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Award of available spectrum: 2500-2690 MHz, 2010-2025 MHz and 2290-2300 MHz

Executive summary

1.1 Ofcom has developed a programme of awards of wireless telegraphy licences that is designed to put unused or under-used spectrum into the market as part of its strategy of ensuring optimal use of the radio spectrum. This consultation document sets out in detail Ofcom’s proposals for the award of wireless telegraphy licences to use the three spectrum bands at 2500-2690 MHz, 2010 MHz -2025 MHz and 2290-2300 MHz (referred to as the 2.6 GHz band, 2010 MHz band and 2290 MHz band respectively).

1.2 The award of this spectrum will play a key role in the implementation of Ofcom’s strategy of spectrum release, comprising 215 MHz out of around 400 MHz of spectrum below 3 GHz that is planned to come to market as a primary offering over the next few years. Of the bands under consideration the most important is the 2.6 GHz band which represents 190 MHz. The bulk of the discussion in this consultation therefore focuses on this band. However, the 2010 MHz and 2290 MHz bands also represent important opportunities for value creating spectrum use and they are covered fully in this consultation document. The reason for consulting on the three bands as part of one award programme is that they are potential substitutes for each other for a number of candidate applications and they are able to be made available together.

1.3 The Spectrum Framework Review: Implementation Plan (SFR:IP), published in January 2005(-1-), consulted on both the overall programme of spectrum awards and on some more specific matters relating to these particular bands. Ofcom’s position was updated in an Interim Statement on the SFR:IP in July 2005(-2-) in light of responses to the SFR:IP. Since then Ofcom has undertaken considerable further work:

  1. to investigate the prospective demand for these bands and the economic benefits that might arise from bringing them into use;
  2. on the technical conditions under which the bands might be used taking into account the candidate technologies and the need to manage interference with adjacent users; and
  3. on the means of packaging the spectrum and the design of auction mechanisms under which the spectrum might be awarded.

Demand assessment

1.4 The three bands for award are either unused at present or expected to become available for new applications as from the beginning of 2007.

1.5 The market research has identified four main categories of services for which prospective operators have indicated an interest in using these bands.

  1. Advanced mobile telephony services using 3G technologies and their evolutions (UMTS FDD, HSPA and Long Term Evolution) which are optimised for a mix of voice and data traffic. These would allow the further development of mobile telephony and data services currently available in the UK.
  2. Broadband wireless services using WiMAX standards (2005/revision e in particular) or a variant of the 3G family (UMTS TDD) which are optimised for carrying data with Voice over IP (VoIP) calls as one data application. These would allow the delivery of high data rate services to fixed, nomadic or mobile devices.
  3. Mobile multimedia services that could complement cellular or broadband wireless services or be stand-alone services. Using specific additional applications based on MBMS or TDtv for example, services like mobile television could be delivered to cellular or broadband wireless terminals. A service could also be delivered using technologies such as DVB-H or DMB. Any of these technologies could potentially allow the delivery of broadcast content to portable multimedia devices.
  4. Programme Making and Special Events (PMSE) services, primarily for digital video applications (e.g. wireless cameras, temporary links, mobile or portable links), enabling such activities as news coverage and the broadcasting of planned events, for example concerts or football games.

1.6 The release of these bands for some or all of the above services is likely to enable significant benefits to consumers to be realised in the form of:

  1. innovations in relation to new or improved services and applications that operators may be able to offer;
  2. opportunities for new entry into the relevant downstream markets, offering services in competition with the existing operators which could result in price reductions and more consumer choice for services; and
  3. cost savings for the existing operators which are likely to be passed on to consumers in the form of price reductions, given the relatively competitive nature of these markets.

1.7 Although estimates of the size of these benefits are uncertain by their nature, our analysis suggests that the benefits would be substantial.

1.8 Given this, it would seem desirable to begin to take the necessary steps now to allow the 2.6 GHz, 2010 MHz and 2290 MHz bands to be brought into use for new applications.

Timing of Award

1.9 The benefits referred to above can only be delivered once the bands have been made available for use. The potential size and scope of the benefits suggest that the bands should be released as soon as possible. Ofcom considers that this could be achieved by the end of 2007 on the basis of the proposals set out in this consultation.

1.10 However, there are a number of factors that could impact on this timetable. In particular, it is possible that work on harmonisation measures at a European level over the course of the next year could impact the way in which the UK is able to progress with these proposals (see paragraphs 1.18 to 1.20 below). Future developments at European level are uncertain and it should be recognised that these could be a source of delay in the award, perhaps into 2008.

1.11 Another consideration relates to other spectrum that could become available to be used to provide the same or similar services (i.e. potential alternatives to the 2.6 GHz, 2010 MHz and 2290 MHz bands). Other spectrum that could be relevant in this context includes:

  1. spectrum that is expected to become available following Digital Switchover (which will be detailed in the forthcoming Digital Dividend Review consultation);
  2. spectrum that may be released by public sector users following the implementation of the recommendations of the Independent Audit of Spectrum Holdings of 2005(-3-);
  3. spectrum that is currently licensed for use only by 2G technology (GSM), but which is expected to become available in due course to be re-used for other technologies in keeping with Ofcom’s general policy of promoting technology neutrality; similar considerations apply to existing spectrum licences currently for 3G-only use;
  4. spectrum at 1452-1492 MHz which Ofcom expects to bring to the market next year, but which is also subject to some uncertainties at European level; and
  5. a range of other bands which form part of Ofcom’s future award programme.

1.12 It has been put to us that the award of the 2.6 GHz band (in particular) should be deferred until such time as there is certainty in relation to the availability of, and terms of use for, at least some of this potential alternative spectrum. Ofcom has considered this point carefully. However, we judge that there is a balance to be struck, in this and other cases, between pursuing the reduction of uncertainty and releasing spectrum promptly so that it can start to be used to the benefit of citizens and consumers.

1.13 The assessment in this consultation document is that there is keen demand for access to these bands as soon as possible. This demand comes principally from potential new entrants and competitors to established operators. It is also clear that no benefits can flow from use of the bands until new rights to use have been awarded. This points towards prompt release of the spectrum with minimum delay.

1.14 On the other hand, it is possible that a delay in the award could lead to a reduction in some of the uncertainties identified above. It is also true that reductions in uncertainty can be beneficial, as they can allow better-informed choices about the use of resources. However, delaying the award of the bands until certainty is reduced is likely to have large costs, as none of the potential benefits from use of the spectrum will be available to citizens and consumers during the delay. Moreover, the extent to which delay might reduce uncertainty may itself be uncertain – both as to the extent of the delay and the extent of the reduction in uncertainty.

1.15 In light of these considerations, Ofcom’s view in this consultation is that it should seek to reduce uncertainty that exists in relation to other bands wherever feasible, but it should do so without delaying the awards covered in this document.

1.16 This is similar to the approach that Ofcom and the Radiocommunications Agency have taken in previous spectrum awards. Many spectrum bands are to some extent substitutable resources. It is therefore inevitable that potential participants in any award process will face uncertainty in relation to the future availability of alternative spectrum. This will be true both as it relates to spectrum that might become available through Ofcom’s award programme, and to spectrum that might become available through secondary markets from existing users in the public or private sector. Uncertainty will also inevitably exist in relation to future regulation at national and European level.

1.17 Potential new entrants, who might be looking to acquire spectrum, will be affected by these uncertainties, as well as established operators. Ofcom considers that a principal means by which uncertainty can be reduced for all parties is by ensuring that as much information is available as possible about the likely availability of other bands, Ofcom’s policies on spectrum management, and the wider regulatory framework. Ofcom will pursue this task as an important part of the award programme.

International issues

1.18 The 2.6 GHz band in particular has been, and continues to be, the subject of discussions in various European regulatory fora. These discussions broadly reflect the existence of two different points of view. The first, which the UK supports along with a number of other countries, favours a technology neutral approach towards spectrum usage. The second favours a more technology specific approach towards spectrum management and, in respect of the 2.6 GHz and 2010 MHz bands in particular, favours the limitation of their use to IMT-2000(-4-) technologies. The relevant European regulatory bodies in this context are the European Conference of Postal and Telecommunications Administrations (CEPT)(-5-) and the Radio Spectrum Committee (RSC), where the position is as follows.

  1. CEPT, the European regulatory body where technical provisions for spectrum use are considered by 47 member states, has adopted several Decisions in recent years that reflect the more technology specific point of view, despite the divergence of views between its members on this subject. In particular, two CEPT Decisions include restrictions on the use of the 2.6 GHz and 2010 MHz bands that designate the bands for IMT-2000 technologies and one of these Decisions organises the 2.6 GHz band according to a fixed band plan that identifies specific blocks for technologies using paired spectrum and another block for technologies using unpaired spectrum. However, members of the CEPT are not required to implement CEPT Decisions and the UK has chosen not to implement these particular CEPT Decisions.
  2. The European Union’s (EU) RSC has the power to make Decisions on spectrum use that are binding on its 25 member states. Over the past year the European Commission has put forward proposals for a binding RSC Decision in relation to the 2.6 GHz band. However, in light of the opposing views on technology neutrality referred to above, it has not been possible to reach sufficient agreement amongst member states for an RSC Decision to be adopted. The Commission has therefore decided to withdraw its proposals. Instead, it has included the 2.6 GHz band in a mandate issued to the CEPT to prepare a technical study on the use of a number of bands for mobile communications under the least restrictive technical conditions.

1.19 CEPT is due to report back to the Commission on the above mandate in July 2007. The RSC is expected to consider its approach towards the 2.6 GHz band again at meetings thereafter; in addition, the Commission may bring back to RSC its original proposals for harmonisation or variant thereof. The potential exists for this process to lead, ultimately, to the RSC making a Decision on the spectrum in a way that constrains the manner in which the 2.6 GHz band can be used.

1.20 The UK does not need, as a binding constraint, to wait for an RSC Decision before proceeding to the award of these bands in the UK; indeed, it is possible that a continued lack of consensus amongst the member states may make it difficult for the RSC to reach a binding Decision on these bands. Ofcom will take full account of any developments in the European regulatory fora during the course of 2007 in deciding whether to proceed with the release of these bands in the UK, in the timescale and in the manner proposed in this consultation, including the possible timing of any future RSC Decision and of the likelihood that any future RSC Decision may conflict in some respects with the approach set out in this document. Ofcom’s current view, although events could cause this to change, is that the prospective developments in the European position over the coming year are likely to be consistent with an award as proposed in autumn 2007.

Overview of key proposals

1.21 A key issue for the design of the award concerns the degree of flexibility in the way that the 2.6 GHz band can be used and the amount of unpaired spectrum and paired spectrum(-6-) there should be in the band. Ofcom considers that regulators are ill-placed to judge the appropriate balance between these alternative uses of spectrum. Moreover, this is a decision that can be left to the market. This is a key element of the proposals in this document.

1.22 In these proposals, we take as a starting point the CEPT band plan which divides the spectrum into blocks of paired and unpaired channels (illustrated in the diagram below). Some features of the CEPT band plan are included in Ofcom’s proposals (such as a duplex spacing of 120 MHz between paired channels); this should allow the relevant degree of technical compatibility between equipment that is likely to be used in the UK and internationally. However, in keeping with Ofcom’s strategy of promoting a technology and service neutral approach where possible, and in light of evidence that there is considerable interest in deploying technologies other than IMT-2000 in these bands (which could lead to a larger requirement for unpaired spectrum than allowed for in the CEPT band plan), we are proposing to:

  1. specify usage rights in a way which will allow any technologies to be deployed (but with relevant technical requirements to avoid harmful interference); and
  2. design the award process in such a way that the split between paired and unpaired spectrum can reflect the relative demand for each as revealed through the auction (rather than lock in a pre-determined split which could well turn out to be economically sub-optimal).

1.23 In view of this, the main proposals for packaging the spectrum in the 2.6 GHz band are as follows.

  1. Division of the spectrum into two types of lot which mirror the CEPT band plan to the extent necessary, as illustrated in the figure below. The first type of lot consists of a single, unpaired(-7-) 5 MHz channel in the central part of the band from 2570-2620 MHz. The second type of lot consists of a pair of 5 MHz channels with a duplex spacing of 120 MHz. In addition, there needs to be a third category that reflects the need for guard channel(s) between the adjacent technologies (although these are not reflected in the CEPT band plan below).

    Figure 1: CEPT band plan from ECC Decision (05)05 with predetermined amounts of paired and unpaired spectrum
  2. Allow the paired lots to be converted into the equivalent of two unpaired lots through the operation of the auction rules if the relative demand for paired and unpaired spectrum indicates that this would be efficient.

1.24 There are two ways in which this could be translated into the resulting band plan. The first approach, and the one we propose to adopt, would be to accommodate additional unpaired spectrum at the top of the 2.6 GHz band. This has the advantage of preserving the 120 MHz duplex spacing for the paired spectrum (as in the diagram below) but the disadvantage that it could require an extra guard channel.

Figure 2: Illustration of the expansion of the amount of unpaired spectrum at the top end of the 2.6 GHz band relative to the CEPT band plan (duplex spacing of 120 MHz)

1.25 The alternative approach would be for the central block of unpaired channels to be expanded in both directions. This would avoid the need for an extra guard channel, but at the expense of requiring a duplex spacing for paired lots that differs from 120 MHz.

1.26 It is proposed that the licences be awarded by auction. Ofcom considers that a simultaneous multiple round auction (SMRA) design is likely to be most appropriate for the award of this spectrum band. Ofcom has prepared detailed auction proposals on which it is seeking views through this consultation. A key feature of the particular design being proposed is that it breaks the auction into two stages.

1.27 Turning to the 2010 MHz band, Ofcom’s main proposals are as follows.

  1. Package this band as a single 15 MHz block since the usage rights that would have to be imposed on separate 5 MHz channels would be so restrictive as to severely impair any potential use.
  2. Award this lot as part of the same process as the 2.6 GHz auction since these bands could be close substitutes(-8-); in practice, this can be achieved by including 2010-2025 MHz as a separate type of lot within the first stage of the auction with its own price during the clock stage, but with bidders allowed to switch demand between the 2010 MHz lot and the unpaired lots in the 2.6 GHz band in accordance with specific rules.

1.28 In the case of the 2290 MHz band, Ofcom’s main proposals are as follows.

  1. Make available a 10 MHz block for award (2290-2300 MHz) as market testing suggests that the demand is for a block of this size, rather than the full 12 MHz available. The remaining 2 MHz can be held for inclusion in a later award should the current status of the spectrum above 2302 MHz change.
  2. Award this spectrum as part of a distinct process that is in advance of the 2.6 GHz and 2010 MHz auction. This proposal reflects the expectation that this spectrum is a much weaker potential substitute for the other 2.6 GHz and 2010 MHz bands, except potentially for prospective PMSE users.
  3. Award the lot under a second price, sealed bid approach, although an SMRA could be an alternative option.

1.29 It is proposed that the key elements of the licensees’ rights and obligations for the spectrum to be auctioned in all three bands should be as follows.

  1. The licences should have an indefinite term with a minimum period of 20 years (during which time Ofcom’s powers to revoke will be limited).
  2. The licences should be tradable.
  3. The licences should be technology and application neutral.

1.30 We are consulting on two possible approaches for defining the technical conditions associated with each lot.

  1. Using spectrum masks for transmission rights.
  2. In terms of Spectrum Usage Rights that are in keeping with our recent information notice in this regard(-9-).

Detailed summary of Ofcom’s proposals

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

Timing

Ofcom proposals

Timing and linkage of awards

All three bands to be awarded as soon as practicable. The 2.6 GHz and 2010 MHz bands to be awarded as part of the same auction, with the 2290 MHz band being awarded in advance as part of a separate auction.

Spectrum packaging

Ofcom proposals

2500-2690 MHz

Packaged on the basis of blocks of 5 MHz as lots of paired spectrum (2x5 MHz, 120 MHz duplex spacing) and unpaired spectrum (5 MHz), with the eventual amount of lots in each category to be determined in the auction. The reference point is as per the CEPT band plan: 14 lots of paired channels (14x2x5 MHz with uplink in 2500-2570 MHz and downlink in 2620-2690 MHz) and 9 lots of unpaired channels (9x5 MHz in 2570-2615 MHz).

One guard channel will be necessary at adjacencies between paired and unpaired spectrum, at 2615-2620 MHz, and possibly another in the top part of the band.

Allow paired lots to be converted into the equivalent of two unpaired lots in the event that demand for unpaired lots exceeds that for paired lots at a given lot price.

Each bidder to receive contiguous lots in each category, except potentially one assignment of unpaired spectrum which could need to be split into two blocks of contiguous lots.

2010 MHz -2025

Package for award as a single 15 MHz lot.

2290-2302 MHz

Package for award as a single 10 MHz lot and retain 2300-2302 MHz for possible inclusion as part of a future award together with 2302-2310 MHz.

Wireless Telegraphy rights and obligations

Ofcom proposals

Licence term

The licences will have an indefinite duration, with an initial term of 20 years for the 2.6 GHz, 2010 MHz 2290 MHz bands 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 initial term, which could lead to the licence being terminated the day after the expiry of the initial term or at any time thereafter.

Licence fees

The auctions will determine the fees payable, subject to a reserve price. After the expiry of the initial term, if a licensee continues to hold its licence, there may be additional charges in line with Ofcom's policy on spectrum pricing at that time.

Spectrum trading

The licences 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 effective use of the licensed frequencies, controlling interference between different authorised uses.

The technical conditions will comprise a constraint on use defined either by Spectrum Usage Rights or by reference to Spectrum Masks.

Rights to use the frequency will be on a UK-wide basis within the defined frequency range of each licence.

Award mechanism and rules

Ofcom proposals

Auction format for the 2.6 GHz and 2010 MHz bands

 

Two-stage award process with first stage being a multi-round clock auction with three types of generic lots (paired channels in 2.6 GHz band, unpaired channel in 2.6 GHz band and a lot representing the 2010 MHz -2025 MHz band), and the second stage being a sealed bid process to convert the generic lots won in the first stage into packages of spectrum at specific frequencies in the 2.6 GHz band.

Auction format for the 2290 MHz band

 

Second price, sealed bid auction

Eligibility rules for auction of the 2.6 GHz and 2010 MHz bands

 

Each lot in the auction will have an associated number of eligibility points with each lot in a given type attracting the same number of points.

The number of lots on which bidders can make bids would be constrained by their eligibility, which in turn is determined by their initial eligibility and bidding activity over multiple rounds

Reserve price

Ofcom will set a reserve price above zero for each individual lot. Bids in both proposed auctions will need to be higher than the reserve prices.

Deposits

Ofcom will set an initial level of deposit per eligibility point. Each bidder’s 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 2.6 GHz / 2010 MHz auction and at the bidding stage in the 2290 MHz 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 granted after payment has been received.

Transparency

 

In the 2.6 GHz / 2010 MHz auction the identity of the bidders will be made public. Information on the volume of bids will be released after each round. Prices at which lots are awarded after stage 2 will be published. At the end of the auction, all bids made, including best and final offers and stage 2 bids, and the prices paid by the winning bidders will be published.

In the 2290 MHz auction, the identity of the bidders will be made public. However, upon completion, only the amount paid by the winning bidder will initially be published. The detail of all bids will only be published when the 2.6 GHz / 2010 MHz auction is completed.

Pace of the 2.6 GHz / 2010 MHz 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 acquisition of spectrum and competition issues

We are consulting on the question of whether or not there should be a safeguard cap (e.g. set at 90 MHz) on the amount of spectrum that an eligible bidder can win. We will also consider whether any conditions are required to guard against behaviour such as anti-competitive hoarding.

Question 1: Do you agree with these proposals for the awards of the three bands or have any other comments on the contents of this document?

Next steps

1.32 This consultation closes on 9 March 2007. Ofcom plans to hold a seminar on its proposals in early 2007 for interested parties during the consultation.

1.33 Subject to the outcome of this consultation, Ofcom expects to publish the following key documents during the course of 2007:

  1. a statement on this consultation;
  2. an Information Memorandum for each of the two proposed awards, describing in detail the relevant information for the awards such as the award procedure and rules, prospective licence conditions and other information likely to affect use of the bands;
  3. draft regulations setting out the auction rules with distinct draft statutory instruments for the two separate auctions processes; and
  4. draft regulations to allow trading of the proposed licences.

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

1.35 As noted above, Ofcom is planning in the near future to embark on consultations in relation to the DDR spectrum and in relation to the liberalisation of spectrum that is currently licensed for 2G and 3G use. In addition, the 2.6 GHz and 2010 MHz bands continue to be the subject of consideration for possible harmonisation within Europe. It is possible that developments in any of these areas could have a bearing on the timing of the awards of the 2.6 GHz and 2010 MHz bands.

1.36 Subject to any material developments in relation to these matters, and subject to the outcome of this consultation, Ofcom considers that it should be possible to proceed with this award in late 2007.

Footnotes

1.- The consultation and responses are available at http://www.ofcom.org.uk/consult/condocs/sfrip/sfip/.

2.- See http://www.ofcom.org.uk/consult/condocs/sfrip/statement/.

3.- The Audit, led by Professor Martin Cave at the request of Government, was conducted with a view to identifying spectrum used by public sector bodies that could be released to the market.

4.- IMT-2000 is a term which refers to a family of technologies that is identified by the ITU. It currently includes 5 categories: UMTS FDD (paired), UMTS TDD (unpaired), cdma2000, EDGE and DECT. Some technologies that are plausible uses for the available bands are not included at present such as WiMAX (IEEE 802.16), iBurst (HC-SDMA), FLASH-OFDM or PMSE technologies.

5.- See http://www.cept.org.

6.- When using “paired” channels the uplinks, from handsets to base station, and the downlinks, from base station to handsets, take place at different frequencies to avoid interference (this is called FDD). An “unpaired” channel can be used for one-way transmission (e.g. mobile TV) or for two way communication where the uplink and downlink take place at the same frequency, but are separated by timeslots i.e. a burst of uplink followed by a burst of downlink (this is called TDD).

7.- These lots are referred to as “unpaired” as they are not paired with other channels within the 2.6 GHz band. However, a successful bidder could choose to pair these with other spectrum outside the 2.6 GHz band, e.g. with spectrum in the 2010 MHz band.

8.- These bands could also be close complements if a bidder wished to pair 2010 MHz spectrum with unpaired channels in the 2.6 GHz band in order to deploy FDD technology with a non-standard duplex spacing.

9.- See the update of 1 November 2006, available at http://www.ofcom.org.uk/consult/condocs/sur/next_steps2/.

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