Spectrum licensing
Regulation of radiofrequency spectrum
December 2013

Dr Martyn Taylor
Partner
Overview
What is spectrum?
•

Electromagnetic radiation

•

Which telecoms technologies use which frequencies

•

How do m...
1. What is radiofrequency spectrum ?
•

Energy is conveyed by electromagnetic waves that
propagate outward from an energy ...
How are radio waves created and received?
Marconi won the Nobel prize for physics in 1909.
Radio transmitter

•

When a di...
Which are the better mobile frequencies?
•
•

Different frequencies have different characteristics
regarding site coverage...
How do mobile networks use spectrum?
Multiple access technique
Mechanism for multiple transmitters to
broadcast in the sam...
Management of radio interference
•

If signals are broadcast at the same frequency by different
transmitters, they interfe...
2. How and why is spectrum regulated ?
•

Spectrum is regulated by Government for two key reasons:
•

co-ordination of rad...
ITU Radio Regulations – international co-ordination
•

The first radio regulations were concluded in Berlin in 1906.

•

T...
National spectrum planning

10

Spectrum licensing – Regulation of radiofrequency spectrum
Class licensing - communal use
•

Typically reserved for low emission devices that cause
limited interference. Such device...
Apparatus licensing - particular equipment
•

A licence is issued for a particular transmitter at a particular location fo...
Spectrum licensing - exclusive use
•

A spectrum license for a particular band gives the holder of
the licence the exclusi...
3. Key commercial issues
Country and regulatory risks remain a key issue
Example: Indian 2G spectrum scandal (2008)
•

Pol...
Ownership and transferability
•

Key issues in due diligence:
•

What is the bundle of ownership rights in the spectrum?

...
Licensing fees and renewals
•

Licensing fees are affected by the licensing model

•

If spectrum licences are allocated o...
Restrictions on use
•

Spectrum licences typically contain various restrictions on the
use of the spectrum.

•

Generally ...
Risk of resumption
•

Generally, all spectrum licences involve some risk of resumption. The
State normally reserves for it...
Spectrum auctions
•

Because spectrum is centrally allocated by the State, it is possible
for the State to extract a scarc...
Case study: Digital dividend spectrum
•

Analogue broadcasting technologies (radio and television) have
traditionally used...
Disclaimer: Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulb...
Telecoms spectrum licensing - regulation of radiofrequency spectrum
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Presentation on the regulation of radiofrequency spectrum used for mobile telecommunications. What is spectrum ? How is it regulated ? What are the key commercial issues ?

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Telecoms spectrum licensing - regulation of radiofrequency spectrum

  1. 1. Spectrum licensing Regulation of radiofrequency spectrum December 2013 Dr Martyn Taylor Partner
  2. 2. Overview What is spectrum? • Electromagnetic radiation • Which telecoms technologies use which frequencies • How do mobile networks use spectrum • Interference management How is it regulated? • International Radio Regulations • Spectrum planning • Licensing of spectrum • Approaches of different jurisdictions Key commercial issues • • Licensing fees • Restrictions on use • 2 Ownership and transferability Risk of resumption Spectrum licensing – Regulation of radiofrequency spectrum Dr Martyn Taylor Partner +61 45 777 4711 (Mobile) martyn.taylor@nortonrose.com
  3. 3. 1. What is radiofrequency spectrum ? • Energy is conveyed by electromagnetic waves that propagate outward from an energy source at the speed of light. • Electromagnetic waves have different wavelengths and hence frequencies (measured in Hertz). 1 Hertz (Hz) = 1 wavelength per second • The electromagnetic spectrum is the complete set of wavelengths/frequencies, including visible light. • The radiofrequency spectrum is the set of frequencies (3kHz – 300GHz) associated with radio waves. • Radio waves have wavelengths of 1mm to 100km 3 Spectrum licensing – Regulation of radiofrequency spectrum
  4. 4. How are radio waves created and received? Marconi won the Nobel prize for physics in 1909. Radio transmitter • When a direct electrical current is applied to a wire the current flow creates an electromagnetic field around the wire. • Switching on this field sends an electromagnetic wave outward from the wire at the speed of light. If the current is removed, the field collapses and sends a wave. • If the current is repeatedly switched on an off (or reversed), a series of waves is propagated at a discrete frequency. Radio receiver • When the electromagnetic wave hits another wire (e.g., an aerial on a phone), it induces a current in the wire. • Tuners are used to detect the current at particular wavelengths. 4 Spectrum licensing – Regulation of radiofrequency spectrum
  5. 5. Which are the better mobile frequencies? • • Different frequencies have different characteristics regarding site coverage and building penetration. Frequency Wavelength • Lower frequencies have less attenuation (i.e., pass through walls with less energy loss), so better inbuilding penetration. Signals also travel further, giving reduced cellular tower density. • Higher frequencies give greater bandwidth. • 850MHz is best suited to sparsely populated, densely vegetated, or highly urbanised environments where signal penetration is the key focus. • 2GHz is best suited to densely populated areas where network capacity and bandwidth is the key focus. 5 Spectrum licensing – Regulation of radiofrequency spectrum 60 cm 850MHz 35 cm 1GHz 30 cm 2GHz Mobile antenna are traditionally a half or quarter a wavelength long (850MHz = 9cm; iPhone = 12cm). 500Mhz 4 cm 5GHz 1.5 cm
  6. 6. How do mobile networks use spectrum? Multiple access technique Mechanism for multiple transmitters to broadcast in the same block of frequency. Frequency Division Multiple Access (FDMA): Each call is carried on a separate frequency channel. Time Division Multiple Access (TDMA): Each frequency channel is divided into a set of timeslots. One timeslot per call. Code Division Multiple Access (CDMA): Duplexing technique Mechanism for differentiating uplink (talk) and downlink (receive) channels. Frequency Division Duplexing (FDD): Two frequency bands are used, one containing the uplink channel (talk) and the other the downlink channel (receive). FDD requires ‘paired’ spectrum bands. Time Division Duplexing (TDD): The uplink and downlink channels are carried in the same frequency band. Radio signals are spread across a band of spectrum (know as ‘spread-spectrum’). Each transmitter is assigned a code and the call is encoded. At the receiving end, the call is isolated by decoding the signal. 6 Spectrum licensing – Regulation of radiofrequency spectrum 2G (GSM) uses FDMA/TDMA and FDD 3G (W-CDMA) uses CDMA and FDD 4G (LTE) uses FDMA/TDMA and FDD or TDD
  7. 7. Management of radio interference • If signals are broadcast at the same frequency by different transmitters, they interfere with each other and may be difficult for a receiver to differentiate, resulting in radio interference. • Potential legal solutions to interference issues include: • • regulatory dispute settlement; and • • commercial negotiation and common law litigation; pre-determined co-ordination of radio emissions. In practice, interference is now managed by the combined effects of licensing, regulations, standards and frequency planning. • Unintentional emissions are subject to regulations and technical standards. For example, commercial electronic products must comply with maximum permitted radio emission requirements. • Intentional emissions are subject to licensing and frequency planning. • New Zealand enacted the world’s first radiocommunications laws in 1903. 7 Spectrum licensing – Regulation of radiofrequency spectrum
  8. 8. 2. How and why is spectrum regulated ? • Spectrum is regulated by Government for two key reasons: • co-ordination of radio emissions so to avoid radio interference; • allocation of scarce radiofrequency spectrum between competing uses. • Radiofrequency signals do not stop at the border, meaning that crossborder interference disputes arise, requiring an international solution. • Modern spectrum regulation therefore involves the following key elements: • • national frequency planning, typically giving effect to the agreed international standards; • licensing for intentional emissions, typically by way of class licences, apparatus licenses and/or spectrum licences; • regulations and standards to minimise unintentional emissions; and • 8 international co-ordination of frequency planning; procedures to resolve any remaining interference disputes. Spectrum licensing – Regulation of radiofrequency spectrum
  9. 9. ITU Radio Regulations – international co-ordination • The first radio regulations were concluded in Berlin in 1906. • The current “Radio Regulations” are a legally binding intergovernmental treaty of the International Telecommunication Union (ITU). • The ITU is a specialized agency of the United Nations which coordinates the global operation of telecommunication networks. • The Radio Regulations incorporate the Final Acts of the World Radiocommunication Conferences, essentially meetings between all nations to agree binding resolutions and non-binding recommendations. • The Radio Regulations define, among other matters: • • procedures for the coordination and notification of frequency assignments by national governments; and • 9 the allocation of different frequency bands to different services; mandatory technical parameters to be observed by transmitters. Spectrum licensing – Regulation of radiofrequency spectrum
  10. 10. National spectrum planning 10 Spectrum licensing – Regulation of radiofrequency spectrum
  11. 11. Class licensing - communal use • Typically reserved for low emission devices that cause limited interference. Such devices can co-exist without the need for greater frequency co-ordination. • Examples: airport body scanning machines; industrial, scientific and medical equipment; radio frequency identification (RFID) for stock control and monitoring; bluetooth and Wi-Fi transmitters • Class licences are communal so are not held by an entity. A transmitter can either be used as of right within the scope of the class licence, or a simple registration under the class licence could occur required. • Registration may involve payment of a minimal registration fee. • The class licence will typically set out requirements regarding the permitted radiofrequency emissions and the permitted maximum power of those emissions. • In some jurisdictions, class licensed frequency bands may also be referred to as ‘unlicensed’ bands. 11 Spectrum licensing – Regulation of radiofrequency spectrum
  12. 12. Apparatus licensing - particular equipment • A licence is issued for a particular transmitter at a particular location for a particular use. • The licence gives ‘first in time’ priority to the holder of the licence against any other entity in relation to any disputes over interference. • Apparatus licences are normally acquired ‘over the counter’ and tend to be short term in nature, typically between 3 and 5 years. • An administrative pricing arrangement usually applies, often in the form of annual fees plus an up-front application fee. These fees may involve a scarcity premium as well as administrative cost recovery. • Apparatus licences do not confer exclusivity, so have little intrinsic value (except providing a right to operate a particular transmitter). • Most regimes have a combination of class, apparatus and spectrum licensing, including hybrid licensing constructs. Australia – all 3; Philippines – hybrid; Japan – apparatus, but undergoing reform. 12 Spectrum licensing – Regulation of radiofrequency spectrum
  13. 13. Spectrum licensing - exclusive use • A spectrum license for a particular band gives the holder of the licence the exclusive right to use and manage the frequency band in a pre-determined geographic area. • The licences are long-term in duration, typically 15 - 25 years. They are intended to correspond with the expected life of a mobile network. • A spectrum licence normally confers various rights and obligations on the licensee. However, the licensee normally has a reasonable amount of flexibility regarding the use of the band. • Spectrum licences normally involve a ‘market based approach’ and hence may be traded and transferred. The licensee can normally sublicence the use of the spectrum to other users. • In most jurisdictions, mobile networks would have been deployed under spectrum licences. However, this is not always the case. • Telecommunications regulators sometimes place limits, or caps, on the amount of spectrum that can be licensed to a single operator, thus ensure that an incumbent cannot hoard spectrum as a barrier to entry. 13 Spectrum licensing – Regulation of radiofrequency spectrum
  14. 14. 3. Key commercial issues Country and regulatory risks remain a key issue Example: Indian 2G spectrum scandal (2008) • Politicians and government officials in India were alleged to be illegally undercharging for 2G spectrum licenses, resulting in losses to Indian taxpayers estimated at up to USD 27 billion. • Various criminal prosecutions are continuing in India, including a prosecution of the former Minister of Communications. Various allegations of corruption have also been made in those prosecutions. • The Supreme Court of India declared the allotment of 2G spectrum as "unconstitutional and arbitrary" and quashed all 122 licenses issued in 2008. As a result, ownership of the spectrum reverted to the State. • A number of telecoms operators lost hundreds of millions of dollars as a result. Operators reputed to have suffered substantial losses include Telenor, Axiata, Etisalat, Batelco and Tata. • Ranked by TIME as #2 on global abuses of power list, beaten by Watergate. 14 Spectrum licensing – Regulation of radiofrequency spectrum
  15. 15. Ownership and transferability • Key issues in due diligence: • What is the bundle of ownership rights in the spectrum? • Can such ownership rights be transferred and, if so, how? • Most jurisdictions consider spectrum the exclusive property of the State. However, the State may confer property rights in spectrum to private entities. • The bundle of ownership rights conferred by the State depends on the particular regime. In most instances, a statutory “right of use” is conferred. • • • 15 At the more flexible end of the continuum, such rights are fully tradeable and may be sub-divided and sub-licensed. Transfer can occur by way of simple registration without any need for formal regulatory consents. At the less flexible end of the continuum, such rights are allocated to a particular entity for its personal use for a specific telecoms purpose and cannot be transferred, sub-licensed or used by any other entity. The various Asian jurisdictions lie on a continuum between these to extremes. Different models also apply for different licence types and frequency bands. Spectrum licensing – Regulation of radiofrequency spectrum
  16. 16. Licensing fees and renewals • Licensing fees are affected by the licensing model • If spectrum licences are allocated on an administrative basis (eg beauty parade), then licence fees are typically set as periodic annual charges. • If spectrum licences are allocated by auction or tender, the licence fees are determined by a competitive bid process. • Key questions include: • • 16 should fees include a scarcity premium for congested bands in order to encourage efficiency? • • should fees be based on admin cost recovery? should fees be market benchmarked? Many of the original 2G spectrum licences are due for renewal. A key issue is whether such licences should be renewed or reallocated and, if so, at what price. Spectrum licensing – Regulation of radiofrequency spectrum
  17. 17. Restrictions on use • Spectrum licences typically contain various restrictions on the use of the spectrum. • Generally all spectrum licences will: • restrict radio emissions within certain levels and apply international standards as set out in the Radio Regulations; • apply national frequency plans, so will be restricted to a general use (e.g., mobile cellular networks, satellite networks). • Restrictions on use become an issue where the spectrum is not technologyneutral and sets out the permitted use with a high degree of granularity. • Example: can a 2G GSM or Wireless Broadband licence be used for 4G LTE? • In some instances, the spectrum licence may be tied to the underlying telecommunications licence. The telecoms licence may then require the licensee to deploy a particular network and technology. 17 Spectrum licensing – Regulation of radiofrequency spectrum
  18. 18. Risk of resumption • Generally, all spectrum licences involve some risk of resumption. The State normally reserves for itself the right to revoke licences if required due to changes in radiofrequency plans. • Given that radiofrequency planning is normally linked to the ITU Radio Regulations, in practice the risk of resumption is low. Many nations also provide for compensation if resumption occurs. • The greater risk arises in the context of failures to meet various licence conditions. A contravention of a licence condition can sometimes result in the forfeiture of the licence. • Some jurisdictions also impose ‘use it or lose it’ conditions on spectrum licences (or network licences to which spectrum licences are linked). These may be automatic or at the discretion of the regulator. • If a network is not deployed to meet certain requirements by certain milestones, the licence may be revoked by the state and reallocated to another party. 18 Spectrum licensing – Regulation of radiofrequency spectrum
  19. 19. Spectrum auctions • Because spectrum is centrally allocated by the State, it is possible for the State to extract a scarcity rent for the allocation of certain spectrum that is in high demand. • An auction is generally recognised as the means for the State to extract an optimal scarcity rent. • Australia used a ‘combinatorial clock’ auction for the allocation of its 700MHz spectrum and 2.5GHz spectrum in 2013. (Multiple bidding rounds for multiple bands of spectrum). • A reserve price is normally set for the auction and bids are submitted electronically in each round via sophisticated software. • A policy issue with spectrum auctions is that they result in the payment of substantial scarcity rents. Accordingly, they tend to favour incumbents with deep pockets as a barrier to entry. They also result in higher costs that are ultimately paid by end users of mobile services. 19 Spectrum licensing – Regulation of radiofrequency spectrum
  20. 20. Case study: Digital dividend spectrum • Analogue broadcasting technologies (radio and television) have traditionally used substantial spectrum in bands 174 - 230 MHz (VHF) and 470 - 862 MHz (UHF). These bands provide greater coverage and high building penetration. • Digital broadcasting technologies use much less spectrum. More digital channels can be offered and some of the spectrum can be reallocated for other purposes. • The ITU redesignated the 700MHz frequency band in 2007 so that it could be used for either mobiles or broadcasting. The band provides greater coverage and penetration, but is still appropriate for mobiles. • As the digital switchover from analogue to digital television occurs, the digital broadcasters will use different spectrum and 700MHz will be free. • The ability to auction the 700MHz spectrum has provided Governments with a so-called ‘digital dividend’. • The 700MHz spectrum is ‘waterfront property’, so is particularly valuable. 20 Spectrum licensing – Regulation of radiofrequency spectrum
  21. 21. Disclaimer: Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South Africa (incorporated as Deneys Reitz Inc) and Fulbright & Jaworski L.L.P., each of which is a separate legal entity, are members (“the Norton Rose Fulbright members”) of Norton Rose Fulbright Verein, a Swiss Verein. Norton Rose Fulbright Verein helps coordinate the activities of the Norton Rose Fulbright members but does not itself provide legal services to clients. References to “Norton Rose Fulbright”, “the law firm”, and “legal practice” are to one or more of the Norton Rose Fulbright members or to one of their respective affiliates (together “Norton Rose Fulbright entity/entities”). No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any Norton Rose Fulbright entity (whether or not such individual is described as a “partner”) accepts or assumes responsibility, or has any liability, to any person in respect of this presentation. Any reference to a partner or director is to a member, employee or consultant with equivalent standing and qualifications of the relevant Norton Rose Fulbright entity. The purpose of this presentation is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of any Norton Rose Fulbright entity on the points of law discussed. You must take specific legal advice on any particular matter which concerns you. If you require any advice or further information, please speak to your usual contact at Norton Rose Fulbright. 21 Spectrum licensing – Regulation of radiofrequency spectrum
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