Ofcom launches consultation on impact of new mobile coverage obligation on licence fees

19 Feb 2015

UK telecoms regulator Ofcom has published a consultation on whether a recently announced obligation for the nation’s mobile network operators to boost coverage should affect how much they will pay for their revised annual licence fees.

As reported by CommsUpdate earlier this month, Ofcom announced it had varied the licences of all UK cellcos – EE, O2 UK, Vodafone UK and Hutchison 3G UK – with a view to improving mobile coverage across the country. As per the licence variations all four cellcos have committed to providing voice coverage across 90% of the UK’s territory by the end of 2017. At the time of announcing the licence variations, Ofcom said it would consult further on the annual licence fees for the 900MHz and 1800MHz spectrum bands, noting that the Government had directed it in 2010 to revise the charges to reflect full market value after the completion of the 4G auction.

Now, in launching the consultation Ofcom said its initial view is that while there could be incremental costs incurred by the mobile operators in meeting the coverage obligation, this is ‘unlikely to have a material effect on the market value of the spectrum’, though it said it is ‘open to considering alternative views before reaching a final decision’.

Provisional decisions on the revised licence fees have been set out, though these are subject to consulting on the impact of the geographic coverage obligation on them. According to the proposals, total fees payable by the UK’s operators would be GBP223 million (USD343 million) per year, a figure which it noted was 10% lower than earlier proposals it had made in August 2014. The lower fees, it said, reflected: 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 a reduction in the assessment of the market value of the 1800MHz band (expressed as a lump-sum value).

United Kingdom, EE, Hutchison 3G UK (Three UK), O2 UK, Ofcom, Vodafone UK