Ofcom’s proposed plans may decrease MNO innovation, increase customer cost

In proposed increases of mobile license fees by UK regulator Ofcom; both operators and customers may feel the squeeze as costs are QUADRUPLED.

Currently it costs EE, Vodafone, O2 and Three UK £64.5 million a year in licensing fees. Under the plans - revised after calculating the value of the spectrum based on the bids received in the 4G auction - Vodafone and O2's annual rent will be raised to £83.1 million, Three to £37.5 million, whilst EE will hit a massive £101.7 million.

Of course these plans are in an early stage, and are in no means finalised. Consultation will occur up until December 19th where we can only hope they are sensible, and not disruptive to the industry.

One of the biggest dangers of this increased cost could revolve around less money to be invested into increased infrastructure and innovation on both the network and consumer fronts (such as fighting back against the threat posed by OTT services, and decrease in VAS usage.)

Robin Kent, director of European operations at Adax, comments:

“For some time now, although perhaps not quite as much as in the past, telecom operators have almost been tarred with the same brush as those nasty bankers: stacking up profits whilst providing poor service.

“In the main, I think that is an outdated view and operators generally provide a good network service. But the main reason for them being able to do that is by reinvesting profits in infrastructure. Infrastructure investment has been low in previous years because of the global financial crisis and the wait for 4G, and it is only just now starting to recover.. 

“If a large chunk was taken out of those operator profits, with these spectrum price increases, I would have real concerns about operators maintaining increased expenditure on infrastructure. That will affect jobs in the telecom network manufacturing, installation and managed services industries, and ultimately the quality of the network service could suffer. That to me could have a bigger impact for customers than a price hike on their bill – would we rather see nil, three or five signal bars on our handset?"

But naturally, one of the weight-bearers would also be the customers.

Mobile operators are businesses which naturally like to keep their profits growing year-on-year, or at least the same. Such a massive increased cost is going to put a big dent into that which will likely be made-up by increased customer charges.

This is a situation neither customers nor mobile operators would want to arise.

The EU Commission is currently pushing for a “single telecoms market” with one of the most notable proposals to be the erection of a single regulatory body; rather than the many individual regulators (such as Ofcom) across the various member states.

Mobile operators may be increasingly supportive of this idea after these Ofcom proposals; an EU-based regulator may be less heavy-handed in their fees and approach.

One of the biggest dangers would be an EU regulator may be less-focused on the individual requirements of each member state; yet on the other hand could boost collaborative EU projects such as the scrapping of roaming charges.

What do you think of Ofcom’s proposed license fee increases?

* Taken from Ofcom’s announcement post.

** EE and H3G figures relate to holdings after EE’s divestment of 1800 MHz spectrum to H3G, to be completed in October 2015.

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