Mobile phone spectrum fees rise: Costs to us won’t

THE mobile phone companies have got all hot under the collar about new fees they’ve got to pay for the spectrum they use to provide the service. So much so that they’ve actually started lying about it. For this rise in fees will have absolutely no effect at all on the prices the companies charge us:

The move will provide a £245m a year boost to the Treasury, but the mobile operators said that it would discourage investment in new 4G services and labelled the price rises “excessive”.

Industry sources said they were digesting the likely implications of the new fees, adding that they may have to charge customers extra in order to protect margins.

That last is nonsense. A company does not add up its costs then decide what the price will be. A capitalist company charges the maximum it thinks it can get away with regardless of its costs. So, changing the costs doesn’t change the prices charged: it is competition from other suppliers of the same or similar goods that determines the price they think they can get away with.

So, raising these spectrum charges doesn’t change the price to us consumers. It just changes who gets that chunk of what is gouged out of us consumers. Is it the shareholders in the companies or is it all of us again in our guise as taxpayers?

As to the argument that this will mean less investment in 4G, bunkum. These are charges for 2G spectrum: meaning that the faster they roll out 4G then the earlier they can hand the 2G back to the government and not have to pay the new fees.

This all comes under the economics of what are called “Ricardian Rents” and the general agreement is that government should charge for things like spectrum (or mineral deposits, a similar sort of thing) and charge highly for access to them. The companies are near lying here just because they’re squirming, not because they’re right.

Tim Worstall

Posted: 11th, October 2013 | In: Money, Technology Comment | TrackBack | Permalink