The UK’s mobile operators are facing huge price rises of almost £245m for the use of spectrum to run their networks under new proposals from Ofcom, which could see subscribers hit with higher charges.
The UK telecoms regulator has outlined proposals after a government decision in December 2010 that the cost of licences covering spectrum in the 900MHz or 1800MHz bands should be reviewed.
Currently, operators pay £24.8m to be allocated portions of the available 900MHz spectrum, and £39.7m for the use of 1800MHz spectrum. Under the proposals this would rise to £138.5m for the 900MHz band and £170.4m for 1800MHz. This would equate to increased income of £244.4m for the government.
The proposals announced could see EE paying an additional £80m, while Vodafone and O2 will have to pay almost £60m more. Three could see a price raise of around £28m. A table illustrating the proposed price changes is below:
- EE: £24.9m £107.1m
- Vodafone: £15.6m £83.1m
- O2: £15.6m £83.1m
- Three: £8.3m £35.7m
Ofcom said it has calculated these figures by analysing the sums paid for 4G services in auctions earlier this year, and comparisons with the amounts being bid in other spectrum auctions
The regulator said it also assessed the overall value of the bands when considered against other UK holdings. The plans are now subject to consultation, which will close on 19 December. If the proposals go through, they will be in effect by next year.
The move could potentially see the increased costs being passed on to customers, leading to higher tariffs for UK mobile subscribers.
The UK's mobile operators all voiced some concerns with the figures outlined by Ofcom. O2 said it would respond to the consultation in due course. Vodafone said it had yet to read the full document from Ofcom but that it was disappointed with the huge price raises prospoed.
"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," it said.
"Vodafone UK is spending more than £900m this year alone on its network and has pledged to bring indoor 4G coverage to 98% of the UK population by 2015. The regulator should be encouraging such private sector investment in infrastructure and new services like 4G.”
Both EE and Three also said the proposed figures were far too high. Three said: “The sums proposed by Ofcom over-value high frequency spectrum. We look forward to making the case for a clearer reflection of the true value for the benefit of competition and UK consumers.”
EE added: “The proposed increase in licence fees is excessive at a time when we are investing heavily in the roll out of 4G."
The government seems to be hoping to to push the proposals through in order to boost its coffers, after it gained a further £2.3bn from the mobile operators earlier this year when it auctioned off 4G spectrum holdings in the 800MHz and 2.6GHz bands.
Ovum analyst Matthew Howett said a shake-up of the pricing for spectrum was always expected given the fundamental importance spectrum now plays in the market.
“Leaving aside the amounts, Ofcom is right to amend the ongoing licence fees to reflect the market value of the spectrum. The previous fees were set at a time when the use of the spectrum was limited to basic telephony,” he told V3.
“Today that spectrum can be used for new technologies such as LTE which makes it that much more valuable.”
He added that raising the prices would make sure operators only kept the holdings they truly needed, and could pave the way for spectrum trading between operators.
“Given the scarcity of spectrum and the considerable increase in demand for mobile broadband we see coming, operators need to be incentivised to only hold the spectrum they need to support those services,” he said.
“This is Ofcom's way of making sure operators only hold on to the spectrum bands they value the most. I wouldn't be surprised if we saw some spectrum trades further down the line."
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