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29|09|04

Ofcom consults on new mechanism to price licences for wireless communications services

Ofcom today published proposals for the future pricing of Wireless Telegraphy Act (WT Act) licences. The proposals are aimed at ensuring that radio spectrum - the frequencies used for hundreds of different wireless communications services - is allocated to those people and organisations that value it most.

The spectrum is a finite and scarce resource, vital to the UK economy. Providers of a broad range of wireless communications services – from television and radio broadcasts to radar and mobile phones – must hold a WT Act licence.

Section 3 of the Communications Act 2003 requires Ofcom to secure the optimal use of the spectrum and to secure a wide range of electronic communications services throughout the United Kingdom. Ofcom is also required (under Section 2 of the Wireless Telegraphy Act 1998 and Section 154 of the 2003 Act) to have regard to present and future demand for use of that spectrum for wireless telegraphy.

Later this year, Ofcom will outline its overall approach to spectrum management in the Spectrum Framework Review. However, it has already made clear its intention to adopt a more dynamic, market-oriented approach. Today’s consultation is another step toward this goal.

An important part of these plans is the continued application of Administered Incentive Pricing (AIP). AIP helps to encourage efficient use of the spectrum by providing a financial incentive for WT Act licence holders to utilise their spectrum allocation fully.

Today’s proposals take account of the findings of an independent report by Indepen, Aegis and Warwick Business School along with further research by Ofcom which reviewed the case for AIP and the appropriate level of prices.

Today’s proposals

Many licence holders will see no change in their WT Act licence fees, although others will be affected as follows:

• Fixed Wireless Services - Point-to-Point Microwave Links
• Some increases
• Programme Making and Special Events
• Some increases
• Business Radio
• Some increases affecting certain national and regional licences.
• Television and Radio Broadcast:
• No immediate changes.
• However, Ofcom is consulting on outline proposals for ways in which AIP could be applied to television broadcast spectrum in the future. For example, AIP could serve as a valuable incentive for broadcasters to achieve switchover to digital transmission in line with Government plans. Further consultation will be carried out in this area before any changes are introduced.
• 2G mobile telecommunications
• No change.
• 3G mobile telecommunications
• AIP does not apply here as these licences were acquired through an auction.

The closing date for responses to the consultation is 3rd December 2004.

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