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The policy framework

3. What is spectrum liberalisation and how does it relate to spectrum trading?

Spectrum liberalisation allows greater freedom to decide how to use spectrum. Traditionally, wireless telegraphy licences have specified the use to which spectrum can be put and the means by which that spectrum can be exploited, including details of the services that can be offered and the wireless technology and its operating parameters. Spectrum liberalisation involves the reduction or removal of these restrictions.

Spectrum trading and liberalisation are distinct, though complementary, developments. Spectrum trading involves transfers of licence rights and obligations whereas liberalisation involves the reduction or removal of licence restrictions. It is possible to have trading without liberalisation and vice versa but liberalisation will be a significant additional reform that is expected to add significantly to the benefits from trading.

4. How will spectrum be liberalised?

Two mechanisms are available:

Licence Variation: this involves Ofcom removing licence restrictions on a case-by-case basis by varying wireless telegraphy licences individually in response to requests from licensees.
More Flexible Licences: this involves Ofcom removing restrictions from all licences in a class to make them intrinsically more flexible. This will allow licensees to make certain types of change to their use of spectrum without requiring prior consent from Ofcom.

5. Why two mechanisms?

Licence variation allows Ofcom to exercise control over interference and its related causes on a case-by-case basis and minimise the risk of undue interference. Whilst Ofcom will publish information on the criteria it will use to assess requests for licence variation (in the form of Technical Frequency Authorisation Criteria, see section 4) it will not be possible to have absolute certainty about what exactly will be permitted until Ofcom has given its decision on a specific request. This mechanism is also administratively more burdensome.

The second mechanism is superior to the first in that it provides more certainty and is administratively less onerous. However, implementation is more challenging as spectrum usage rights need to be defined generically in a way that is more technology and usage neutral while maintaining the necessary degree of control over interference.

6. What is the timescale for liberalisation?

Ofcom plans initially to adopt an approach focused on individual variation but to move to a more generic approach to variation in 2009 in the Business Radio sector where an advanced assignment tool will make it possible to allow greater flexibility. In the longer term, Ofcom hopes to undertake a more radical redefinition of spectrum rights and is consulting on this in the Spectrum Framework Review (SFR) published on 23 November 2004. Liberalisation in certain mobile bands is being addressed in the SFR: Implementation Plan, published on 13 January 2005.

7. How does spectrum liberalisation relate to Ofcom’s overall spectrum strategy?

Spectrum liberalisation is a key mechanism in Ofcom’s approach to managing the radio spectrum. Radio spectrum is a finite resource and Ofcom aims to secure its optimal use. Ofcom believes that liberalisation, combined with complementary policies such as spectrum trading, auctions and administrative incentive pricing, will help achieve that objective and deliver significant benefits for consumers and businesses by fostering competition and innovation.

8. What are the benefits of spectrum liberalisation?

Spectrum liberalisation will play an important part in securing the optimal use of the radio spectrum, maximising economic and other benefits. Ofcom believes that spectrum liberalisation will promote innovation, investment and competition in the supply of wireless services, opening up new opportunities for businesses to innovate and grow and giving consumers faster access to new services and lower prices.

A recent report produced for the European Commission in 2004 estimated that the benefits to the European Union of spectrum trading and liberalisation could amount to as much as €9bn per year (which would equate to about £1bn per year for the UK ).

Study on conditions and options in introducing secondary trading of radio spectrum in the European Community, May 2004

9. What are the risks?

Removing restrictions from licences has the potential to lead to an increase in interference that could lower the value of the spectrum. Ofcom will remain actively engaged in interference investigation and vigilant to this risk. The challenge is to maintain sufficient control to prevent undue interference and other related objectives and obligations whilst allowing as much flexibility as possible. There is also a risk that it might lead to loss of certain benefits from harmonisation and standardisation. This will be taken into account in decisions on individual liberalising measures.

10. When is liberalisation being introduced?

Liberalisation is being phased in from early 2009.

Phase 1 will involve individual licence variations across a range of licence classes in the Business Radio (BR), Fixed Wireless Access (FWA) and Fixed Links (FL) sectors.
Phase 2, planned for later in 2005, will extend liberalisation further in the Business Radio class and begin the process of making licences more generically flexible.
Phase 3, which may involve more fundamental reforms, will follow in due course following consideration of responses to the SFR

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