Mobile bills set to rise after hike in licence costs

Mobile phone companies are warning that customers' bills could rise, thanks to a trebling of their spectrum licensing fees.

Regulator Ofcom announced yesterday that it was putting up the amount it charges the industry for using the airwaves from £64.4 million to £199.6 million per year.

The fees cover the 900 MHz and 1800 MHz spectrum bands, used by phone companies to provide voice and data services using a mix of 2G, 3G and 4G technologies. And thanks to the introduction of the latter two services in recent years, Ofcom reckons the spectrum's now worth much more than it used to be.

"The mobile industry has not previously had to pay market value for access to this spectrum, which is a valuable and finite resource, and the new fees reflect that value," says Ofcom's group director of spectrum Philip Marnick.

Half the price rise will come into effect at the end of October, with the rest a year later.

Things could be worse. The decision follows a long consultation, during which Ofcom's original plan - to increase fees five-fold - was challenged by phone companies and finally withdrawn.

But the operators are still warning that the price hike could hit customers' pockets. EE, which runs EE, T-Mobile and Orange, is particularly concerned, given that it's the biggest spectrum user - indeed, its bill will hit £75 million a year.

"We think Ofcom has got this wrong. The trebling of fees is bad news for British consumers and business as it raises the risk that we won't be able to offer the best prices, and invest and innovate at the pace we and our customers would like," comments an EE spokesperson.

"We're also very disappointed that Ofcom has not reflected the higher costs we've taken on to meet enhanced coverage obligations that Ofcom and government encouraged us to accept."

Vodafone and O2 both say they are 'examining the decision' before deciding how to proceed, with Vodafone warning that the new prices represent a 'significant increase'. The final member of the big four, Three, has yet to comment.

And while Ofcom points to a recent 4G auction in Germany as evidence that operators have been paying too little in the UK, the proceeds from the German auction were ploughed back into extending coverage in rural areas - something British phone companies are expected to do themselves.

Between them, EE, O2, Three and Vodafone are legally bound to spend £5 billion on their networks to extend voice coverage to 90% of the UK's landmass.

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