Mobile operators clash with Ofcom over price hike

Regulator Ofcom may introduce new licensing fees which could quadruple the cost of using existing mobile spectrum. Speaking to the BBC operators said the increase was "excessive" and Vodafone said it was "disappointed" with the proposals. Ofcom believes the increase was justified based on comparable fees in other European countries. The current prices for the 900Mhz and 1800Mhz spectrum bands were set several years ago when it was primarily used for 2G. In 2010 the coalition government directed Ofcom to revise the cost of licenses which remain some of the most competitive in the EU.

Questions will be asked as to whether the huge rise in cost that mobile networks will have to pay to the regulator will be passed on to consumers. The increases have not yet been confirmed and Ofcom are still consulting as to whether the price hikes are warranted.

Responding to the question of costs being passed into the consumer, an Ofcom spokesman told the BBC that it did not expect the operators to increase charges for consumers.

JP Morgan in an advisory note said that the UK's highly competitive mobile market would stop the increased costs being passed onto the consumer.

Vodafone criticised Ofcom, saying:

We are disappointed that Ofcom is proposing a 430% increase in the fees we pay for our existing spectrum at a time when we are investing more than ever in vital national digital infrastructure.

The regulator should be encouraging such private sector investment in infrastructure and new services like 4G, which will benefit consumers, businesses and the wider British economy for many years to come.

Should the new prices be introduced individual fees would rise from £15.6m to £83.1m for Vodafone and O2. Fees for EE will rise from £24.9m to £107.1m and Three will see an increase from £8.3m to £35.7m