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Executive Summary

1.1 As part of Ofcom’s plans to implement its strategy of ensuring optimal use of the radio spectrum it has developed a programme of awards of wireless telegraphy licences that is designed to put unused or under-used spectrum into the market. One such award is of wireless telegraphy licences for the spectrum band 1452 – 1492 MHz.

1.2 This consultation sets out in detail Ofcom’s proposals for the award of wireless telegraphy licences to use these frequencies, in the light of responses it received to the Spectrum Framework Review: Implementation Plan consultation document published in January 2005 and the October 2003, Opportunities for Future Use of Spectrum within VHF Band III (174 to 230 MHz) and in the 1.5 GHz Band (1452 to 1492 MHz ) consultation.

Demand assessment

1.3 The spectrum available for award is 40 MHz (1452 - 1492 MHz). Less than 100 fixed links are still operating in this spectrum band, as well as some PMSE users. These users have been given notification to vacate this band by 31 March 2007, making the band available for alternative use from April 2007.

1.4 This spectrum has particular importance due to the wide range of potential uses that the band could be put to. This includes new services such as mobile multimedia (using standards like DVB-H or DMB) and broadband wireless access (using technologies such as TDD-IP and WiMAX). Terrestrial digital broadcasters (T-DAB) might also be interested in this band, as well as those seeking to provide programme-making and special events (PMSE) services such as digital wireless cameras. Finally, satellite digital radio (S-DAB) services may be deployed in the upper 12.5 MHz of this band (1479.5 – 1492 MHz). Given the wide range and variety of the potential services that could be deployed, and consistent with Ofcom’s established policy for spectrum release, technology and service neutrality will be key principles in this award.

1.5 There is a limited amount of other spectrum that may be made available to the market over the coming years that could be used to provide one or more of the services listed above. Ofcom will seek to provide additional information on the availability of other bands before this spectrum band is released for use. In particular, Ofcom’s ongoing Digital Dividend Review (DDR) project is examining the options arising from the release of spectrum afforded by the digital switchover programme.

International constraints

1.6 Several international arrangements are relevant to different parts of this band, most notably:

• 1452 – 1479.5 MHz: the CEPT Maastricht 2002 Special Arrangement (“the Maastricht Plan”) provides an allotment plan for T-DAB. The Maastricht Plan gives the UK the right to deploy T-DAB services in this band, but also requires us to protect T-DAB services in neighbouring countries. These rights do not currently extend to services and technologies other than those that meet the definition of T-DAB (or T-DAB variants including T-DMB and DAB-IP), resulting in limited rights to use other technologies (or to demand interference protection for these). However the plan does not prevent deployment of other technologies subject to international coordination.
• 1479.5 – 1492 MHz: the ITU Radio Regulations require us to protect reception of registered satellite radio services in neighbouring countries. At least five such satellite networks are notified (or pending notification), resulting in material constraints on terrestrial use in this sub-band across much of the UK.

1.7 As they stand, these international arrangements will impose material constraints on the use of this spectrum band. However, Ofcom considers that not all of these constraints are necessary or justified to achieve the internationally-shared goal of efficient use of the spectrum. Ofcom therefore intends to engage in discussions with the UK’s international neighbours, with the aim of agreeing less restrictive arrangements. This would create a more certain framework within which a wider range of technologies and services could be deployed.

1.8 In the light of other initiatives in Europe, Ofcom considers that there is a reasonable chance of success in these discussions. But the outcome plainly cannot be guaranteed, and the timetable for the completion of these discussions is also uncertain.

1.9 However, Ofcom considers that, even if these discussions are not successful, the release of this band would represent a significant opportunity for the deployment of new or expanded services providing significant benefits to citizens and consumers in the UK. New mobile multimedia services could, for example, be deployed within the existing international agreements, using standards such as DMB or DAB-IP that fit within the specifications used in the Maastricht Plan.

1.10 Ofcom considers that, whether or not the existing constraints in the Maastricht Plan are relaxed, it would be possible to use each of the frequency blocks covered by that plan on a UK-wide basis. It would not, in particular, be necessary for use to be based on the pattern of local multiplexes, and frequency re-use, provisionally planned in 2002 (some constraints on geographic coverage within the footprint of the UK may however still arise as a result of incoming or outgoing interference constraints; these are discussed in this document).

Overview of the key proposals

1.11 Ofcom proposes, subject to the outcome of the current consultation, to award national wireless telegraphy licences to use the spectrum band 1452 – 1492 MHz as soon as practically possible. Ofcom’s aim is to award licences by the end of the financial year 2006/07. Ofcom plans to make all 40 MHz available to the market through this process.

1.12 Four options for the packaging of the lower 27.5 MHz (1452 – 1479.5 MHz) are put forward in this consultation. Specifically:

• dividing the spectrum into 16 lots of 1.7 MHz (in line with the Maastricht Plan);
• dividing the spectrum into five lots of 5.1 MHz and one lot of 1.7MHz ;
• dividing the spectrum into varied-sized lots; and
• offering the spectrum as one 27.5 MHz block

1.13 It is proposed that the upper 12.5 MHz (1479.5 – 1492 MHz) be awarded as one spectrum block (due to the requirement to protect potential foreign satellite networks which may be deployed across the entire sub-band);

1.14 It is proposed that the key elements of the licensees’ rights and obligations for the spectrum to be auctioned should be as follows:

• The licences should have an indefinite term with a minimum period of 15 years (during which time Ofcom’s powers to revoke will be limited);
• The licences should be tradable;
• The licences should be technology and application neutral (though some technical constraints on use may exist as a result of the need to respect international arrangements);
• The licences should contain transmission rights including limits on aggregate field strength at defined points outside the UK (in order to comply with the Maastricht Plan);
• The licensees should be required to agree criteria and procedures for the mutual coordination of transmitter location between themselves

1.15 It is proposed that the licences would be awarded by auction. Ofcom considers that a simultaneous multiple round auction (SMRA) design is likely to be the most appropriate for the award of this spectrum band.

1.16 An SMRA can be more or less complex, depending on the specific rules created for the award. Ofcom has identified two SMRA formats that may be most suitable for this award:

• an SMRA with augmented switching rules; and
• an SMRA with limited packaging.

1.17 Ofcom plans to study both formats in further detail and consider comments received in response to this consultation prior to deciding on a preferred approach.

Detailed summary of Ofcom’s proposals

1.18 The table below sets out in summary form Ofcom’s proposals for this award.

International and timing	Ofcom proposals
Maastricht 2002 Special Arrangement	Ofcom will seek more flexibility in the international arrangements through discussions with our international neighbours. If additional flexibility cannot be achieved, Ofcom expects to proceed with the award within the framework set by existing international agreements.
Timing of award	All the spectrum between 1452 and 1492MHz will be awarded at the same time and as soon as practically possible. This implies simultaneous award of the top 12.5MHz and the lower 27.5MHz of this spectrum.
Spectrum packaging	Ofcom proposals
1479.5-1492MHz	The upper 12.5MHz (i.e. 1479.5-1492MHz) should be packaged for award as a single block.
1452-1479.5MHz	Four options for the packaging of the lower 27.5 MHz (1452 – 1479.5 MHz) are put forward in this consultation: dividing the spectrum into 16 lots of 1.7 MHz (in line with the Maastricht Plan); dividing the spectrum into five lots of 5.1 MHz and one lot of 1.7MHz; dividing the spectrum into varied-sized lots; and offering the spectrum as one 27.5 MHz block.
Wireless Telegraphy rights and obligations	Ofcom proposals
Licence term	The licence will have an indefinite duration, with a minimum term of 15 years during which Ofcom's powers to revoke will be limited. Ofcom will have the power to revoke for spectrum management reasons on not less than 5 years' notice after the minimum period, which could lead to the licence being terminated the day after the expiry of the 15 year minimum period or any time thereafter.
Licence fees	If there is only one application for spectrum in the band, the fee payable for the licence will be the aggregate reserve price for the spectrum lots that the applicant requests. Otherwise the auction will determine the fee payable. After the expiry of the minimum period, if the licensee continues to hold the licence, there may be additional charges in line with Ofcom's policy on spectrum pricing at that time.
Spectrum trading	The licence will be tradable. All types of trade - partial or total; concurrent or outright - will be permitted.
Liberalisation	The licences will contain the minimum necessary technical conditions and will not specify either the technology to be used or the services that may be offered.
Technical conditions	These are intended to be the minimum necessary to: ensure compliance with international agreements; and ensure effective use of the licensed frequencies, controlling interference between different licensed services. The technical conditions will comprise a constraint on use defined by reference to a spectrum mask. Rights to use the frequency will be on a national basis within the defined frequency range of the licence.
Award mechanism and rules	Ofcom proposals
Auction format	The auction format will be a simultaneous multiple round auction with specific lots and with either: augmented switching rules i.e. with rules that facilitate switching between lots; or limited combinatorial bidding: i.e. the ability to make package bids for triples of lots.
Eligibility rules	Each lot in the auction will have an associated number of eligibility points. Bidders ability to make bids for multiple licences would be constrained by their eligibility, which in turn is determined by their bidding activity over multiple rounds
Reserve price	Ofcom will set a reserve price above zero for each individual lot. The reserve prices will also determine the initial prices for lots under either auction format.
Deposits	Ofcom will set an initial level of deposit per eligibility point. Each bidders’ initial eligibility will thus be determined by the level of deposit that they have paid before the auction. A mechanism will be introduced to ensure that bidders increase their deposits in a way that reflects their aggregate bid levels at set points during the auction.
Payment terms	Winning bidders will be required to pay 100% of the fee for their licence by a specified time and the licences will only be issued after payment has been received.
Transparency	The auction will be fully transparent. Comprehensive information about the number, amount and type of bids on each lot will be released after each round. In addition, bidders will able to monitor the identity of all other bidders and the bids they made.
Pace of the auction	Rules will be deployed to give Ofcom flexibility in managing the pace of the auction
Prohibitions on bidder association and collusion	There will be specific rules to prohibit collusion and bidder association.
Limits on applying for spectrum	There will be no restrictions on the number or identity of lots that an eligible bidder can bid for, other than as determined by their initial deposits

Next steps

1.19 This consultation closes on 9 June 2006. Ofcom plans to hold a seminar on its proposals for interested parties during the consultation.

1.20 Subject to the outcome of the discussions with international neighbours and the outcome of this consultation, Ofcom expects to publish the following key documents during the course of 2006.

• a short statement on this consultation;
• an Information Memorandum, describing in detail the relevant information for the award such as the award procedure and rules, prospective licence conditions and other information likely to affect use of the band;
• draft regulations setting out the auction rules;
• draft regulations to allow trading of these licences.

1.21 Ofcom will consider any comments it receives on the draft auction regulations before finalising them. The regulations will then be made to allow Ofcom to hold the auction. Before the auction is held Ofcom expects to hold a further “question and answer” seminar for interested parties, in particular on the rules for the auction.

1.22 As noted above, Ofcom is currently progressing work on the release of other spectrum bands, including through the DDR. One issue being considered within the DDR is the timing for potential auction of frequencies in the UHF band. This includes 590-598MHz (channel 36), which it may be possible to release to the market earlier than other frequencies in UHF. Ofcom will consider the relationship between the timing of the auction of the spectrum band discussed in this document, and of the spectrum bands considered in the DDR, as work is taken forward on both projects.

1.23 Ofcom intends to proceed with this award in the first quarter of 2007. This timescale is subject inter alia to the outcome of this consultation and the outcome of discussions with the UK’s international neighbours.

• Award of available spectrum: 1452 – 1492 MHz [pdf]
  Full Print Version - updated 07/04/06 to correct factual error at para 2.10

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