Reply to post: There is no purpose to spectrum pricing than a tax by any other name

There is no purpose to spectrum pricing than a tax by any other name

(From the FT comments:)

The article lacks a bit of  context. All the 3G, 4G and now 5G spectrum has been auctioned. The 3G auction raised £22.4 billion, 4G auction raised £2.3B and the 5G auction (part 1) raised £1.3 billion.  It is a nice little Treasury racket as the price of spectrum is now so high that no new network entry is feasible, as we saw in the 5G auction. The 5G spectrum at 3.4 GHz fetched £7.38m per MHz - the same spectrum was sold in 2003 for £175,000 a MHz.

In general the spectrum cost is treated as a capital asset and when spectrum prices go too high, as they did with 3G, the mobile operators directly cut back on the extent of network they initially roll out...one of the reasons 3G coverage was so awful for so long. It is one of the reasons why 5G coverage may be a while reaching you.

The 2G spectrum at 900 MHz was given to the Vodafone and Cellnet free in 1987 in exchange for them investing in the GSM networks early (they had only just rolled out their 1G networks). This led, as a matter of fairness, to the new competitors at 1800 MHz getting their spectrum free. The auction fees in dispute relate to this 900 MHz and 1800 MHz spectrum, where the mobile operators are required to pay an annual fee  based upon a market value, which Ofcom guesstimates. What upset the mobile operators was when Ofcom, acting as the spectrum branch of the Inland Revenue, suddenly jacked the price up. There is no purpose to spectrum pricing than a tax by any other name.