Ofcom cuts back proposed spectrum price hike

UK communications regulator Ofcom has responded to criticism over its proposal to increase annual licence fees for 900 and 1800MHz spectrum in the UK with a reduced proposal and the promise of a further consultation before the plan is finalised next year.

Ofcom’s initial proposal in October 2013 met with stiff opposition from the operator community and warnings from analysts that a price hike in the cost of annual licences might be passed on to consumers in the form of higher bills. UK operators also claimed that a price hike would stifle investment in infrastructure just as 4G deployments are gathering momentum.

The licensing fees in question are for the 900 and 1800MHz spectrum bands originally used to carry 2G services, most of which was awarded in 1991. However swathes of the two bands have since been repurposed to carry 3G and some 4G services.

The Government directed Ofcom in 2010 to revise the licensing fees to reflect full market value, after the completion of the 4G auction in February 2013.

According to the authority, mobile network operators currently pay an annual combined total of £24.8m per year for 900 MHz spectrum and £39.7m for 1800 MHz spectrum. Initially the revised licence fees would have been bumped up to £309m in total but the current revision stands at £246.8m, or £109.3m per year for 900MHz spectrum and £137.5m for 1800MHz spectrum.

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Ofcom said it updated its proposal after reassessing the bids made in the 4G auction; the interpretation of international benchmarks; and the calculation used to convert the total value of the spectrum into an annual fee, over 20 years.

Philip Marnick, Group Director of Ofcom’s Spectrum Group, 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.”

Subject to this consultation, new annual licence fees are likely to come into effect in 2015.

Current and proposed total annual licence fees for 900 MHz and 1800 MHz spectrum