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Executive summary

1.1 In 2003, before Ofcom came into existence, the Government decided to release a digital dividend when digital switchover (DSO) was complete. Our Digital Dividend Review considered how we should approach the award of this spectrum (UHF Bands IV and V, 470-854 MHz) in light of the various different users affected, both existing and potential. One of the key users of interleaved spectrum - the capacity available on a geographically fragmented basis within the spectrum that will be retained to carry the six digital terrestrial television (DTT) multiplexes after DSO - was identified as being the programme making and special events (PMSE) sector.

1.2 The PMSE sector contributes significantly to the cultural well-being of the UK. It is a diverse community, spanning theatres, broadcasters, major event organisers, community users and others. As such, PMSE is a key use of spectrum - whether for wireless microphones in West End theatres or for wireless cameras at major news events.

1.3 As new and innovative uses of spectrum have appeared so the demand for spectrum has increased. This means that there may be competing uses for the same frequencies and, where this is the case, their opportunity cost - the cost of denying their use to other, potentially more valuable uses - will tend to rise.

1.4 Historically, fees for licensed PMSE use have, at most, met the administrative costs of issuing licences. This was a satisfactory arrangement when there was no other competing use for the spectrum that PMSE had access to. However, it meant that the sector was faced with relatively low licence fees and little incentive to use spectrum more efficiently. As new uses of spectrum have developed over recent years, it has become clear that there is or will increasingly be competing demand for the spectrum most heavily used by PMSE.

1.5 As a result, we considered that measures should be put in place which would promote more efficient PMSE use of spectrum, in line with our duty under the Communications Act 2003 to secure optimal use to further the interests of citizens and consumers. We set out initial proposals on 19 December 2006 in our consultation document on our approach to awarding the digital dividend. In the light of responses, we published a further, PMSE-specific consultation document on 20 June 2007. We initially focussed on PMSE use of interleaved spectrum and channel 69, primarily for wireless microphones.

1.6 On 13 December 2007, we published a statement (the December 2007 statement) setting out our high level decisions on how we would award the digital dividend. These included awarding a single package of interleaved spectrum and channel 69 via a beauty contest to a band manager with obligations toward PMSE users. To help PMSE users make the transition to a market-based approach to spectrum access, we would use criteria designed to ensure the band managers interests were aligned with those of PMSE users. The band manager would pay a charge for the spectrum to reflect its opportunity cost and would be able to earn revenue by charging its customers for access. But regulation would ensure it had to meet reasonable demand from PMSE users on fair, reasonable and non-discriminatory (FRND) terms. So long as these obligations were met, the band manager would be able to allow the spectrum awarded to it to be used for other purposes.

1.7 We published a first consultation document on the detailed design of the band manager award on 31 July 2008 (the July 2008 consultation document). That document considered key issues including whether we should award spectrum outside the digital dividend, the selection criteria we should apply in the beauty contest and how we should ensure reasonable PMSE demand is met on FRND terms.

1.8 This second consultation document makes further detailed proposals for how we expect the band manager to behave toward PMSE users and what this is likely to mean for them. In particular it addresses:

• the licence fee we will charge the band manager and how we will introduce this in a way that does not cause PMSE users disruption which would adversely affect their ability to continue providing a service to their customers;
• how, in meeting our selection criteria, applicants to the band manager award will need to offer commitments in relation to making spectrum available to PMSE users on FRND terms and conditions; and
• the rigorous scrutiny to which we will subject any request by the band manager to allow non-PMSE use of spectrum awarded to it.

1.9 It also outlines our proposed approach to defining the technical licence conditions (TLCs) for the spectrum which we are proposing to award to the band manager and sets out those proposed TLCs.

1.10 We believe that the proposals contained in this consultation document, taken with those published in July 2008, should give PMSE users confidence that they will be able to continue to operate without significant disruption during the transition to a market-based approach to spectrum access. A summary of how we are proposing to achieve this is illustrated in figure 1 below.

Figure 1. Effect of proposals for detailed design of the band manager award

1.11 We do not underestimate the importance that PMSE stakeholders place on our proposals and ultimate decisions. We also recognise the concern felt by many in the sector. For that reason we have engaged very closely with individual PMSE users and representative bodies throughout our policy making process, ensuring that their legitimate concerns are reflected appropriately and that we meet all of our key objectives for the band manager award.

Next steps

1.12 We welcome all views from stakeholders on the questions raised in this consultation document. Responses are due by 7 September 2009. We will hold seminars on our proposals one open to all stakeholders, others aimed specifically at PMSE users and parties interested in applying to be the band manager respectively during the consultation period.

1.13 We welcome continued discussion with stakeholders about what our proposals will mean in practice as we move toward publishing a statement of our decisions later this year and start the award process itself.

• Digital dividend: band manager award: Second consultation on detailed award design [pdf]
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