Ofcom consults further on spectrum fees for 900MHz/1800MHz bands

4 Aug 2014

UK telecoms regulator Ofcom has published a further consultation concerning the proposed revision of annual licence fees for the 900MHz and 1800MHz spectrum bands. With the government having previously directed the watchdog to revise the fees ‘to reflect full market value’ once a 4G spectrum auction had been completed, Ofcom has said that its latest proposals build on earlier analysis, following consideration of responses from stakeholders.

Having considered feedback from a previous consultation, Ofcom confirmed it has updated its analysis of a number of elements, including: the bids made in the 4G auction for 800MHz and 2600MHz spectrum; the interpretation of international benchmarks; and the calculation used to convert the total value of the spectrum into an annual fee, over 20 years. As a result, it said it has reduced the overall proposed levels of fees down from its previous plans. Currently the nation’s mobile network operators pay a combined GBP24.8 million (USD41.9 million) for spectrum in the 900MHz band, while paying a total of GBP39.7 million for 1800MHz frequencies. However, as per the latest proposals total fees payable for the 900MHz spectrum will rise to GBP109.3 million per year and GBP137.5 million for the 1800MHz band.

On an operator-by-operator basis, the revised fee proposals will see market leader EE required to pay a total of GBP86.4 million for its 900MHz/1800MHz spectrum holdings (after its divestment of 1800MHz spectrum to Hutchison 3G UK [H3G UK], to be completed in October 2015); by comparison it currently pays GBP24.9 million, while Ofcom’s initial proposals would have seen it pay GBP107.1 million. Meanwhile, O2 UK and Vodafone UK both face a new annual fee of GBP65.8 million for their respective 900MHz/1800MHz spectrum holdings, up from the GBP15.6 million both pay now, but down from the GBP83.1 million proposed in October 2013. Rounding out the market, H3G UK will pay GBP28.8 million, up from its present GBP8.3 million fee, but lower than the initial GBP35.7 million proposal. Subject to this consultation, the new annual licence fees are likely to come into effect in 2015, with the consultation set to close on 26 September 2014.

Commenting on the latest fee plans, 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.’

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