Oftel's five minute guide to…radio spectrum

What's spectrum got to do with Oftel?

Spectrum is important to Oftel for a number of reasons. On the legal procedural level, the DG has a duty to advise the Radiocummunications Agency (RA) on competition issues surrounding spectrum. Oftel has been involved in things like the 3G spectrum auction and, more recently, the 28 GHZ broadband wireless access auction. Oftel also has an interest because spectrum will be an important element of Ofcom's work, and once we are part of Ofcom it will have a major impact on the way we operate.

More importantly, however, Oftel is interested in the impact spectrum can have on competition in the telecoms market, and the benefits it can bring to consumers by offering new and innovative services. This is our primary interest, and it is the analysis of how spectrum impacts on the market that guides our thinking on this issue.

Lets talk money

The RA has estimated that spectrum adds around £20 billion per annum to the UK economy. It is used for the obvious (GSM and broadcasting), but also for 'radio leased lines'. BT uses radio point to point links as well as copper and fibre in its network and mobile operators use large numbers of radio based 'leased lines' to connect their remote base stations back to their switching networks.

The £20 billion breaks down as follows:

• GSM @ £8 billion per annum;
• Broadcasting @ £7.5 billion per annum;
• Radio leased lines @ £1.6 billion per annum;
• Private mobile radio (taxis etc) £1 billion per annum; and
• Satellite (not broadcasting) £2 billion per annum.

These figures show the importance of spectrum to telecoms services. Spectrum provides a possible method of increasing competition in markets by bypassing the entry barriers. For example, the use of radio in the local loop raises the prospect of allowing someone to compete with BT and the cable operators. Radio also has the possibility of covering areas that are too sparse to make copper or cable deployment viable.

Markets

A recent study by Professor Cave on the future of spectrum management in the UK concluded that we need to move to a more market based system. A system where people buy and sell, and make commercial decisions. For this to happen requires some changes to the way spectrum is licenced. The main change being the issue of a spectrum property right giving you the right to do what ever you want in your spectrum as long as you do not radiate more than a certain amount of power outside your 'plot'. As opposed to the current system that sets out what equipment you are allowed to use, and at what powers.

If we can come up with a flexible spectrum property right which would allow a market to work, and would still allow for the spectrum needed for public policy (like defence and public service broadcasting) then we should be on to a winner. However much work needs to be done. Oftel is already working with the RA, and in the near future Ofcom will need to input into this important debate.

The bottom line

The bottom line is that spectrum is important, and if we don't get the future management of it right the UK economy will lose out on huge potential efficiency gains, as well as denying consumers the opportunity to use new and innovative services that they really value. The current regime of central state control cannot cope with the increasing demand and pace of change of spectrum use. If the UK consumer is going to get the most from these significant benefits then we need to embrace markets to manage spectrum.