Statement: Proposal to apply Administered Incentive Pricing for the 412–414 MHz, paired with 422–424 MHz, frequency bands

Published: 3 June 2021
Consultation closes: 16 July 2021
Status: Closed (statement published)

Statement published 7 October 2021

In this statement, we set out our decision on the level of annual licence fee for the 2 x 2 MHz of spectrum at 412–414 MHz paired with 422–424 MHz (the “412 MHz spectrum”).

This spectrum was auctioned in October 2006 and an indefinite licence with a minimum period of 15 years was awarded to Arqiva. The minimum period comes to an end on 5 October 2021, after which an annual licence fee can be applied by Ofcom. In 2008, Arqiva added Airwave as a concurrent licensee.

We have decided to set a fee for this spectrum on the basis of Administered Incentive Pricing (“AIP”), which is based on the opportunity cost of the spectrum not being available to other potential users. We consider that setting a cost-based licence fee would result in excess demand for this spectrum, making a fee based on AIP appropriate.

We have determined that the highest value alternative use for this spectrum is Business Radio, which operates in the adjacent bands, and have decided to set the fee for the 412 MHz spectrum based on the fees we already charge Business Radio users in the adjacent bands for a national exclusive licence.

Our pricing policy is to set fees which reflect our estimate of the market value (i.e. opportunity cost) of the underlying spectrum. We consider this approach is consistent with our statutory duties, including our duty to secure the optimal use of the spectrum.

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