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Annex A - Experience of Spectrum Trading in Australia and New Zealand |
Following a 1990 report by the Bureau of Transport and Communications Economics, which identified widespread inefficiency in many aspects of spectrum management in Australia and a 1991 report on the Management of the Radio Frequency Spectrum by the House of Representatives Standing Committee on Transport, Communications and Infrastructure, the Australian administration introduced the Radiocommunications Act 1992 to reform spectrum management.
The Act introduced spectrum pricing and also provided for the creation of spectrum licences akin to property rights.
After considerable development work on engineering and legal aspects of spectrum property rights, the Spectrum Management Agency (SMA) published a discussion paper in March 1995 on Implementing Spectrum Licensing. This put forward three approaches. The favoured approach sub-divided a given band into standard blocks, which individual licensees could aggregate through the market to cater for their preferences.
These three dimensional blocks were defined geographically by parallels of latitude and meridians of longitude and by a standard bandwidth in frequency. Boundary conditions were set in terms of interference levels based on a sophisticated terrain model and theoretical calculations, rather than field measurements, with ownership of blocks recorded in a computer database. The smallest indivisible unit of spectrum space is called the standard trading unit . Conceptually, the standard trading unit is four dimensional, the extra dimension being time, but four dimensional space is difficult to visualise so the temporal dimension is usually ignored to aid practical understanding.
The SMA created a spectrum map grid covering the entire country. The cells, of which there are 21,998, come in three sizes ranging from 3 degrees of arc to 5 minutes of arc, depending on population density. Each spectrum licence consists of an aggregation of standard trading units. Units may be aggregated to cover a larger area or to give a wider bandwidth or both. Licensees can also sub-divide their spectrum access into narrower channels or smaller geographical coverage.
Within the spectrum licence, the licensee is free to deploy any technology, device or antenna on any site provided that unacceptable interference is not caused to other users.
The Act requires spectrum licences to be assigned by a market-based mechanism, such as an auction, tender or predetermined or negotiated price.
There is a programme for converting bands to spectrum licensing but not all spectrum is considered suitable for this, for example if there is a high degree of sharing or the band is subject to international co-ordination or is used for broadcasting. In such cases, apparatus licences, which permit the use of a particular technology and type of equipment, are being retained. These are also tradable.
Both types of licence may be traded or sub-let but only spectrum licences can be sub-divided or aggregated.
The Australian Communications Authority (ACA), formed by a merger of the SMA and the Australian Telecommunications Commission, maintains registers of spectrum and apparatus licences. The only exclusions are for reasons of national security.
The ACA is required to include in the register the name and address of the licensee, the date of issue and expiry of the licence, licence conditions, any authorisations by the licensee of others to operate equipment under the licence, any details required to be recorded about transmitters or receivers and may include any other details it considers to be necessary or convenient.
The regulatory framework is set out in the 1992 Act and regulations made under it. When the two parties have agree on the transaction and price, details have to be registered with the ACA, which charges a small administrative fee. The ACA does not have a right of veto but ACA does apply loading rules to mobile radio to facilitate orderly access and prevent speculation.
Competition policy is separately administered by the Australian competition authority under general competition legislation, which treats spectrum as an asset within the meaning of the legislation so that its acquisition may be blocked if it would lead to a significant reduction of competition in a significant market.
The ACA does not collect data on spectrum trading. Apparatus licences are traded routinely but not in large volumes. The first spectrum licences in the 500 MHz band were issued less than 12 months ago and the owners are not yet thought to have seen much need for trading.
A scheme of tradable spectrum property rights was adopted in late 1989 following the enactment of the Radiocommunications Act 1989. A programme to convert portions of the spectrum from apparatus licensing to property rights followed. Apparatus licences are still being issued for most of the radio spectrum, including land mobile and fixed bands, but the New Zealand government aims to bring all fixed, mobile and broadcasting radio spectrum progressively under the new regime.
The new system involves the creation of management rights and licence rights. Management rights do not confer the right to transmit but the manager is able to issue licences to itself or others for spectrum within its management. Holders of management rights pay no annual fee for those rights but will have paid through a tender process for the management right. They also have to pay a fee to the Ministry of Commerce (MoC) for any licence rights they issue to themselves and others.
Management rights can be aggregated or sub-divided. They are traded on a similar basis as land and can be mortgaged. The market has been facilitated by the establishment of a register of spectrum rights.
The MoC can retain management rights as Crown property and issue licence rights (normally by tender and now by electronic auction through the Internet) or sell the management rights to the private sector. A private sector holder of a management right can sell it or retain it and sell the associated licence rights.
When management rights are created, existing apparatus licences in the band are entitled to a transitional right, which may be either a 5-year spectrum licence (without payment) or a 20-year spectrum licence (for which a fee is charged). Management rights are defined in terms of bands on a national basis. Licence rights are similar to individual assignments, are defined in terms of transmitter sites and prescribe technical parameters. Transfer of ownership of a management right does not affect the subordinate licence rights.
Management rights are protected by adjacent frequency emission limits to define the strength of out-of-band emissions and by protection limits defining the protection that the manager can expect within the management right boundaries. Licence rights have unwanted emission limits and maximum permitted interference limits. A defined floor level of -50dBW for noise is set in the legislation. Management rights holders are not responsible for ensuring their licence rights holders comply with the interference limits. Licence rights are legally enforceable and conciliation and arbitration processes are being established to resolve disputes. If these fail, the courts provide a last resort.
The new regime was applied first in broadcasting where the perceived need for reform was greatest. Spectrum trading is considered to be working well and, in combination with spectrum pricing, to have provided a degree of flexibility in spectrum utilisation that would not have occurred under a purely regulatory regime. For example, when frequency bands used for television broadcasting were converted to tradable spectrum rights in 1995, there was little expectation that there would be any new services to add to the three existing networks. However, it proved possible to create a fourth television channel covering 70% of the population.
Long-term spectrum licences are deemed to be an asset for the purposes of the New Zealand competition legislation. The general competition law therefore applies to spectrum trading and may be considered by the competition authority to determine if market dominance is achieved or strengthened by a proposed trade. Amending legislation currently under consideration would apply specific limits on spectrum acquisition at the time of initial sale by the Crown. Subsequent transactions would remain subject to general competition legislation.
The MoC holds the national frequency register, which is the database of government and civil use. Defence and police assignments are excluded. The public have over-the-counter access to spectrum assignment information and to the register of spectrum rights.
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