Home > About Ofcom > Accountability > Annual Reports and Plans > Ofcom Annual Report 2007 - 08 > Driving forward a market-based approach

Driving forward a market-based approach to spectrum

Making spectrum available for new wireless services

Delivering the Digital Dividend

Radio spectrum is a finite and extremely valuable resource, the essential ingredient for all wireless communications. Demand is increasing all the time with changes in technology and consumer trends, and the use of spectrum underpins at least three per cent of UK GDP.

The Digital Dividend – the spectrum that will be freed-up through digital television switchover – will be some of the most valuable spectrum to be released in the UK in the next 10 to 20 years. The Digital Dividend is valuable because it is in the sought-after UHF band where transmissions cover large geographical areas with relatively few transmitters, and penetrate buildings well.

The spectrum is suitable for a wide range of uses, such as ultra-fast wireless broadband, mobile television and more digital terrestrial television channels.

Following a major public consultation, Ofcom announced in December that the most effective way to maximise the value of the Digital Dividend to society was to take a market-led approach to its release, with an auction for most of the spectrum planned for 2009.

This approach means that companies and organisations will have the freedom and incentive to offer services using the spectrum that are highly valued by customers.

We identified one case where spectrum should be reserved for a particular use, to avoid market failure. We therefore announced that we would award spectrum for programme-making and special events (mainly used for wireless microphones) by means of a ‘beauty contest’.

Ahead of the auction, Ofcom will publish a further consultation later in 2008/9 on the design of the award to ensure that the auction process encourages competition.

Releasing spectrum for mobile broadband services

We also pressed ahead with plans for another important spectrum auction, which will see the largest single release of radio spectrum in the UK.

The spectrum is in the 2010-2025 MHz and 2500-2690 MHz bands (known as 2.6 GHz), which is higher frequency than the Digital Dividend. This makes it suitable for a wide range of wireless services including WiMAX.

Completed spectrum awards

Ofcom completed two further spectrum auctions during the year, building on the awards that were held in the previous year.

The awards were:

the bands between 10 and 40 GHz. Following an auction in February we awarded licences to ten companies; and
the 1452-1492 MHz band, the so-called L-Band. Following an auction shortly after the reporting period, Ofcom awarded a licence to use this spectrum to a single company.

Making efficient use of the spectrum

Delivering HD on Freeview

Digital terrestrial television (DTT) has been one of the great broadcasting success stories of recent times, with Freeview now in nearly 15 million homes.

In November 2007, Ofcom announced proposals to build on that success by upgrading DTT. This would mean that Freeview viewers would be able to receive up to four new channels in high definition (HD) when digital switchover is completed in 2012, with the first three channels available as switchover takes place in the Granada region from 2009. The upgrade can take place without existing viewers of Freeview losing their services. To view the new channels viewers would need to buy a new set-top box and have a ‘HD Ready’ television set.

We demonstrated that new channels and services could be delivered to Freeview homes using the broadcasters’ existing spectrum holdings and without using any of the valuable Digital Dividend, which is discussed in the section above.

After considering the points raised during the consultation period we announced the detail of how we would upgrade DTT in April 2008. In this announcement we discussed how the commercial public service broadcasters would be required to submit proposals to Ofcom on how they proposed to use the extra capacity on DTT.

Separately, in June 2007, we announced that from 2014 broadcasters would have to pay a charge, known as Administered Incentive Pricing, according to the amount of spectrum they use. This brings television broadcasters in line with most other spectrum users and promotes efficient use of this finite resource.

Freeing up valuable public spectrum

Public bodies use around half of the radio spectrum below 15 GHz – the most sought-after and congested frequencies. Independent experts have estimated that the spectrum held by the public sector could have a market value of between £3bn and over £20bn.

In January 2008, we announced new plans to allow public organisations to trade, share or release their considerable spectrum holdings.

The proposals were of particular significance to the Ministry of Defence, which has the largest holdings of public sector spectrum.

Removing restrictions on how spectrum is used

Opening up mobile spectrum

With the number of active mobile phone subscriptions in the UK – at nearly 70 million – comfortably exceeding the UK’s headcount, mobiles are an integral part of the way we live and work.

We are doing more with our mobile phones, such as accessing the internet, watching video clips and listening to music.

In September 2007 Ofcom announced plans to open up the radio spectrum that mobiles use, creating more opportunities for operators to offer new services to consumers. This could include significantly better rural coverage, faster web browsing and downloads, greater interactivity, better quality indoor coverage and lower prices.

There were two main aspects to our proposals.

First, we proposed to remove a restriction that limits what the 2G spectrum can be used for. At present, operators can only use this spectrum for services such as voice calls, text messaging and relatively low-speed internet services. By removing this restriction, operators have the potential to offer a much wider range of services.

There are two spectrum bands currently used for 2G services: 900 MHz and 1800 MHz. The 900 MHz band carries many advantages, with signals travelling further and better indoor coverage.

Second, we proposed that some 900 MHz spectrum currently used by 2G operators should be opened up to others in the future.

We will further develop these proposals during 2008/9.

Removing regulation to promote wireless services

From cordless phones and wireless headsets to car key-fobs and WiFi, there are hundreds of wireless devices that are permitted to operate without a licence.

In April 2007 Ofcom announced proposals to create even more licence-exempt uses of radio spectrum, and open up high-frequency bands for innovative applications such as digital cameras, personal audio players and other equipment capable of transferring data.

We also announced in August 2007 that Ultra Wideband (UWB) technology could be used without a licence. UWB allows the transfer of large quantities of data, and has the potential to promote the convergence of communications devices such as PCs, DVD players, MP3 players and digital cameras.

Using mobile phones on aircraft

We also enabled airlines to offer mobile services onboard UK-registered aircraft.

Following a consultation, we announced in March 2008 that the system would operate via an on-board base station, which would route passengers’ calls to a satellite link for onward connection to the ground. The base station would be unavailable during take-off and landing, but could be switched on by the crew above a minimum height of 3,000 metres.

Services would be subject to approval by the relevant UK and European aviation authorities. A number of airlines have expressed an interest in offering these services.

Spectrum enforcement

3G rollout obligations

It was a condition of the 3G mobile licences that networks cover at least 80 per cent of the population by 31 December 2007.

In assessing compliance with this obligation, O 2 was found to reach only 75.69 per cent of the population, a shortfall that meant around 2.5m people could not access its service.

In February 2008 Ofcom issued O 2 with a notice under the Wireless Telegraphy Act for breach of licence. This proposed that if the 80 per cent obligation was still unmet by the end of June 2008, Ofcom would shorten the term of O 2’s licence by four months, equivalent to a financial sanction of at least £40m. In May 2008 we confirmed that O 2 had met its obligation.

Illegal broadcasting

During the year Ofcom maintained its effort to take illegal radio stations off the air. We estimate that there are more than 150 illegal stations operating in the UK, half of them broadcasting across London and the South East of England. These illegal stations can cause serious interference to other radio users such as the emergency services and legitimate radio stations.

In February 2008, we conducted a major operation against illegal broadcasters in London, working in partnership with the London boroughs of Hackney, Haringey, Tower Hamlets and Islington, as well as the Metropolitan Police. The operation resulted in three arrests, one studio raid, the removal of 22 illegal transmitters and warnings issued to 20 nightclubs that had advertised events on illegal stations.

During 2007/8 Ofcom undertook 881 separate enforcement actions against illegal broadcasters; this included 43 raids on studios used by illegal stations and the seizure of 838 illegal transmitters.

Illegal equipment

Ofcom is also responsible for taking action against the manufacture and sale of equipment that does not comply with UK regulations. Such equipment can cause interference to other radio users.

In March 2008 Ofcom won a major court case against a company selling illegal radio equipment. Although the company concerned was not responsible for the way the equipment it sold was being used, and the judge accepted that the company was well-intentioned and professional, there was evidence the equipment was being employed in transmitters used by illegal radio stations. They were causing interference to air traffic control in both the Republic of Ireland and Northern Ireland.

The company and two directors were fined £10,000 and ordered to pay costs of more than £90,000 – the largest sum awarded to Ofcom in a court case involving the sale of illegal equipment.

During 2007/8 Ofcom undertook 96 separate enforcement operations relating to non-compliance with UK regulations, which led to the removal of 31,686 illegal items from the market.

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