Ofcom UK Propose to Cut Mobile Licence Fees for 900MHz and 1800MHz by GBP40m
The UK telecoms regulator has today proposed, following evidence submitted by BT (EE), to reduce the total amount paid by the mobile network operators to use the 900MHz, 1800MHz and 2100MHz radio spectrum bands – used to support 2G, 3G and 4G mobile (mobile broadband) services – by around £40m per year.
The cost of Annual Licence Fees (ALF) is often a highly divisive subject for the likes of EE, Vodafone, Three UK and O2. Mobile operators often complain that hikes in this area can mean price rises for consumers and less investment going toward their networks. The horrifically overpriced 3G auction that netted a staggering £22bn in 2000, but which also hobbled the roll-out and network investment in related services, is just one such example.
In recent years, Ofcom and the Government have worked somewhat more effectively to address the issue of spectrum pricing, although some grumbles will always exist. But the cost of such licence fees can also be influenced by other factors, such as the ongoing removal of 3G services, as well as the desire to make modern 5G services available via the same bands.
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At the start of 2024 the regulator signalled that they would investigate if there was “sufficient evidence of a possible material misalignment between our fees and the underlying market value of the relevant spectrum“. BT then promptly provided evidence to support their claim of a material misalignment with the fees charged for the 1800MHz band (i.e. 1800MHz fees 49% higher than 2.1GHz), which also highlighted other changes, such as in supply and demand conditions since the fees were set. Ofcom then opened a review of this in July 2024 (here) and has today proposed the following changes.
Ofcom Statement
In our review, we considered submissions from the mobile network operators, used evidence from recent spectrum auctions in the UK and internationally, and applied our method for calculating the fees. We are therefore now proposing the following changes:
➤ reduce the ALFs for 900 MHz spectrum to £1.097m per MHz (a 21% reduction);
➤ reduce ALFs for 1800 MHz spectrum to £0.81m per MHz (also a 21% reduction); and
➤ increase ALFs for 2100 MHz spectrum to £0.766m per MHz (a 12% increase).
As a result of these changes, the total amount paid by the mobile network operators to use these spectrum bands would reduce by around £40m per year, with each of the operators seeing a reduction in the total amount they pay. The amount of the reduction varies by operator because they hold different amounts of spectrum in each of the bands.
The savings involved in this change are unlikely to have much of an impact on end-user pricing, but any reduction is sure to be welcomed by the operators (except perhaps those that hold more of the 2100MHz spectrum than the other bands). Ofcom’s related consultation will remain open for feedback until 7th March 2025 and the regulator then aims to publish a final statement during summer 2025.
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 X (Twitter), Mastodon, Facebook, BlueSky, Threads.net and Linkedin.
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£40M per year cut to incoming revenue for government. So does this mean the operators do not have to do hefty and greedy price increases every year for a while then? Thought not.
@anonymous
Try crunching the numbers… and then you will find out why that £40 million will have almost zero (probably precisely zero) effect on the annual inflation-plus price rises.
There are close to 90 million handset subscriptions in the UK. To make the maths simple, given the estimated total £40 million saving for the MNOs, say it’s 80 million subscribers and that there is an equal distribution of subscribers between each of the MNOs (that some fraction of subscribers is via MNVOs is largely immaterial, since the cost is factored in to MNVO pricing at some level by the MNOs). That gives each MNO a £10 million pa saving to be split between its 20 million (direct and indirect) subscribers, which is £0.50 pa per subscriber, or around 4p per month. So no, it will have little/no effect on those annual “hefty” increases. But that £10 million pa saving to an MNO may speed up upgrades, etc., if it is allocated to capital spending rather than to salary and/or shareholder dividend augmentation.
The truth is that though £40 million sounds like a lot of money, it truly ain’t. You could double or triple that amount and it would still be effectively a piddling amount… unless it’s a lottery win deposit into a personal bank account of course.
I’ve said it before and I’ll say it again, licensing spectrum like this is a terrible way to do it. The phone companies should be able to access all available spectrum but instead pay for their usage of it.
Have a 3rd party build out the cell infrastructure similar to openreach or network rail, that way they’re not disincentivised to ignore not-spots and underutilised areas.
We’d get greater coverage, more bandwidth across all providers and the larger providers will naturally pay more. It also means we can have as many MVNO’s as we want because they’d more or less all be MVNO’s and it doesn’t matter if Three and Vodafone merge.
I realise it’s probably too late to make such a fundamental change but things like this just confirm my thinking.
That’s called a monopoly. Generally a bad idea. Openreach may be big but it has competition. As for the railways you are surely not offering Network Rail and the train operating companies as a model of success?!
There are a few problems with that, from a lack of alternatives if the masts are in bad locations (eg: me at work, where one network is better just because it’s on a different roof) to the simple fact you can’t broadcast every band we use today at full power if they are in the same mast.
Then you also have no alternatives when something an older G is shut down, if a new G is being introduced (eg: EE did it first with 5G), etc.
I think this works fine in some cases, like rural areas where mast sharing is better than nothing, football stadiums, underground tunnels, etc, but not for everything.
So the annual price rise fiasco can now stop can it? Nope, because the corporate greed machine is like a large cat, it does little, is constantly hungry for more and become accustomed to been far more than it needs to be.
It works out to less than a pound a subscriber.