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Executive Summary

Introduction

1.1 Under current legislation, users require authorisation to transmit radio signals. The rationale for this restriction is that unregulated use of spectrum is likely to lead to interference between transmissions. This destroys the value of the spectrum as a medium for communication. Authorisation may be granted on a class basis (known as ‘general authorisation’ or ‘licence exemption’) or to individual users (known as ‘wireless telegraphy’ or ‘spectrum’ licences). In such a licence, it is necessary to place some restrictions on their rights to transmit. Without such restrictions there would be a high risk that significant levels of interference might be caused to others. For example, if users had no restriction on the signal levels they were allowed to transmit outside their designated bands, they might transmit high levels to the detriment of neighbouring users.

1.2 There are many different ways in which technical restrictions on spectrum use can be formulated. The way in which this is done can have profound effects on the flexibility that exists for spectrum users, and on the incentives for efficient use of the spectrum. At the most general level, there is a trade-off between increasing the flexibility available to any one user of the spectrum and reducing the risk of interference to other users. However, this trade-off can be managed more or less effectively depending on the way in which the technical constraints are specified, and the way in which change to any given set of constraints is managed.

General policy

1.3 Ofcom’s general policy is to set technical restrictions that are the minimum necessary to provide adequate protection against harmful interference. This is because optimal use of the radio spectrum is more likely to be secured if users decide, rather than Ofcom dictates, what technology to use or service to provide in a particular frequency band. Imposing the minimum necessary constraints will increase users’ flexibility and freedom to respond to changing conditions, and to make best use of the valuable spectrum resource.

1.4 This policy, known as ‘liberalisation’, is at the heart of Ofcom’s Spectrum Vision, set out in the Spectrum Framework Review. As described below, we have already put in place a policy of progressively removing restrictions on spectrum use. This document seeks views on an approach that could be taken to the next phase of liberalisation. We term this method of specifying restrictions in licences spectrum usage rights (SURs). It is possible that specifying technical restrictions in terms of SURs could bring additional gains through extra flexibility of use, while maintaining standards of freedom from significant interference. However, Ofcom recognises that the issues are complex and require careful consideration before implementation.

1.5 This document addresses only the issues associated with specifying restrictions on spectrum use for technical reasons. It does not address other issues that may also be relevant to particular decisions that Ofcom may take on the terms of existing or new licences. These other considerations may include, for example, the effects of potential decisions on the promotion of competition, the protection of consumers, or the availability of services such as electronic communications, television and radio across the UK.

1.6 Ofcom has made clear in its Spectrum Framework Review that it considers policy constraints on spectrum use should be kept to a minimum, and that they should only be used where there is a very clear justification. Ofcom will take into account all relevant statutory duties into account before taking any decision relating to the authorisation of spectrum use.

1.7 For the avoidance of doubt, where particular types of licences are discussed in this document, this is only by way of example in order to illustrate or clarify generic concepts. This document should not therefore be construed as indicating Ofcom’s intentions on, or proposals for, future liberalisation in any specific licence class or for any specific spectrum use.

Historic approach to licence restrictions

1.8 Spectrum has historically been managed on a ‘command and control’ basis, under which licences have often been very specific about the technology to be employed and the use that might be made of the spectrum. Under this approach, the characteristics of users in a given band could be defined very tightly and known with high degree of certainty. This allowed spectrum use to be planned in great detail.

1.9 This approach can be beneficial to technical efficiency, in the sense of maximising the capacity available for a given spectrum use, while avoiding harmful interference. But it is less satisfactory for delivering economic efficiency. Economic efficiency requires spectrum to be used in the way that delivers highest value to the society and economy at large. This use may not be the same as the use which has been planned in detail by the regulator, who knows less about the uses that could be made of the spectrum than the market. Moreover, change from one use, decided and planned by the regulator, to another use, decided and planned in the same way, is a time-consuming process that can be beset by regulatory uncertainty. These problems, of inflexibility, and poor economic efficiency in spectrum use, have been made more pressing by the pace of innovation in wireless technology, which means that more and more technologies and applications are now vying for access to spectrum.

1.10 A wide variety of different technical conditions can be found in existing licences for spectrum use. These include the following (which are not mutually exclusive):

• Licences that specify a particular technology. In this case, parameters such as maximum transmit levels and signals emitted in neighbouring bands are set in the standard which specifies the technology. This approach has the advantage of technically efficient use of the spectrum in the case where many adjacent users of the spectrum have the same restriction, because equipment standards are generally specified to maximise capacity in these situations. However, it is inflexible in not permitting different technologies (and uses insofar as technology dictates use). It requires the regulator to determine the optimum technology, which can have many adverse consequences. And if the optimum technology and use changes, these restrictions can severely restrict users’ ability to respond.
• Licences that specify a particular type of use, such as “fixed” or “mobile”. There may also be further restrictions on parameters such as transmitted power levels. This approach is more flexible than specifying a particular technology, in that many different technologies can typically be deployed under the heading “fixed” or “mobile”. However, this approach can still act as a serious constraint on users’ ability to offer innovative services or to change use in response to market demand. Moreover, while categories such as “fixed” and “mobile” have been helpful historically in capturing some dimensions of spectrum use, they are less and less reflective of modern technologies and uses, which blur these boundaries.
• Licences that specify power limits. A licence might include a limit on the power transmitted within the allowed band, and outside this band. These limits are sometimes referred to as “EIRP limits” or “spectrum masks”. This provides much greater flexibility than either of the alternatives above. However, it is typically necessary to make assumptions about other key variables – such as the type of use and likely density of usage – in order to specify a power limit that will not cause harmful interference to neighbours. It is therefore possible for power limits to be specified either too liberally or too conservatively if actual behaviour departs from the assumptions.

Liberalisation

1.11 Ofcom’s policy of liberalisation involves the reduction or removal of licence restrictions, while continuing to avoid unacceptable increases in interference. As discussed in the Liberalisation Statement and the Spectrum Framework Review, this process involves Ofcom taking into account a range of statutory duties and relevant factors in relation to each individual liberalisation decision. The process has three phases.

1.12 Phase One is currently in place. In this phase, users are able to ask Ofcom to change their licence, for example to remove the restriction to a particular technology. Ofcom will consider each request on its merit but has indicated in its publications on liberalisation various categories of change of use to which it would normally expect to agree while making clear that it also encouraged applications outside these categories.

1.13 Phase 2 proposals are expected to be published for consultation shortly. Ofcom is examining some classes of licence (such as some Private Business Radio licences), to see if restrictions can be lifted across a complete class. As in Phase One, Ofcom needs to be satisfied that this relaxation in restrictions is unlikely to lead to increased interference and is consistent with other relevant considerations. Hence there are limits on the level of relaxation that can be allowed. Ofcom will shortly be consulting on proposals to implement Phase 2 in certain Business Radio licence classes.

1.14 This document discusses the scope for moving to Phase Three, which would involve a new way of expressing technical restrictions on spectrum use.

Spectrum usage rights

1.15 The existing approaches to specifying technical restrictions on spectrum use protect neighbouring users against harmful interference indirectly. They involve specifying or assuming a certain application or technology, and imposing technical limitations, based on the interference effect that the technology or application is likely to cause to neighbouring applications or technologies, which are likewise specified or assumed. The fact that both the interfering and victim characteristics are known makes it simpler to predict the interference that will result.

1.16 SURs would take the alternative approach of directly specifying the emissions that a licence holder may transmit in neighbouring bands or locations. This could bring two key advantages.

• Licensees would have greater flexibility since their licences would not restrict the technology or application.
• Neighbouring licence holders would have more clarity over the levels of emissions from neighbours they can expect, and more confidence that increased flexibility will not cause them to suffer interference above this level.

1.17 There are three main types of interference that must be considered in drawing up SURs.

• Interference caused by emissions across a geographical boundary to a licence holder using the same frequency in a different area. We term this “geographical interference”.
• Interference caused by out-of-band emissions from a licence holder, to licence holders using adjacent or near-adjacent frequencies. These may be both in the same geographical area and neighbouring areas, although in practice the effect in neighbouring areas is normally negligible.
• Interference caused by in-band emissions from a licence holder, to licence holders using adjacent or near-adjacent frequencies. This can be due to the inability of the receivers of neighbouring licence holders to fully remove the signal transmitted within the band of the licence holder.

1.18 For each of these types of interference there are a number of ways that the maximum allowable emissions could be specified. Each of these is discussed below.

1.19 Geographical interference. Possible ways to specify this include:

• A limit on the transmit power allowed. However, this does not directly specify the interference caused and if a user increases the density of transmitters near a boundary then the interference caused across that boundary can rise.
• Coordination of base stations between users. In this case, the users agree on the placement of each base station. If users can reach agreement this can be technically efficient but this could place an excessive burden on licence holders.
• A limit on the power level that can be caused at any point beyond the boundary. A licence holder would not be allowed to transmit in such a way as to cause a signal level above a particular limit at, or beyond a specified boundary. This directly controls interference and appears to us to be the best approach.

1.20 Interference caused by out-of-band emissions. Possible ways to specify this include:

• A limit on transmitter power allowed outside of the band. This does not directly specify the interference caused and if a user increases the density of transmitters inside their coverage area then the interference caused can rise.
• Coordination of base stations between users. In this case, the users agree on the placement of each base station. If users can reach agreement this can be technically efficient but we feel places an excessive burden in licence holders.
• An allowed distribution of signal across a geographical area. A licence holder would be allowed to transmit in a neighbouring band up to a certain level, specified in a probabilistic fashion. A suitable specification might be that within a given area the licence holder must not exceed a set signal level for more than a certain percentage of time at a certain percentage of locations. This directly controls the overall levels of emissions in neighbouring bands, although not the specific location in which emissions might occur. It does not allow interference to rise. This appears to us to be the best approach.

1.21 Interference caused by in-band emissions. The mechanisms for specifying this are identical to those for those specifying interference caused by out-of-band emissions and hence we prefer an identical approach.

1.22 Aggregating the preferred approach under each of the above headings, licences adapted to the SUR method would be specified in the following way.

• The aggregate power flux density (PFD) at or beyond [definition of boundary] should not exceed X1 dBW/m2/[reference bandwidth] at any height up to H m above local terrain for more than P% of the time.
• The out-of-band PFD at any point up to a height H m above ground level should not exceed X2dBW/m2/MHz for more than Y% of the time at more than Z% of locations in any area A km2.
• The in-band PFD at any point up to a height H m above ground level should not exceed X3dBW/m2/MHz for more than Y% of the time at more than Z% of locations in any area A km2.

1.23 Changing licence restrictions to SURs in the form discussed above would have a number of implications. These include:

• Licence holders would have increased flexibility to change technology and usage compared to many current licences.
• Licence holders would have the same levels of certainty about the quality of the spectrum they occupy. The degree of certainty might be enhanced in some cases.
• However, under some circumstances, licence holders might have less ability to significantly increase deployment density than they do at present.

Negotiation and trading

1.24 This document also considers how SURs could be changed, once they have been established, to reflect the changing preferences of neighbouring licensees. Ofcom’s preference would be to find a way in which the process of change could be left to the market as much as possible, rather than mediated by the regulator.

1.25 Ofcom considers that it should in principle be possible to agree many changes through commercial negotiation. A holder wishing to make a change that would cause the technical limits to be exceeded could negotiate with, and secure the agreement of, all affected neighbours. As with current licences, it would be then open for the user, having secured the affected parties’ agreement, to present this proposal to Ofcom, who will then consider the application and vary the licence accordingly. Such arrangements can be entered into in various ways with different degrees of Ofcom involvement.

• spectrum trading in accordance with the trading regulations;
• arrangements in which the affected parties agree not to object to proposals to vary the initiator’s licence;
• coordination procedures, which may be specified in licences.

1.26 The parties to such arrangements would be free to agree on commercial terms to compensate the affected parties for any diminution in their spectrum assignment or spectrum quality resulting from the change. This approach is inherent in spectrum trading, but is also possible under the other two mechanisms.

1.27 If licence restrictions were changed to the form of SURs, then this ability to negotiate would remain. In particular, Ofcom would expect licences in the form of SURs to be tradable. However, we believe that stating licence restrictions in terms of SURs would make negotiation simpler because one licence holder could explicitly agree to a change in the interference they would experience by a simple change to relevant SUR parameters.

Implementation and other issues

1.28 This consultation document is concerned only with the appropriate form of SURs. It does not discuss any issues associated with their implementation, either generically across all spectrum licences or in particular licence classes. Once we have concluded on the best form of SURs, we will bring forward proposals for implementation, where appropriate.

1.29 There are a number of other subsidiary issues on which this document is silent, or on which it provides only initial thoughts. These include the following.

• The way in which the SUR parameters for specific licences will be calculated. Licence holders themselves might have a role in determining these parameters themselves but we have further work to do.
• The timing of any introduction of licences in SUR form.
• The process and legal form we will follow for varying licences if a change to SURs occurs. At present, trading and licence variation both involve Ofcom in reissuing licences but there may be mechanisms that could be permitted under the trading regulations and that would enable a simpler procedure.
• The application of SUR principles to different classes of licence and occupied or unoccupied spectrum. We suggest here that determining the SUR parameters might be more difficult for licences covering small areas, such as single transmitter locations, while the benefits of changing to SURs for such licences will be smaller. Hence, we are minded to apply SURs initially to national or regional licences and not to more local assignments. Further, it would be simpler for licences in SUR form to be introduced in the first instance for new awards as this avoids the need to convert existing licences.
• How administrative incentive pricing might be applied to licences in SUR form.

Summary

1.30 In summary, we are consulting on a new method for stating necessary restrictions in spectrum licences. We designate this ‘spectrum usage rights’ (SURs). Licences in SUR form would restrict the permissible emissions into frequency bands and geographic locations of neighbouring users. This would both maximise flexibility while protecting neighbouring users from excessive interference. Licences in SUR form would be more flexible than existing licences and holders would be able to take advantage of the existing mechanisms, including spectrum trading, to negotiate changes with neighbours.

1.31 We are setting these ideas out at this stage for consultation on the concept of SURs. Depending on the comments received, we would then intend to consult further, as appropriate, on more detailed issues and on the scope for applying SURs to specific licence classes. The timing of this is dependent on the responses to this consultation.

The full document is available below

• Spectrum Usage Rights [pdf]
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