James Barnes says reactions to Ofcom’s proposal to increase mobile spectrum fees may mean its effects won’t be seen until well into the new year
Communications regulator Ofcom ruffled the feathers of UK operators when it proposed increasing the fees for legacy spectrum bands, taking the operators’ joint spend from £64.5 million to £308.9 million.
The major increase marks an attempt by Ofcom, under orders from the Government, to bring the annual fees paid for the older 900MHz and 1,800MHz bands into line with the auction for 4G licences earlier this year, which raised £2.4 billion.
Operators had expected a price rise – the government directive has been in place since December 2010 – but they claimed to have been shocked by the size of the increase which could more than quadruple what they currently pay for the spectrum bands, which are mainly used for voice calls, 3G and some 4G services.
Vodafone was the noisiest in its disapproval of the proposal, stating that it was “disappointed” by the regulator’s plan, before criticising Ofcom for making changes at a time when Vodafone was spending upwards of £900 million on its network to hit 4G targets.
EE followed suit, adding that it felt the price change was “excessive” at a time when it is “investing heavily in the roll-out of 4G”. Although the 4G auction raised £2.4 billion, it was widely acknowledged as a financial failure, and a pessimistic observer of the industry might reasonably suggest that the extra costs added to older services could go some way to providing the extra £1.2 billion that Chancellor George Osborne had expected to receive.
With operators looking to the future and focusing on expensive investment plans, the additional costs connected with older licence fees may well be passed on to the consumer. Closely following the operators’ backlash, industry analysts weighed in with their own views on who will be picking up the tab. uSwitch telecoms expert Adam Kirby said that “alarm bells” will be sounding for consumers, who could be charged more to maintain operators’ margins.
With the price of non-4G services dropping rapidly, consumers have become used to paying little for generous allowances of calls, texts and 3G data. Earlier this month, Vodafone MVNO TalkTalk Mobile broke new ground by launching Britain’s lowest-priced mobile plan, offering 100 minutes, 250 texts and 100MB of data for £3.50. A small price increase may cause some issues, but prices would still be competitive and the blame could be shifted on to the regulator.
While operators have perhaps over-egged their shock at news which they most likely expected – Ofcom made no secret that it would be taking the 4G auction into account when calculating the new costs –the regulator may yet reconsider the charges, with December 19 marked down as the end of the consultation period.
Whether operators raise their prices or cut back on infrastructure investment to make up for the proposed fee increases, their reaction to Ofcom’s revisions suggests that any public backlash will be deflected on to the regulator, dragging the effects of the proposal well into the new year.