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A Statement on Spectrum Trading

Implementation in 2004 and beyond

1.1 This Statement follows a public consultation by Ofcom and the Radiocommunications Agency on proposals for the introduction of spectrum trading in the United Kingdom. The consultation, which was published in November 2003, explained that the introduction of spectrum trading and liberalisation would help to encourage efficient use of spectrum by enabling it to be transferred to, and used by, the user that values it most.

1.2 Ofcom's overall approach to spectrum management will be set out in the Spectrum Framework Review, one of Ofcom's three major reviews, due to be published in Q4 of this year. Spectrum trading and liberalisation fit within the Framework Review as the key mechanisms in the implementation of a market forces approach to spectrum management.

1.3 In recent years substantial progress has been made in relation to spectrum management, most notably through the development of proposals to implement spectrum trading and liberalisation. Ofcom is committed to continue the implementation of this more dynamic and market-oriented approach.

1.4 Ofcom is taking forward its reform programme through three inter-related projects. These are:

Spectrum Trading - mechanisms for allowing spectrum to change hands;
Spectrum Liberalisation - relaxation of constraints on the use of spectrum;
Spectrum Pricing - updating of annual fees for spectrum not acquired through auction.

1.5 This document sets out Ofcom's conclusions on spectrum trading. It explains how, in the light of the generally favourable responses received to the proposals set out in the November consultation, Ofcom intends to continue with its plans for the phased introduction of spectrum trading over the next four years. Further documents will be published in the next few months on each of the other areas.

Spectrum Trading

1.6 Spectrum Trading - the transfer of rights and associated obligations to use spectrum - represents a new approach to spectrum management. It will allow holders of wireless telegraphy (WT Act) licences to transfer some or all of the rights and associated obligations that they enjoy as a result of those licences, to third parties. This will enable spectrum to migrate to users that will use it most efficiently, thus benefiting the economy. Trading will be entirely voluntary and no licensee will be forced to trade by Ofcom.

1.7 Ofcom will authorise spectrum trading through the publication of Trading Regulations. Ofcom intends to publish the first set of such regulations in November 2004, thus allowing the commencement of spectrum trading for certain licence classes from December 2004. Ofcom expects to publish further regulations in each of the subsequent three years, extending the range of licence classes authorised to trade, and potentially also expanding the range of types of transfer permitted.

1.8 Different types of transfer will be authorised by the Trading Regulations:

transfers for all or only certain parts of the rights and associated obligations under a licence - i.e. 'total' or 'partial' transfers;
transfers such that the acquirer of the rights and associated obligations holds them to the exclusion of the original holder, or concurrently with them - i.e. 'outright' or 'concurrent' transfers.

1.9 Ofcom believes that such a flexible approach will support various commercial arrangements between parties which can be adapted as necessary to reflect market conditions.

1.10 The licence classes for which Ofcom intends that trading be introduced in 2004 and Ofcom's proposals for the extension of trading to other licence classes in subsequent years are set out in Section 4 and in Annex C. A summary of these proposals is set out in Table 1 below. This timetable will be subject to review and consultation, especially in relation to some of the plans for later years. In particular, Ofcom is still considering the appropriate timing for the introduction of spectrum trading in 2G and 3G mobile spectrum, and expects to confirm its proposals in this area later this year.

Table 1: Timetable for the phased introduction of spectrum trading
2004	2005	2006	2007	Other
Analogue PAMR	Wide area PBR	Emergency services	2G and 3G mobile	Mobile satellite
National paging	On-site PBR		PMSE	Satellite shared with terrestrial services
Data networks	Digital PAMR		Aviation and maritime communication	Radio broadcasting
National and regional PBR	10 GHz FWA		Radionavigation (Radar)	Television broadcasting
Common Base Stations	32 GHz
Fixed wireless access	40 GHz
Scanning telemetry
Fixed terrestrial links

1.11 It is Ofcom's intention to introduce a simple, quick and predictable process to support spectrum trades. This should encourage take-up of trading and maximise the benefits that can be obtained. Ofcom has set out the limited set of circumstances under which it may refuse to consent to a trade in Section 3 of this statement. Section 3 also describes the arrangements for notifying Ofcom of a proposed trade.

1.12 Ofcom has also proposed that existing competition law is sufficient to deal with distortions of competition that may arise following the introduction of spectrum trading and that further new controls are unnecessary. This issue has been the subject of a separate consultation .

1.13 Finally, as a further incentive to trade, Ofcom will not impose, at the current time, any charges in connection with the transfer of rights and associated obligations.

Liberalisation

1.14 In parallel with the introduction of spectrum trading, Ofcom will be open to licensees requesting a change in the use of their licence. This is referred to in this document as liberalisation and will exist in parallel to the procedures for spectrum trading. Spectrum trading and liberalisation are separate developments. However, it is anticipated that liberalisation will provide an additional impetus for spectrum trading and generate additional benefits. Further details about liberalisation will be set out in a separate consultation which Ofcom will publish later this summer.

Licence term and period of notice

1.15 Ofcom will modify certain wireless telegraphy licences to give them a rolling term. In addition, Ofcom will clarify the circumstances under which licences will be revocable by Ofcom, and the periods of notice that Ofcom will give in each case. The reasons for revocation, which are set out in Section 6 of this statement, will include the power to revoke a licence on 5 years minimum notice for spectrum management reasons.

1.16 Ofcom will review any non-spectrum licence conditions before the introduction of trading in each licence class. If Ofcom concludes that any such conditions are no longer objectively justifiable or proportionate, then Ofcom will propose changes accordingly.

1.17 Ofcom will start to implement these changes later this year, beginning with those licence classes scheduled for trading in 2004. This will be done through the usual licence variation process, including consultation with the affected licensees.

Administrative Incentive Pricing

1.18 Ofcom intends to continue charging Administrative Incentive Pricing (AIP) on both tradable and non-tradable spectrum after the introduction of trading later this year. A further consultation on detailed arrangements for AIP from April 2005 will be published towards the end of the summer.

Intermediaries

1.19 Ofcom believes that intermediaries could bring benefits to trading markets by facilitating trading between disparate and otherwise unconnected parties. Ofcom will leave it to the market to establish intermediaries and does not intend to include any specific legislation to regulate their activities through the Trading Regulations. Intermediaries will therefore be subject to no more control than other licensees, but equally they will have to abide by the same rules as everyone else, and will not receive any special treatment. Ofcom will monitor the development of intermediaries as spectrum trading develops and will keep policies under review.

Spectrum 'hires'

1.20 As well as trading, Ofcom will also permit a wider range of short term hiring arrangements than previously allowed. This will provide spectrum access to users who may be unwilling directly to assume the rights and obligations of a spectrum licence.

Publication of information and monitoring of the market

1.21 Ofcom recognises that access to a range of accurate and up-to-date information is a prerequisite for a successful market. At the same time Ofcom appreciates the concerns raised by some licensees that harm could result from the release of sensitive information about the configuration of their networks. Ofcom will therefore publish a range of information about licences, transfers, variations, and Ofcom's own future plans, but will, in some cases, limit the level of detail provided to minimise the risk of harm.

1.22 This information will be disseminated through different channels, including a Register of Licences and a trading web page, as described in Section 7 of this document. Ofcom may also, from time to time, publish aggregated statistics on trading to allow interested parties to monitor the development of the trading market, whilst ensuring that confidentiality of individual transactions and parties is preserved. Ofcom believes that this approach will leave scope for the private sector to develop value added information and monitoring services in line with market requirements.

Next steps

1.23 Ofcom intends to publish the draft Trading Regulations in September. At the same time, Ofcom will publish draft Register Regulations which will enable Ofcom to publish information about individual licences. Following a one month statutory consultation, it is expected that the final regulations will be made in November so that they enter into force in December 2004. In the meantime, preliminary drafts of the Regulations are included at Annexes A and B to this statement. Initial comments on these preliminary drafts are invited by 31 August 2004 .

1.24 Later this year, Ofcom intends to begin its programme of varying WT Act licences, as described in this statement, starting with those classes identified for trading in 2004.

1.25 Ofcom expects to take similar steps in 2005 to extend trading to further licence classes.

For the full text please use the link below to a PDF version of the document

A Statement on Spectrum Trading [pdf]
Implementation in 2004 and beyond