Ofcom sets market-based annual licence fees for 900 and 1800 MHz bands

UK regulator Ofcom has reached what it says is a final decision in a long-running dispute over the annual licence fees it charges to use the GSM bands and reduced them by an average of 13 per cent compared to its most recent previous proposals, issued in February 2015.

The UK’s mobile operators had previously argued that the proposed fees, which according to a 2010 government directive must be based on the bands’ market value, should be reduced to take into account a deal they struck with the government over coverage obligations.

But in the end, only the 900 MHz band fees were reduced significantly (by 24 per cent), and this was to take into account the results of the recently concluded German multiband auction, rather than the new coverage agreement.

Fees payable per MHz per year

Using data from the German auction in this way did not impress the UK’s biggest mobile operator, EE, which has spectrum in the 1800 MHz band but not the 900 MHz band. In a consultation response this summer, it argued that the weight that Ofcom was attaching to the German results would be “in breach of Ofcom’s duty of regulatory consistency, and hence would be unlawful”.

The CFO of its part-owner, Deutsche Telekom, wrote personally to Ofcom’s new chief executive Sharon White to argue that the German auction prices were the result of business strategy rather than the bands’ intrinsic value.

Vodafone, which has also described Ofcom’s methodology as “unlawful”, would not comment on whether it was planning a legal challenge. “We will be reviewing Ofcom’s proposed spectrum fees over the coming days as they represent a significant increase when we are already investing around £1 billion on our network and services this year,” the company told us.

EE’s next payment is due to be made on 28 February 2016. Will the company make that payment, or will it be paying lawyers instead?

Toby Youell, PolicyTracker

25/9/2015