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Mobe industry quails as Ofcom floats idea of QUADRUPLING 2G spectrum prices

Unilateral price increase? B-b-but we have a contract...

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The GSM Association has castigated Ofcom for wanting to quadruple the price of the mobile phone spectrum mostly used for 2G.

The price hike, which will hit the 900MHz and 1800MHz bands, was proposed in an Ofcom document issued in October.

John Giusti, head of spectrum at the GSMA, said: “We focused on the relative impact that a four-fold increase will have on UK competitiveness... A large new tax on mobile operators is exactly the wrong way to go right now.”

Ofcom argued that the Government “directed Ofcom in 2010 to revise the fees so that they reflect full market value,” claiming that “no decisions have been made on the level of the fees” so far. A decision is due later this year.

Ofcom also said that their objective for the 4G auction was “not to maximise the amount of revenue, but to secure the optimal use of the spectrum and to promote competition.”

It added: “We designed the auction in such a way as to ensure a minimum of four operators in the UK with enough spectrum to roll out four competing national 4G networks. This is exactly what we achieved, helping to maintain the UK's position as one of the most competitive mobile phone markets in Europe.”

The GSMA disagrees that it’s made the UK competitive but agrees with the principle of auctions.

“Spectrum auctions started as a means to fairly assign the spectrum so that the government isn’t picking winners and losers,” said Giusti. “Spectrum is a valuable resource in terms of the services and benefits it provides to businesses and consumers. Ofcom's focus should not be on revenue maximisation, but instead on fostering the certainty needed to create an environment conducive to 4G investment.”

The crux of the argument is that Ofcom says its regulations are providing the best competitive environment and the GSMA is saying that it doesn't. In the words of Giusti: “The question is whether the UK wants to lead or follow in terms of global competitiveness. Consumer demand for mobile data means that operator requirements for spectrum will only go up. Nobody wants an environment where government pricing creates incentives to give up spectrum needed to deliver broadband connectivity to businesses and consumers.”

The consultation period on Ofcom's proposed spectrum pricing changes closed on January 16th and a judgment is imminent. The GSMA is highlighting the issue now to put pressure on those making the decision.

It’s easy to postulate that taxing each mobile phone subscription an extra 34p a month is trivial – although, of course, this sum multiplies by the time it's passed down onto consumers. It’s only those countries which are deeply focused on technology development – notably Japan – that give spectrum to their telcos for free.

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