to extend geographic mobile coverage to 90%.

Ofcom has been threatening to increase licence fees for the 900MHz and 1800MHz bands for sometime (here), which followed an earlier 4G auction of the 800MHz and 2.6GHz bands that perhaps failed to raise quite as much money as the Government might have hoped (here). Suffice to say that many viewed the proposed hike as a tool for the Government to balance its books.

At the same time the Government has also nudged operators to agree a new £5bn deal that would extend geographic network coverage to 90% (here) and part of that involved asking Ofcom to look again at the fees, although the regulator had already warned this was “unlikely to have a material effect” on their proposal.

As can be seen below, neither EE nor Three UK have really benefited from Ofcom’s revisions.

Mobile operator EE then attempted to challenge the decision by launching a Judicial Review, which was also supported by O2, Vodafone and Three UK. According to The Telegraph, EE argued that Ofcom had wrongly calculated the bills (e.g. they didn’t factor network running costs) and failed to consider the potential impact on future investment in networks.

In the end the Judge, Mr Justice Cranston, ruled that Ofcom’s approach gave a “better reflection of market value” than the cost models provided by EE and its supporters. Meanwhile EE, which could still appeal (it remains to be seen if that will happen), said that the fees were “excessive at a time when significant private investment is needed to ensure the UK benefits from first class mobile infrastructure.”

An Ofcom Spokesperson said:

“The government directed Ofcom to revise these fees to reflect the full value of this mobile spectrum. We’re pleased the High Court has agreed that we lawfully implemented that direction.”

The decision might raise another question mark over the Government’s £5bn deal with mobile operators, although EE appears not to have changed this goal. On top of that EE recently won the Emergency Services Network (ESN) contract that supports a pledge to increase 4G landmass cover to 95% of the UK (99.8% population coverage) by 2020 (details).

Meanwhile the Government is also facing a difficult time in pushing through their new Digital Economy Bill (here), which is being opposed by private land owners because it includes ECC changes that would potentially make it easier and cheaper for telecoms operators to install new infrastructure on their land (i.e. less money for land owners). Mobile operators also called for these changes as part of the original £5bn agreement.