MOD charged double for airwaves
Feb 10, 2013 (Financial Mail on Sunday - McClatchy-Tribune Information Services via COMTEX) --
BRITAIN'S financially stretched Armed Forces are paying more than twice as much as commercial telecoms operators to use the radio frequencies that carry vital communications.
Under a regime set up by Labour, the Ministry of Defence pays telecoms regulator Ofcom pounds sterling 155 million a year as part of the "administrative incentive pricing" scheme aimed at encouraging the efficient use of its spectrum, which is used for everything from radar to satellite communications.
However, commercial telecoms operators pay only pounds sterling 64.5 million a year in licence fees for the use of radio spectrum carrying mobile phone calls.
The mobile telecoms providers are: EE, owned by Deutsche Telekom and France Telecom; O2, owned by Spain's Telefonica; and Britain's Vodafone. EE paid pounds sterling 33 million, while O2 and Vodafone paid pounds sterling 15.6 million each.
An Ofcom spokesman said the sum paid by the Armed Forces was "based on the opportunity cost of the spectrum -- or how much money could be raised if someone else had the opportunity to lease the spectrum instead of the MoD."
Ofcom is currently auctioning spectrum to mobile operators to use for high-speed 4G services and is hoping to raise pounds sterling 3.5 billion.
Following the auction, Ofcom will revise the licence fees charged to mobile operators and it is expected that they will be substantially increased.
The MoD is also selling spectrum in the first move of its kind by a Government department.
Its annual spectrum payment would more than pay for a new communications system designed for troops in Afghanistan, which is scheduled to cost pounds sterling 32 million, though this is not due to be delivered until the troops come home.
The defence budget for 2011-12 was pounds sterling 37.97 billion and is set to come down to pounds sterling 36.75 billion this year. The MoD has overspent its equipment budget by pounds sterling 6.5 billion and some of its major orders are likely to be almost 40 years late.
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