Ofcom has defended its decision to treble the price of mobile spectrum, after mobile operators hit back over the increase.
The regulator recently revised the pricing of mobile spectrum used to deliver voice and data over 2G, 3G and 4G services.
As a result Vodafone, O2, EE and Three will see fees triple for 900 MHz and 1800 MHz bands. The new pricing will cost the operators a combined annual fee of £199.6m, compared to the previous cost of £64.4m a year.
Ofcom explained that the new prices better reflect the market value of the spectrum bands, claiming that the operators have had five years notice to budget for this increase. It described the spectrum as a ‘finite resource’, one that it says the industry has previously not had to pay market value for.
The regulator said: ‘Mobile operators have a strong incentive to invest in networks and to keep prices competitive. The operators have had five years’ notice that the fees would be increased to reflect full market value and we expect them to have budgeted for this.
‘We’ve listened carefully to the arguments and evidence put forward by industry. The fees announced today are in line with analysts’ expectations and with the amounts that operators pay for accessing spectrum in other countries.’
However, EE has responded to this price hike by claiming that it will mean bad news for consumers and businesses. A spokesperson said: ‘We think Ofcom has got this wrong. The proposed licence fees for 1800MHz spectrum are based on a flawed approach.
‘The trebling of fees is bad news for British consumers and business as it raises the risk that we won’t be able to offer the best prices, and invest and innovate at the pace we and our customers would like.
‘We’re also very disappointed that Ofcom has not reflected the higher costs we’ve taken on to meet enhanced coverage obligations that Ofcom and Government encouraged us to accept.’
Ofcom’s spectrum pricing has recently fallen into the spotlight, with Vodafone commenting to the Competition and Market’s Authority (CMA) that it doesn’t generate enough money in the UK to invest in ‘significant’ infrastructure costs, including spectrum.
In response to the regulator’s recent price hike, Vodafone has said it will review Ofcom’s decision, which it claims comes on top of its own investment. The network said: ‘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 £1bn on our network and services this year.’
O2 has said that it too will review Ofcom’s decision before deciding how to proceed.
The new fees will come into effect from 31 October 2015, with the operators set to continue with annual payments from 31 October 2016. Unlike in previous spectrum payments, the new system will require mobile operators to pay on a single common payment date that will be set by Ofcom.
The price changes are also expected to have ramifications in the consumer mobile market. Sunetra Chakravarti, editor of Mobile Choice, claimed that it is ‘inevitable’ that that price increase will pass onto consumers.
She said: ‘Every mobile phone customer knows bill shock and it is only a matter of time before they see OFCOM's fees reflected on their invoices.'
'This is inevitable because networks will be unlikely and unwilling for anything to affect their margins and will be more likely to push them to customers. Higher tariffs and less data for a higher price will be the result and rollout of 4G network will be delayed.
'Customers can however take consolation from the fact that OFCOM is only tripling the licence fee and not increasing it five-fold as it had previously threatened to do.'
Three has declined to comment.