While Ofcom will only review the amount charged rather than the regime itself, the EU is considering broader changes to spectrum management practices
Ofcom will review the formulas used to calculate annual licence fees
On 23 July 2024, Ofcom announced it would launch a review into the annual licence fees (ALFs) paid by mobile operators in the UK for use of the 900MHz, 1800MHz and 2.1GHz spectrum bands. The announcement follows a request submitted by BT for Ofcom to review the ALF charged specifically for use of the 1800MHz band. Citing the similarity between the formula used to assess fees for all relevant spectrum bands, Ofcom instead decided to initiate a review of all of the ALFs it currently charges. The regulator expects to complete its review by the end of 2024 and welcomes input from relevant stakeholders, although it will not be conducting a formal public consultation.
The regulator already restated its commitment to an indefinite licensing system with ALFs in a January 2024 review requested through the WIS
Ofcom’s review of ALF formulas was preceded by a broader review of the regulator’s strategy for managing mobile spectrum conducted at the request of the Government through the Wireless Infrastructure Strategy (WIS) and published in January 2024. In that prior review, Ofcom stated that it believed that its current approach in awarding spectrum via indefinite licences with related ALFs remains the most appropriate mechanism to achieve efficient outcomes. The regulator discussed but dismissed other methods for spectrum allocation, including indefinite licensing with obligations and fixed term licensing with a reallocation procedure, in response to the Government’s specific request to consider how spectrum is managed in other countries. Having established its commitment to its current spectrum management approach, Ofcom’s upcoming work will now focus on assessing how the levels of ALFs are set as opposed to reconsidering their use entirely. Both the existence of ALFs but also the level at which fees are set have received frequent criticism from industry stakeholders, as well as being the focus of public consultation and scrutiny in recent years. ALFs set for the 900MHz and 1800MHz bands were subject to five rounds of public consultation before an interim decision was reached in 2015, with an additional consultation completed before the decision was finalised in 2018. Ofcom was also required to refund nearly £220m in ALFs in 2020 following a successful legal challenge brought by operators against the regulator’s decision to significantly increase the fee level. Though the regulator noted in its January 2024 review that it did not find evidence of ALFs negatively impacting network investment, driving the rollout of 5G across the UK remains a priority for all parties, and ALFs represent a degree of additional financial pressure on operators.
Regulators elsewhere in Europe have come under similar scrutiny over spectrum allocation procedures
Elsewhere in Europe, the costs of acquiring spectrum and the objectives set by governments in their spectrum management strategies have drawn similar criticism. In response to the EC’s white paper on digital infrastructure, a number of operators expressed frustration at what they have seen as the artificial inflation of spectrum prices at auction. Operators also discussed the uncertainty that underlies fixed term licensing and related reallocation procedures, which is the management strategy of choice in a number of EU countries, including Germany, Ireland and the Netherlands. Similar to the concerns expressed through the WIS on the impact of spectrum allocation procedures on network investment incentives, European operators also argued that regulators across the bloc should uniformly value coverage and quality commitments more highly when awarding spectrum. While Ofcom will not further interrogate the merits of its ALF regime for the time being, the EU may well see some concerns reflected in a more unified spectrum management approach through a potential Digital Networks Act.
