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On 6 July 2006, Ofcom published a consultation on Business Radio Trading and Liberalisation which outlines plans to take forward the implementation of spectrum trading and liberalisation in relation to the Business Radio sector .

Spectrum is a scarce and valuable national resource and Ofcom has a role to ensure it is used as efficiently as possible. These proposals are aimed at ensuring Business Radio use can continue to grow and develop. Ofcom wants to remove barriers to trading and liberalisation in this sector which will help to stimulate its future use.

The deadline for comments is 15 September 2006. Full details of the consultation can be found at: http://www.ofcom.org.uk/consult/condocs/brtrading/

Since publishing the consultation document, Ofcom has held a series of seminars with stakeholders in London and in the nations and regions. This document addresses some of the issues that were raised at these seminars.

1. What has Ofcom proposed in this consultation?

The proposals include a number of reforms:

• A simplification of Ofcom licence classes by rationalising them from twenty-one to three: Area Defined, Technically Assigned and Light Licensed.
• The introduction and adoption of a single set of fee setting principles for all licence classes;
• The introduction of a new tool, MASTS, for making technical assignments which will:

1. result in a more efficient use of spectrum
2. automate the process of applying for and receiving a licence for the majority of new applications in the technically assigned licence class;
3. provide a transparent and consistent approach to assignment

The proposals also intend to:

• Extend facilities to allow licensees to be applied for and managed online.
• Remove many of the restrictions on the use of a spectrum assignment, although any use will still have to remain within the technical parameters in the licence.
• Extend of the right to trade to all licences (except the Light Licence class where trading is not relevant). The introduction of more flexibility in the way that trading can take place and the ability to trade a part of the area or frequencies covered by a licence.

This will give Business Radio licensees greater flexibility to change the application or use of spectrum, enable trading, providing the ability to buy and sell spectrum, and a new consistent and more transparent technical assignment process, giving greater certainty to licensees through the extension of licences to an indefinite duration, with a five year minimum notice period in most cases. The extension of trading and liberalisation under the proposals will introduce a more flexible licensing system to the Business Radio sector.

2. I already hold a Business Radio Licence. How will these proposals impact upon me?

Existing licensees will receive a new licence (which in many cases will allow more flexibility in use e.g. change of business from a taxi to a courier) to replace their existing licence.

The benefits to existing licensees will be:

• A new, more consistent approach to the derivation of fees across different licence classes. For most users, the fees will not change (over 90% will remain at or around current levels or be reduced). As part of this restructuring exercise there could be potential increases or decreases in fees for a small number of users.
• An administrative benefit from the simpler licences not having to renew each year, and a simpler, e-enabled renewal process;
• Licence technical parameters and conditions remaining broadly similar to those in the current licensing system. Note; Stakeholders are not expected to have to change their technical assignment. However, some users may wish to reduce coverage or change frequency to attract a lower fee and are free to apply to do so at any time.

3. How will these proposals affect new Business Radio licensees?

These proposals will mean new licensees will benefit from:

• A new improved e-enabled licensing service resulting in increased efficiency in obtaining a licence, with the added advantage of self-service;
• Access to a wider pool of currently available, but unassigned, spectrum as the assignment process will look for available assignments within the channel plans which will distinguish only between the three new classes (rather than the more fragmented twenty-one classes which exist at present). Details of frequencies available for each class are published on the Ofcom website (see http://www.ofcom.org.uk/radiocomms/isu/ukpfa/?view=Search+form) and will be updated as the new classes are introduced;
• The availability of new assignments will also be increased by the efficiencies made possible by the new MASTS tool.

4. When will the new arrangements take effect?

Subject to the outcome of the current consultation, the new arrangements are planned to come into effect during the course of 2007 (no earlier than June 2007 with a phased introduction most likely to be spread through the second half of the year), although the precise timing will depend on IT system implementation.

5. Under the new proposals, how does Ofcom see its continuing role in regulation of spectrum?

Ofcom will continue its active role in regulating Business Radio spectrum, subject to its duties set out in the Communications Act. Ofcom has further interpreted its vision in the Spectrum Framework Review, encouraging a market-led approach to spectrum management (e.g. through trading) however, Ofcom sees a continuing role in oversight of spectrum use and enforcement.

6. Will the existing licences be placed in different categories?

Yes, all existing licence products issued publicly are moving to one of the three new licence categories, Area Defined, Technically Assigned or Light Licensed.

7. Under the new fee structure, will persistent non-payers have their licences revoked?

Yes, this will continue under the new structure. We will also take tougher action on persistent late payers.

8. How can Ofcom set prices for Business Radio spectrum when its role is to regulate the spectrum?

Ofcom sets the fees for licences that it issues, consistent with its statutory duties which include, the duty to manage the spectrum effectively and to encourage optimal usage of the spectrum. If a licensee subsequently sells its licence rights to another user under the trading provisions, that transaction will reflect a commercially negotiated price and the new user will take on responsibility for paying the fee for future licence renewals to Ofcom.

9. Will paper applications still be accepted under the new products?

Yes, whilst Ofcom hopes that many people will take advantage of the new e-licensing system we will still provide the option for paper applications.

10. When experiencing interference from other services (under the new proposed products) what role will Ofcom play in resolution?

Ofcom will continue to play an active role in the investigation and resolution of interference. We do not plan to change the basis of Ofcom’s arrangements for interference investigation in the business radio sector, and interference from external sources will continue to be investigated free of charge. Ofcom intends to encourage industry, wherever possible, to actively resolve and mitigate any interference issues as they arise. However, if we are asked to investigate and we find that licensee’s equipment is the cause of the problem – because it is not operating in accordance with the licence, or does not have immunity, or is poorly installed – the licensee will be liable for the cost of the investigation.

Information on how Ofcom deals with interference issues to business radio can be found on our website at http://www.ofcom.org.uk/radiocomms/ifi/enforcement/

11. What is Ofcom’s future plan for the release of unallocated Business Radio spectrum?

There are different types of unallocated Business Radio spectrum: channels which are available but not currently assigned- users will have greater access to these assignments than is currently the case due to the reduction of licence categories from twenty-one to three - and channels which are not made generally available at present for band management reasons. Although we expect to release some of these additional channels in due course, this issue does not fall within the current consultation.

12. How do we ensure that competition issues are resolved under the new proposals?

The proposals do not change any current competition issues. Ofcom and other bodies involved in overseeing these issues have to do so in accordance with the framework of competition law in the UK. The Communications Act covers such issues as dispute resolution procedures and Ofcom publishes competition bulletins from time to time.

13. What will be the variation process to transfer the existing licences to the new products?

Ofcom will issue a general statement and also write individually to each licensee to advise that the existing licences will automatically be replaced with new licences (using the same assignments). Licensees will get a short period (at least a month) to raise any problems arising from this notice letter before the new licence is finalised and issued to them. The old licence will then become redundant.

14. What Spectrum Trading rights will existing licensees have when the new proposals come into force?

Trading in some classes in the Business Radio sector was introduced in 2004. This initial implementation focussed on licence types that were for large geographical areas and assigned exclusively to a single user. The licence classes in question were analogue PAMR, National Paging, Data Network, CBS and National & Regional PBR. Ofcom now proposes to extend trading to a far greater range of situations in the sector and in so doing, provide the facility to trade to over 35,000 licences.

Ofcom’s proposals support a wide range of different types of transfer including the ability to partially trade parts of their spectrum and, for certain licence classes, by allowing the partial trading of geographical areas. Such changes allow licensees the flexibility to trade unused elements of their spectrum to those who might wish to make use of it.

15. What benefits will trading offer to the Business Radio industry?

Trading gives additional opportunity to satisfy specific spectrum requirements. If a prospective user wants to make use of spectrum in an area (frequency and / or geographic area) which is currently fully assigned, so that new, primary assignments are not possible, then they will be able to obtain information on current assignments from the Trading Register and approach existing users to explore trading opportunities. It also offers users more flexibility in deciding how best to make use of the spectrum rights licensed to them, which is clearly greater for the larger systems providing more opportunities to sub-divide their licence both in terms of spectrum and geography.

In the past, users no longer needing their systems only had the option to surrender the licence. In future they may find another user who would like to pay to take it over either in part or in whole. Users may also want to lease those rights for a short period (e.g. for weekend usage) or some other commercial arrangement. Trading introduces these possibilities.

16. What is the view of the other European administrations regarding the UK’s proposals for Spectrum Trading and Liberalisation?

The UK is at the forefront of these developments and other European states are monitoring the UK with keen interest in this area. Many other member states are also proposing to introduce trading and the new European framework being reviewed by the European Commission envisages more encouragement for both trading and liberalisation of use.

17. How successful has Spectrum Trading been in other Countries?

Trading has been introduced in a number of countries, notably in Australia, the USA and New Zealand. In Australia, where trading has been in existence the longest time, it has been more effective with a larger volume of trading activity. In the USA and New Zealand take up (as in the UK) has initially been slow, but users are now more familiar with these approaches and successful trades have taken place.

18. What is the future for commercial TETRA wide-area?

As Ofcom takes a technology-neutral approach as it releases new spectrum, we believe it is up to the market to decide the use of this technology.

19. Can an existing licensee using a voice system change to data without the involvement from Ofcom?

Yes, as long as this does not result in undue interference to existing users.

20. If a licensee wants to reduce the coverage required would Ofcom need to approve this change?

Yes. Ofcom must approve any variation to a licence. For example, if a licensee did not require coverage of such a wide geographical area they would be able to apply to Ofcom to reduce their coverage area. Ofcom would carry out the necessary technical checks and adjust the licence’s technical characteristics accordingly. Our pricing proposals are specifically designed to incentivise such behaviour and such a change could reduce the fee payable to Ofcom.

21. Will the existing e-licensing system be replaced?

Yes, the current e-licensing system will be completely overhauled and replaced with the new IS system.

22. Can anyone apply for a Suppliers Licence or will there be some checks to prohibit this?

The requirements on applicants for Suppliers’ Licences will not change under the new proposals and there will continue to be a specific licence for suppliers (it is one of the three sub-categories of Light Licence). We do however, propose to simplify and streamline arrangements here as part of our proposals for light-licensing.

23. Will Shopwatch systems continue to be protected under the new products?

Future Shopwatch systems should be able to select which of our new products best suit their needs. On the assumption that many existing systems will remain with a light licensing system, protection will only be against illegal use but there will be the option to apply for a technically assigned licence which will provide the additional protection arising from co-ordinated assignments if required.

24. Will the new licensing system manage the interference and allocation of signalling tones?

Yes, the signalling tones will be assigned ensuring that they are not in use by existing users within the same geographical area.

25. Why did Ofcom not consider the use of antenna height above sea level for pricing?

The fees regulations need to clearly state the factors used in determining fees in a way that is transparent and indisputable. Introducing the terrain height (as an explicit parameter) would result in many people not being clear or able to calculate their fee as this information is not readily available to them. However, for the avoidance of doubt, the MASTS algorithms do take account of terrain height when making assignments.

26. Will the existing licence application turnaround targets be at least maintained or improved?

Yes, it is expected that with the introduction of e-licensing, that the key licence turnaround targets will be improved from current levels.

27. What resolution terrain and clutter data will MASTS use?

MASTS will initially use 200m terrain and clutter data.

28. What was the receiver height used in the propagation model?

The receiver height will be assumed to be 1.5m above ground level.

29. For the Light Licence products, will Ofcom send fee reminder notices before the 5 year renewal period?

Yes. Ofcom proposes to send reminders at least a month in advance.

30. For a technically assigned licence can the licensee move their Base Station location without Ofcom consent?

No. Ofcom will always need to know the base station locations to ensure the impact can be assessed for that licensee and other existing users and ensure our databases are kept up to date.

31. Why did Ofcom decide to move to population density for a proxy for fee calculations?

Demand for business radio use is considerably higher in the more populated areas of the UK. Ofcom considers that it helps balance supply and demand if we charge more for the more congested areas but congested areas are difficult to quantify and to set in regulation. Population counting is well documented and is commercially mapped based on census data which remains valid for ten year intervals. It is easy to reference in regulations and Ofcom considers it a good proxy for determining congested areas. This was also the recommendation from the Indepen pricing review that was carried out in 2002.

32. Are CBS licences currently tradable?

The possibility of trading was introduced for some CBS licences last year. It is proposed to now widen trading to all licences that will be transferred to the new Technically Assigned Licence products.

33. Do CBS systems continue to enjoy exclusive use protection under the new proposals?

Yes. CBS use is still represented as exclusive use over the Designated Service Area under the new proposals.

34. Will Ofcom make spectrum available which is CEPT aligned?

The UHF-2 band experiences interference from other European countries from base stations transmitting on our base station receiver frequencies, whilst some parts of the VHF band experience the reverse, resulting in the UK providing interference into Europe. Ofcom’s statement in 2004 stated that we would not propose a band re-alignment exercise to ensure UK frequencies were aligned. However, some users may be able to use the new opportunities provided by trading and liberalisation to re-align their own frequencies.

35. Can we buy a trading unit directly from Ofcom for an Area Defined Licence?

No. At this time the option to trade or sell spectrum trading units (i.e. sub-parts of the full licence) will only be available to existing Area Defined licensees.

36. Is the MASTS Quality of Service algorithm publicly available?

Yes. When the new licence classes are introduced it will be made fully available within the Technical Frequency Assignment Criteria (TFAC) once it is published on the Ofcom website in line with normal procedures. However, it is currently available on request.

37. Will the existing administrative licensing process change under MASTS?

Ofcom is moving towards an e-enabled system making licence administration more efficient with streamlined processes which will be supported and improved through the use of the MASTS algorithm to make more informative decisions regarding assignments.

38. If MASTS is unable to make the assignment what will happen?

There may be situations when MASTS cannot make an assignment - an example would be in central London where we do not have the detailed building clutter to accurately model the coverage effects. The application will then be transferred to a Licensing Officer who may be able to make a more informed decision based on local knowledge.

39. Will Ofcom consider the noise floor effects when calculating fees?

No. It is not a determinant in our frequency assignment approach for business radio and, consequently, is not directly reflected in our fee proposals. Ofcom does, however, continue to monitor the level of the noise floor in the UK and would adjust its frequency management and assignment policies accordingly if this was appropriate.

40. Does the Spectrum Quality Benchmark (SQB) apply to all services or is it just Business Radio?

The SQB references within the Business Radio Trading and Liberalisation consultation document specifically apply to Business Radio only but there are SQBs defined for other services. More information on current SQBs can be found on our website at http://www.ofcom.org.uk/radiocomms/ifi/trading/libguide/

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