Ofcom hikes spectrum licence prices

The annual licence fee paid by mobile operators for spectrum is set to rocket if new plans from Ofcom get the go-ahead.

The government told the telecoms regulator to look at the figures back in December 2010 and revise them to ensure they represented full market value – something Ofcom’s spectrum auction earlier this year was able to help determine.

Now it has opened a consultation, suggesting the yearly fee for the 900MHz band should rise from £24.8m to £138.5m and the charge for the 1800MHz band should increase from £39.7m to £170.4m.

As well as the sale price of the 4G spectrum, Ofcom also took into account similar processes abroad and assessed the technical and commercial characteristics of the UK spectrum bands before coming to a final figure.

The current split of spectrum between operators would mean both Vodafone’s and O2’s current fees would rise from £15.6m to £83.1m, Three’s fee would go from £8.3m to £35.7m and EE’s would shoot up from £24.9m to £107.1m – taking into account the upcoming transfer of spectrum from EE to Three as part of the deal which allowed it to repurpose its 1800MHz for 4G connectivity a year early.

“Spectrum is a valuable and finite national resource and charging for it can incentivise the optimal use of frequencies,” said Ofcom.

O2 merely said it would respond to Ofcom “in due course,” while Three made it clear it was unhappy with the proposals.

“We welcome Ofcom’s move to reflect the market value of legacy spectrum holdings, but the proposals fail to recognise the relative value of high and low-frequency spectrum, despite evidence from around the world,” said a Three spokeswoman.

“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,” she added.

EE said it would work with Ofcom on the issue, but believed the increased was "excessive at a time when we are investing heavily in the roll-out of 4G”.

Vodafone said it would take its time to put its formal response to Ofcom, but was happy to show its initial displeasure, with a spokesman saying: "We are disappointed that 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.

"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, which will benefit consumers, businesses and the wider British economy for many years to come.”

Ofcom said the consultation was due to close on 19 December 2013 and, if all goes to plan, the new prices should come into force next year.