Businesses battling spectrum price rises

Businesses battling spectrum price rises

The government's decision to raise the price of the country's mobile spectrum has proved somewhat problematic for businesses of sizes up and down the UK.

The government decided several months ago to raise the price of airwaves space from £64.4 million to £199.6 million a year.

That amount was still substantially lower than the amount initially proposed by industry regulator Ofcom, but has come as a blow to the country's major mobile operators.

Vodafone and O2 have been particularly hard, with both companies having to live up to their spectrum costs tripling from £15.6 million a year to £49.8 million.

The first phase of the fees was finally implemented in October with the second half coming in from October next year.

Breakdown in trust

Vodafone and O2 are not the only ones to express their dismay at the decision, with rival firm EE stating the move had led to a breakdown in trust between the government and operators.

In an interview with Mobile News, EE's chief executive Olaf Swantee said the government had broken key promises made to overall industry relating to achieving 90 per cent coverage by 2017.

He added that a “landmark” agreement saw EE, O2, Three and Vodafone voluntarily change their current license agreements in order to commit £5 billion to meet the government's target, in exchange for the guarantee that each operator would be consulted on any proposed price rises to the spectrum.

He added that the government also made a commitment to reforming the Electronic Communications Code (ECC), making it easier to build and access masts.

Mr Swantee claims EE's spectrum costs have since trebled to £75 million, adding that the government had done little to fulfill its side of the bargain.

“I’m really angry about it,” said Swantee. “We made a commitment as an industry to make a voluntarily change to our license.

“In return we would have the ECC amended, which hasn’t happened. We would also have serious consideration for the annual licence fee, that hasn’t happened. That leaves a pretty bad taste.”

EE, as well as Vodafone, Three and O2, have all confirmed they will be reviewing the spectrum price rise.

Impact on businesses

There can be little doubt over the increased influence of mobile working on businesses across the UK, with trends such as bring your own device (BYOD) and cloud computing, as well as government legislation on flexible working, contributing to an increased emphasis on mobile working.

And yet, this rising trend has coincided with a shift in the UK's mobile landscape. December has begun with Ofcom deciding to postpone February's auction of 2.3GHz and 3.4GHz spectrum, previously used by the Ministry of Defence, over a legal challenge launched by Hutchison and Telefonica – the parent companies of Three and O2.

A merger involving both operators is currently being assessed by the European Commission,  with both companies keen to have a verdict settled beforehand.

Rivals BT and EE have already seen a proposed merger given the green light by the Competition Markets Authority.

And yet Mr Swantee insists the government is not paying enough attention to such long-term changes, adding the UK's efforts in becoming a benchmark leader for mobile infrastructure could be under threat if action is not taken.

“We are always interested in more spectrum,” he added. “But if it’s just about the government wanting a quick way of making a very large amount of money, then that would not be very good for Britain. I hope another spectrum auction and another annual increase in spectrum licence fees, doesn’t spoil the party.”

Any plan that is potentially detrimental to the UK's mobile infrastructure could have a hugely negative impact on the flexible working trends taking hold of British business. At a time when Chancellor George Osborne is keen to keep the nation's economy moving in the right direction, any negative hit to productivity could prove problematic.