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Arqiva Presentation For Iic


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UK spectrum liberalisation - where have we got to?

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Arqiva Presentation For Iic

  1. 1. Spectrum Liberalisation: Where have we got to? Julian McGougan, Head of Public Policy International Institute of Communications, UK Chapter 1 st July 2009
  2. 2. Think of spectrum supply as 3 markets But the primary market dominates – and Ofcom is the monopoly supplier Rentals Band management Third Owned and occupied Spectrum trading Secondary New build Auction Primary Land analogy Spectrum
  3. 3. But the primary market has undergone considerable change <ul><li>Slow but consistent progress from old world (“command & control”) to new world (spectrum liberalisation): </li></ul>The infamous 3G auction of 2000 was in the transition between old and new worlds. The worst of both worlds! Minimum guaranteed term No No Yes (in whole or part) Up front Auction New world No end date Probably Yes No PAYG Beauty contest Old world Licence term Rollout Obligations? Technology- Specific? Licence Tradable? Payment Principal allocation method
  4. 4. What does liberalised spectrum use mean? <ul><li>Government/regulator doesn’t know best after all. So market-based allocations of spectrum are the optimal approach. </li></ul><ul><li>Spectrum licensees are awarded rights , not obligations . Licensees decide what to deploy (technology- and service-neutral), with what coverage, subject to: </li></ul><ul><ul><li>The licence’s Technical Licence Conditions (TLCs) – “planning permission for spectrum”. </li></ul></ul><ul><li>No coverage or “use it or lose it” obligations. </li></ul><ul><li>A spectrum licence is a tradable asset in whole or part, so a licensee can: </li></ul><ul><ul><li>Sell the licence if their business model proves flawed (or someone else comes up with a better use for their spectrum) </li></ul></ul><ul><ul><li>Sell the “white space” around their network </li></ul></ul><ul><ul><li>Lease the white space to those who only want a bit of it (including geographically or temporally) – or at least that’s the theory! </li></ul></ul>
  5. 5. But with its auctions, Ofcom has some tensions to balance <ul><li>Striving for a technology- and service-neutral auction (an unachievable & time-consuming goal trying to anticipate every potential use) vs. accommodating the most obvious potential uses: </li></ul><ul><ul><li>The primary market shouldn’t have to solve everything! </li></ul></ul><ul><ul><li>Generally the market would rather an auction design now which was 85% perfect instead of a 95% perfect design 18 months later. </li></ul></ul><ul><li>Harmonised use & sub-bands vs. free for all (which may result in “sub optimal” subsequent use with guard blocks). </li></ul><ul><li>Spectrum caps & other ex ante measures to distort an auction’s outcome vs. relying on ex-post competition law: </li></ul><ul><ul><li>If spectrum use is technology- and service-neutral, which downstream markets are being affected by one bidder being allocated “too much”? </li></ul></ul><ul><ul><li>How should Ofcom define “spectrum hoarding”, when very little of the spectrum auctioned so far is in use? </li></ul></ul>
  6. 6. Ofcom spectrum auctions to date No 0.0 2 √ 16 DDR (interleaved) Feb 2009 No 8.3 1 √ 15 L-Band May 2008 A little 1.4 10 √ √ 15 10-40 GHz Feb 2008 ? 0.4 1 √ 15 1785-1805 MHz May 2007 Yes, lots 1.5 1 √ 15 412 MHz Oct 2006 Some 3.8 12 √ 10 DECT guard band May 2006 Regional National Anything deployed yet? Amount raised (£ m) Number of licensees Geographic licence areas Minimum Licence term Spectrum Date
  7. 7. Spectrum for auction in the next 2 years <ul><li>MOD manages about a third of all spectrum under 15 GHz: </li></ul><ul><ul><li>Including 2.3 GHz (suitable for mobile WiMAX broadband) </li></ul></ul>Fixed links? MOD 13 GHz 2011 Fixed links? MOD 10 GHz 2011 Freeview/mobile TV Ofcom 600 MHz 2011H1 Fixed links? MOD 4.4 – 4.5 GHz 2010 Mobile broadband (WiMAX) MOD 3.4 – 3.6 GHz 2010 Private Mobile Radio (PMR) – TETRA MOD 406 – 430 MHz 2010 Mobile broadband (LTE) Ofcom 800 MHz & 2.6 GHz (paired) 2010 ? Ofcom 872/917 MHz (paired) 2010H1 Mobile/fixed broadband (WiMAX) Ofcom 2.6 GHz (unpaired) 2009H2-2010H1 Potential uses Seller Spectrum to be sold Year expected
  8. 8. … and the secondary and third markets? <ul><li>No spectrum brokers operating in UK yet. </li></ul><ul><li>So vendors need to find their own purchasers (e.g. Red-M’s recent “auction” of 28 GHz). </li></ul><ul><li>For potential spectrum purchasers, Ofcom’s website provides some details of spectrum licences, but not everything (e.g. TLCs, anything deployed?). </li></ul><ul><li>Very limited band management at present. </li></ul><ul><li>Third market held back by lack of industry familiarity and inadequacies of current spectrum trading regulations - </li></ul><ul><ul><li>Lack of certainty over what Ofcom & EU would accept as a lease (as distinct from a de facto trade). </li></ul></ul><ul><ul><li>WTA & European Directives to take into account. Consultation soon. </li></ul></ul><ul><li>Ofcom’s desire to introduce commercial band management for PMSE means they intend to update the trading regulations to make the third market more commercially viable. </li></ul>
  9. 9. Some future spectrum trends <ul><li>Increasing litigation in the primary market (with implications for Ofcom’s resources & the timing of auctions). 2.6 GHz will set a trend. </li></ul><ul><li>Ofcom’s after sales service will become increasingly important (with implications for Ofcom’s resources): </li></ul><ul><ul><li>Applications to change Technical Licence Conditions (a key determinant of the value of a spectrum licence in secondary market), including for permitting very different uses of the same spectrum with geographic separation (Ofcom sets TLCs on a UK-wide basis). </li></ul></ul><ul><ul><li>Increasing number of trades (including splitting spectrum licences) </li></ul></ul><ul><ul><li>Band management – Ofcom’s latest proposals for access to spectrum for PMSE use doesn’t imply “letting go” (quite the opposite!). Ofcom very cautious about lack of oversight. </li></ul></ul><ul><ul><li>Complaints about incoming interference likely to rise, but it’s far from clear what would trigger any auction from Ofcom – victims gathering evidence of illegal spectrum usage and incoming interference? Just how keen would Ofcom be to act? </li></ul></ul><ul><ul><li>Need to establish a process for negotiating extensions beyond minimum licence terms </li></ul></ul><ul><ul><li>Appeals against changes to AIP. </li></ul></ul><ul><li>Ofcom will have to decide whether to remain the dominant supplier of spectrum for certain services (e.g. fixed links, business radio, PMSE), where a commercial spectrum owner may find itself competing against its regulator (like playing against a competing team, where that team has picked the referee). </li></ul>