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Mobile Operators Face 900MHz and 1800MHz Licence Fee Hike Again

Monday, December 17th, 2018 (9:01 am) - Score 1,688

After years of delay and court battles Ofcom have today set the annual licence fees (ALF) that O2, Vodafone, Three UK (H3G) and EE will pay for their 2G, 3G and 4G Mobile services in the 900MHz and 1800MHz spectrum bands. The regulator has separately proposed fees for UK Broadband’s (H3G) holdings at 3.4GHz and 3.6GHz.

The situation began in December 2010 after the Government directed Ofcom to revise fees for mobile spectrum in the 900MHz and 1800MHz bands in order to reflect the “full market value” of those frequencies, as well as other statutory duties.

Mobile operators have long warned that doing this could also result in price rises for consumers and less investment going toward their networks, although the aggressively competitive market (inc. ever changing technology and new coverage requirements) make it difficult for them to sacrifice the latter of those two concerns.

Nevertheless the first proposal was published in late 2013 (here) and has since been revised several times. This followed an earlier 4G auction of the 800MHz and 2.6GHz (4G) bands in early 2013, which arguably failed to raise as much money as the Government might have hoped (here). Some critics thus saw the proposed hike as one way for the Government to balance its books.

spectrum holdings uk 900mhz and 1800mhz

ofcom mobile licence fees sept 2015

NOTE: The “Final Decision” cost above is the original September 2015 conclusion, which is based off a base ALF level of £1.128m per MHz per annum for 900MHz and £0.815m per MHz per annum for 1800MHz.

Several years of court battles followed until November 2017, when the Court of Appeal announced it had reversed an earlier ruling that originally found in favour of Ofcom’s proposed hike to annual licence fees (here). The court agreed with EE and ruled that Ofcom’s rise was inconsistent with EU laws on infrastructure investment.

The court also found that Ofcom had misinterpreted a 2010 instruction from the government, which ordered it to review the levy and reflect the fact that the market value of spectrum had risen due to rising Smartphone use. However today’s announcement suggests last year’s court victory by EE will be short lived.

Ofcom Statement

In November 2017, the Court of Appeal quashed our 2015 decision. It did so on the basis that in implementing the Direction, Ofcom should have considered its statutory duties, in particular the Article 8 objectives in the Framework Directive which are reflected in section 4(2) of the Communications Act. [This] resulted in the fees reverting to a lower level which had applied for many years.

Specifically, the Court stated that whilst the Secretary of State has powers to issue directions to Ofcom under section 5 of the Wireless Telegraphy Act in relation to Ofcom’s exercise of its radio spectrum functions, section 5 does not empower the Secretary of State to exercise those radio spectrum functions himself. As such, Ofcom is not relieved of the requirement to act in accordance with its statutory duties when exercising its radio spectrum functions, such as when setting fees, even when it is directed in that regard.

However, the Court of Appeal did not find the Direction to be unlawful and it therefore remains in force.

In response Ofcom has simply “considered again at what level ALFs should be set” for the 900 and 1800MHz bands, having “regard as appropriate to the Direction and our statutory duties.” In short, Ofcom has concluded an outcome that is essentially the same as their final decision from 2015, albeit with slightly reduced ALF levels.

December 2018 ALFs (expressed in April 2018 prices):

A) 900MHz: £1.093m per MHz per annum (down from £1.128m in 2015)

B) 1800MHz: £0.805m per MHz per annum (down from £0.815m in 2015)

The new ALFs will become effective on 31st January 2019 and no doubt the big mobile operators will be displeased. Separately Ofcom has also begun a new consultation on the level of annual licence fees that should apply for the 40MHz of spectrum in the 3.4GHz band, and 80MHz in the 3.6GHz band, that are licensed to UK Broadband Ltd., which is owned by Hutchison 3G UK Limited (aka – Three UK).

As we know Three UK intends to harness this for their future 5G mobile and fixed wireless broadband network (here). Ofcom have thus proposed that the fees for both 3.4GHz and 3.6GHz spectrum would be £0.358m per MHz. “While we propose to apply the fees for 3.4GHz spectrum as soon as possible, we plan to phase-in the increase in fees for 3.6GHz spectrum over the period to mid-2020,” said Ofcom.

The new consultation runs until 11th February 2019.

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
Leave a Comment
7 Responses
  1. Avatar CarlT says:

    Annoying. The costs end up in our bills and hence come out of our pockets one way or the other. A tax on each person’s bill would be more transparent and fairer.

    1. Avatar Joe says:

      Why should I pay more for using a network that uses less frequency.

    2. Avatar Mike says:

      Transparent? Fair? Since when has the UK government done that?

    3. Avatar Joe says:

      You bid openly for frequency and and you pay for what you bid for. The present process coulnd’t be more transparent and fair.

  2. Avatar Optimist says:

    For every pound operators have to add on to consumer bills to pay for this, the taxman gets an additional 20p VAT.

  3. Avatar Sam Machin says:

    Interesting to do some rough calculations of how these increases could affect bills, assuming the cost is shared equally across all subscribers.
    EE are looking at £50m/year more shared across 30m subs, so that’s 13p a month on each bill
    O2 is £33m/year – 25m subs which is 11p per bill
    Voda, £33m/year – 19m subs, 14p per monthly bill
    Three are paying an extra £16m a year but as they only have 10m subs that’s 13p per month per subscriber too.

    So all in all it seems like a pretty even spread, of course there’s arguments about how the burden should be shared across customers, should heavier users pay more or is this about access in which case every subscriber has access to the same amount of spectrum, certainly for the 900 & 1800 its pretty much used nationally, could be more interesting when you consider the urban environments that have several 4G bands deployed vs those in rural areas that might only have 1 band.

    1. Avatar Sam Machin says:

      Oh and of course I didn’t take into account any MVNO subs these networks have as the figures I could fine where for their own direct customer base only,

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