Technology

Networks hit out at Ofcom mobile spectrum price hike plan

Woman walks past Vodafone shop
Image caption The price rise affects several of the UK's major mobile operators

Mobile network operators may have to pay more than four times the current amount to use the radio spectrum, under new proposals from Ofcom.

The regulator said the new licensing fees reflected market value based on other European countries.

Operators told the BBC the increase was "excessive". Vodafone said it was "disappointed".

Some analysts have raised concerns the increased costs might be passed on to the public.

"The size of these figures may come as bad news to the mobile networks, but more worryingly could sound alarm bells for consumers," said Adam Kirby, telecoms expert at uSwitch.com.

"The proposed new costs reflect a huge leap in the amount networks will have to pay the regulator for using the spectrum - our concern is that it will be consumers who are left to foot the bill.

"However, the good news for concerned consumers is that no increases have been confirmed as yet - Ofcom are now consulting on the fees. It remains to be seen how much these costs will actually rise, and if the networks can fight back and keep a lid on these increases."

An Ofcom spokesman told the BBC that while it had no control over how much operators charged customers, it did not expect the rise to have an impact on bills.

In an advisory note, financial services firm JP Morgan said it expected the competitiveness of the mobile market would stop costs being passed down.

On the cheap

However, operators contacted by the BBC expressed concern that the rise had been higher than they had budgeted for.

The affected companies - Vodafone, O2, EE and Three - each told the BBC that they would respond to Ofcom's announcement in due course.

EE said it would aim to stress that "there must be a balance between licence fees and the critical 4G network investment consumers and businesses are demanding to drive growth and jobs for the UK economy".

Vodafone criticised Ofcom, 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.

"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."

Image caption Operators are also under pressure to lower the costs of using mobile phones when abroad

Prices for the 900Mhz and 1800Mhz spectrum bands were set when it was used for 2G services several years ago. Ofcom has since "liberated" the spectrum - the term given when a certain band is freed up for different purposes.

In this case, it meant that operators could use the bands for higher-speed services such as 4G.

In 2010, the government instructed Ofcom to revisit the cost of the licences for 900Mhz and 1800Mhz which - in comparison with other equivalent services across the EU - were considered to be very cheap.

The new prices will see Vodafone and O2's individual fees rise from £15.6m to £83.1m. EE will pay £107.1m, up from £24.9m, and Three will go from £8.3m to £35.7m.

The increase comes at a time when operators are facing a drop in income via calls made while customers are overseas. The European Union is pressing hard for far lower roaming costs in a bid to reduce so-called "bill shock".

4G auction

A source at one of the affected operators said he expected operators would now engage in a tug of war with Ofcom to see the proposed amounts lowered.

In response, the regulator said: "It's a consultation - we welcome the views of our stakeholders. Nothing's final at this stage.

Image caption 4G was launched with a bang in the UK

"They've been expecting this for some time and we've based our proposed annual license fees on market value."

Ofcom also dismissed the suggestion that the price hike is in response to a lower-than-expected return from the recent auction of 4G spectrum, which took place earlier in the year.

That sale raised £2.3bn - less than the £3.5bn expected by the Office for Budget Responsibility.

The shortfall is being investigated by the National Audit Office, which expects to publish its findings early next year.

Follow Dave Lee on Twitter @DaveLeeBBC.

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