Introduction

This paper outlines the groups’ view on spectrum trading in response to the Agency’s consultation document.

2. The group supports the direction of the paper and considers spectrum trading to be an essential and inevitable progression in light of the introduction of spectrum pricing. There was concern that trading should not be introduced on a piecemeal basis but in the context of a wider strategy, however, a phased introduction was regard as sensible. There was a preference for deregulation rather than increased legislation of existing systems.

3. Strong agreement that market forces should be encouraged and regulation kept to a minimum. There was support for both simple transferability and flexibility to change the use of assignments, however, consideration must be given to:

• European compatibility
• Usage definitions remaining broadly consistent
• Minimum interference; maximum efficiency
• No hoarding
• Consistent licensing conditions
• National considerations (e.g. Defence)

4. The extent of the Agency’s current role was questioned and it was felt that 3^rd party involvement in the management of spectrum should be encouraged. The group was not in favour of additional legislation to enhance the current provision under the WTA, Competition Laws and Intellectual Property Laws to prevent anti-competitive behaviour. The group would prefer to see appropriate clauses in licences rather than legislative changes. However, a central database with all assignments and sub-assignments was recommended.

5. The issue of whether more complex trading modes should be permitted in different license classes was thought to be possible but it was considered too early to suggest the form these may take.

6. The group did not think it necessary to distinguish between licenses that had been auctioned and licenses subject to administrative pricing, the consensus was that all should be tradable. There were seen to be advantages in the existence of a secondary market in setting administrative prices, as trends could be reflected.

7. Still regarded as acceptable benefit for risk takers in a free market economy (as with land). Windfall gains were most likely to occur as a result of low administrative pricing initially, and that would not be justification for recovering gains.

8. It was felt that spectrum property rights should be introduced but preferably under the existing legislation. SPR could be assigned under the terms of the license and would be automatic once trading had assigned a value.

9. The group sited a new TV channel in New Zealand as one example of the positive use of spectrum trading. Although concerns were expressed by SMAG regarding the trading of spectrum purely for profit this was not considered an unacceptable activity by the sub group. It was felt that anti-hoarding conditions in the licence e.g. geographical coverage targets for UMTS licences could prevent this.

10. Market intermediaries should be allowed to evolve if they occur naturally.

11. There was agreement on a move towards fixed term rather than perpetual licences for trading purposes and that the duration ought to be 20 years with renewal expected if performance is good. Issues regarding security of tenure still need to be addressed and need to be clear in relation to the conditions of the license.

Spectrum Management Advisory Group
November 1998