Ofcom, the UK telecoms regulator, opened up a consultation period about whether or not annual licence fees for 900MHz and 1800MHz spectrum should take into account the coverage agreement operators signed with the UK government, although its latest proposal already lays out a ten per cent cut for operators.
The regulator has been consulting on revising fees for 900MHz and 1800MHz spectrum since conclusion of the UK’s 4G auction in February 2013. The regulator is working to a government directive to determine their “full market value”.
Indeed, Ofcom has already made some licence fee proposals, including one in August 2014 and another towards the end of last year (which took into account responses to the August 2014 consultation).
The latest provisional decision would see total fees payable by operators of £223 million per year, which is 10 per cent lower than Ofcom’s earlier proposals in August 2014 (see table, click to enlarge).
The regulator said the reason for the price drop was “a reduction in the discount rate that Ofcom considers to be appropriate when converting a ‘lump-sum value’ (of the type paid by licensees when they acquire a licence in an auction) into an equivalent annual payment”, and also a “reduction in the assessment of the market value of the 1800 MHz band (expressed as a lump-sum value)”.
The latest proposal, however, doesn’t take into account the mid-December agreement signed by EE, O2 and Vodafone on voice coverage – an obligation which the regulator duly inserted into 900MHz and 1800MHz licence conditions at the end of January.
O2 and Vodafone hold licences for both 900MHz and 1800MHz bands, while EE and 3 have 1800MHz licences only.
It is Ofcom’s view “that all interested parties should be given a reasonable opportunity to comment on whether they consider that the geographic coverage obligation, taking account of the associated incremental costs incurred by the MNOs, should impact future ALFs (annual licence fees)”.