Ofcom, it's WAR! Mobe networks fire broadside over 2G spectrum pricing The UK's mobile network operators have successfully kicked off their PR campaign against spectrum regulator Ofcom, painting themselves as surprised victims of governmental incompetence. Most of the media coverage of Ofcom's tripled fees for the 2G frequencies focused on the potential for higher mobile pricing. This left no …
Regardless of who is at fault, I don't think it counts as being screwed by fine print, when you're a large national (in some cases multi-national) corporation who employees lawyers to read the fine print.
As pointed out in the article, they all knew this was coming years in advance.
It's still going to be a free lunch for the operator, it's just that the consumer and businesses will be paying for it now.
I'm also a bit concerned, and annoyed, that governments can hold their respective populations to ransom over what is essentially wobbly electromagnetics. I'm all for the operators creating and paying for a non profit regulatory body to ensure that nothing interferes with other things, but for a government to be making billions out of this is absolutely criminal.
If I was in the UK at the moment, which thankfully I'm not, I'd be half expecting to see a demand to pay a license fee based on how good my colour vision is - which would be a tax on my ability to receive what is also essentially wobbly electromagnetics.
Actual loss or accounting loss?
If the former, then only Three, which launched in 2003 and finally got into profit in 2011 - but is still several billions away from earning back the losses of earlier years.
If the latter, then all of them have made a loss at one point or another in the last 10 years.
One: Network operators will bite the pillow and pay up.
Two: they will restructure their businesses, writing down billions in corporation tax in and due to the process and they will relocate to Ulan Bator for tax purposes, further diminishing their exposure to corporation tax.
They will also inevitably raise their prices.
They do not need to relocate to Ulan Bator to use payments to gov as a loss.
Frankly this (same as a lot of other similar "licensing" efforts) is pure and simple compensation for the government utter failure to collect any form of tax from any corporation larger than 250 or so employees. For the same reason they would love to require licensing of web businesses (if they could).
How bad is it really? Wikipedia indicates 75,000,000 active lines. The total fee for these carriers goes from GBP 48.8 million to GBP 225.9 million. This increases it from GBP 0.65 to GBP 3.01. i do think it's unlikely carriers will just eat the charge.
I had to run the numbers, in order to post a comment on the independent's article rubbishing their misleading article title "Customers face paying four times more for 4G services in proposed price hikes". (Of course, besides being inaccurate, there is no "four times more" here, it is four times *as much*... four times *more* would be five times the original amount.)
"How bad is it really? Wikipedia indicates 75,000,000 active lines. The total fee for these carriers goes from GBP 48.8 million to GBP 225.9 million. This increases it from GBP 0.65 to GBP 3.01. i do think it's unlikely carriers will just eat the charge."
They could (of course) hand back large chunks of the band they hold and are just sitting on to keep out competitors.
The MoD hates paying for spectrum that it doesn't make efficient use on a 'we'll hold on to it just in case basis' and now the mobile phone companies are looking to play the same game.
There is only so much radio space and lots of uses it could be put to. The Telcos have been pouring money into investors pockets instead of their infrastructure and now they are going to be charged the commercial rate for the frequencies they don't like it. This is a scheme that has been running in one way or another since the days of the Radiocommunications Agency (precursor of Ofcom that had real engineers who actually understood all matters pertaining to radio) as part of the way of making a finite resource commercially viable to promote efficient use. The more you use, the more you pay.
No sympathy from me, and the bad reporting shows just another example of how poor some parts of the press really are at telling the truth......
Ofcom will of course will be prevented from saying anything to defend itself by Government.
What a company does is, when it young and new and fresh they pay as much as they can to their largest investors as soon as it can. When something like 4G comes along what they will do is fund expansion through higher-than-normal-interest loans from those same investors. Then instead of paying dividends to the investors which are taxable, they pay the massive amount of interest on the loans, whihc isn't taxed in the same way, and, on paper at least, make much less of a profit.
1. Spectrum is charged for because:
a) if you give it away for free it will be like asda giving away free waterbaloons.. I have no use for them, but I will take 2 million of them please, to keep in my shed, forever, without using them (or giving some away or whatever.. they were free.. I don't feel obliged to use them). Also can I please have half the available spectrum allocated to then never use again?
b) it raises money for government / raises money that the government can chose how the country should spend.
2. This is better than the alternative, because although it pushes up prices a bit, it means that the goods (in this case wireless spectrum) are obtained only by those that are willing to use it.. no one will pay good money for spectrum that they are not going to use (unless they have very very poor management practices). its an even better idea to charge rent for it, because then, if you no longer need the spectrum then you can stop renting it... no need to keep paying for gym memberships that you don't use.. like if there was a gym with only 10 places at any given time.. and the memberships were free.. and the 10 current members never went, but also never canceled their hoarding of the memberships because they were free.. or they had just paid a lump sum up front for them, so they really had no reason to ever stop hoarding and never doing anything else with them?
3. This will drive up prices: companies and corporations are constructs that are created / allowed to exist because they provide goods and services to the population. In stead of the state supplying all our needs and requesting all the work to be done this function is passed on to legal entities (companies/corporations) who then supply a service/goods and that the population then pay them for. they are allowed to make a profit doing this, but is taxed to skim some of that money off for the government to spend on services that they deem inefficient to be ran by companies (fewer and fewer these days, good bye royal mail). Companies and corporations do what makes them the most money: If a specific outcome is preferred (better services?) then through taxes and tarrifs the palying field can be altered so that the best economic outcome for these legal entities also happen to be the one where the population gets better services.
a) if you make it more expensive for these companies to deliver services/goods to the population then they will have to charge more for those services. simple.
b) for the population it is better to have a service that works, even if it is slightly more expensive to make it more efficient (so that our telecoms companies aren't all providing 1g services, while hoarding spectrum, because there is no incentive to invest to do stuff with that spectrum)...
c) compare that with a service where we pay inflation increases, that never improves and never has to improve, like a theoretical british telecom who have a monopoly on landlines and don't see anything wrong with keeping the old switched telephone network exactly as it is for another 200 years (exageration - even under BT monopoly there was innovation.. just very slow)
4. taxes and tariffs designed to improve competition and innovation should be plowed back into lowering general taxes for corporations/companies/individuals. This is rarely done, governments generally like to spend money, and are not usually interested in increasing the purchasing power and prosperity of their country by lowering taxes. In stead it will be spent on spent on invented projects which sometimes pay off in terms of improving society, and sometimes are just wasted.
5. It is a good thing that offcom has done this. in the long term if will benefit us as consumers. it is a bad thing that the government will missuse the money raised from it.
6. Most people fail to see how all these things are connected, and companies/offcom/the government can therefore pretend that these issues are onesided... like telecoms convincing the population that what they really want is a a lower priced service that stays the same and where they (telecoms) don't have to invest anything to improve anything ever again :)
b) for the population it is better to have a service that works, even if it is slightly more expensive to make it more efficient (so that our telecoms companies aren't all providing 1g services, while hoarding spectrum, because there is no incentive to invest to do stuff with that spectrum)...
I'm one of the people who choose to live in the country, a 1G service would mean a usable mobile signal from any of the big carriers (O2, Voda or EE). Is there one? No there isn't, O2 Boostbox or Voda Suresignal systems work, but use your own Broadband (at 3Mbps) to connect. Compare this with Albania where I got a 3G signal when "Out in the sticks" on a day trip this year.
The Telcos are all laughing at us
^ very much this ^
I drove through some amazingly poor parts of Albania, Bulgaria, Romania, Macedonia, Moldova and Ukraine last year and had 4-5 bars, 3G service everywhere. I landed back at Gatwick airport and couldn't phone the missus to tell her I was safe, because there was NO signal of any sort. I never got a signal during the 60 mile drive home and pretty much only did when I was in range of my own SureSignal as I walked up to the front door. I live in Hamsphire - the 5th most populated county in England....
"I drove through some amazingly poor parts of Albania, Bulgaria, Romania, Macedonia, Moldova and Ukraine last year and had 4-5 bars, 3G service everywhere."
amazingly poor parts. IE low density population areas with low phone usage. So you got an amazing signal because you had the whole spectrum to yourself.
Similarly:
"Hamsphire - the 5th most populated county in England" - So massively oversubscribed.
Signal is a lot more about contention than people realise. There is a very good signal in London, there's just 10 million people using it all the time.
Doesn't really matter what anyone says or what Ofcom wants, the end result will be higher bills for customers regardless. Either via higher monthly tariffs or less generous deals on new handsets. Since there are only really three operators/spectrum owners in the UK there is an oligopoly so prices will rise across the board.
Granted the operators knew it was going to happen but Ofcom should have seen this coming too.
The Telcos are ploughing vast amounts of money into their networks on a daily basis. The view that they are just sitting back and raking in the cash is ridiculous. The amount of cash it takes to sustain the existing network infrastructure is phenomenal.
This is purely sour grapes from the gvmt. Which is fine, don't get me wrong, its a free economy etc, they own a resource, they govern the price. I'd just be amazed at ANY company that takes a 50m+ hit on its bottom line and doesn't increase its prices in some way to compensate.
Maybe then the UK tariffs will start to be more inline with the rest of Europe's, which are considerably more $$.
The 2G pricing was supposed to be revised in line with the pricing levels achieved in the LTE auction, this is what the Operators knew.
The LTE prices were low, therefore the 2G prices should also be low. It is the variance from this principle which is galling.
This is akin to your neighbour's house rental price being listed as a precedent for the price of your rental, and then changing your mind because the price was not high enough and so asking double for it, even though your house is smaller and run-down. Unlikely to be successful unless you have sitting tenants who can't move.
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