Proposals For The Licensing Of Radio Spectrum At 28 GHz

Patricia Hewitt, Minister for Small Business and E-Commerce, announced on 19 April 2000 proposals for licensing BFWA services at 28GHz. The Radicommunications Agency has a commitment to deliver, by the summer of 2000, the framework to licence radio spectrum at 28GHz for delivering Broadband Fixed Wireless Access (BFWA) services. Further spectrum at 40GHz will be made available shortly after.

This paper summarises the development and consultation work which the Agency has taken forward jointly with other Government Departments and with Industry in order for the Minister to arrive at these proposals which will facilitate the speedy award of spectrum and introduction of new innovative radio services. The Radiocommunications Agency invites comments on the proposals set out below.

	Licences are to be awarded by auction on a regional basis with three licences per region, each licence containing a forward and return (duplex) channel to send and receive data. Further market analysis is being conducted to determine the optimum number and sizes of regions to be offered.
	The opportunity to bid for a licence will extend to all interested parties.
	Participants may bid for only one licence in each region but those wishing to offer contiguous services regionally or nationally may bid in any number of regions.
	Licences will be issued solely for the provision for BFWA services. This may include supporting the infrastructure of BFWA services but will not extend to supporting other services or technologies.
	The licences awarded will not only permit, but will actively encourage the effective use of radio spectrum for BFWA services through a ‘use it or lose it’ condition so that insufficient or non-use of allocated spectrum may lead to its recovery by the Radiocommunications Agency.

On 14 January 2000, Patricia Hewitt, the E-Commerce Minister, announced the Government’s intention to make licences for the frequency range from 27.5GHz to 29.5GHz, commonly referred to as the 28GHz band, available in the summer of 2000 and for the frequency range from 40.5GHz to 43.5GHz (the 40GHz band) in the autumn. Initial preparations have therefore focused on 28GHz and analysis of 40GHz has now begun. Comments from all parties were taken into account in developing the proposals discussed below.

Market analysis has confirmed the Agency’s views that demand for broadband access is increasing rapidly in all sectors of the economy. This demand could be satisfied by a number of competing technologies such as cable, fibre, satellite links and ADSL. BFWA will compete directly with these technologies. However, some of these broadband technologies are not yet available and some will never become available in all parts of the country. Marketing, financial and economic modelling has scoped the likely size of the market for BFWA at 28GHz, assessed the position from the bidders’ perspective and informed a licensing packaging proposal which meets the objectives to:

	secure the timely and economically advantageous development and sustained provision of BFWA services throughout the UK, for the long term benefit of UK consumers and the national economy
	utilise the available BFWA spectrum efficiently
	promote early and effective competition for the provision of broadband access services
	subject to the above objectives, design a licensing award procedure which is best judged to realise the full economic value of the spectrum to consumers, UK industry and the taxpayer.

Results from the market assessment and modelling demonstrate that the market for current BFWA technology is likely to be best suited to serving smaller and medium sized companies in suburban areas, though, of course, successful applicants may address other potential markets also.

There are preliminary policy issues that need resolution irrespective of the procedure to be followed. Once they have been resolved, it is felt that an auction is the most efficient way of allocating radio spectrum, where the market determines the price of the spectrum which then goes to those that value it most.

Industry consultation has drawn concerns that auctions may lead to higher, unaffordable prices for licences. A BFWA auction will not generate revenue of the same order of magnitude as the current 3G auction. The prices that bidders are willing to pay will be dependent on a number of factors including their estimates of the size of the market, costs in installing the technology, the competition and the rights and obligations conferred by the licence. BFWA is an unproven market with an unproven technology and alternative market analysis scenarios show a wide range of possible market share dependent on the timing of availability of competing technologies. With the inherent uncertainties in the valuation of the market, an auction route is considered to be the fairest by which to allow Industry itself determine the value of licences, rather than relying on the Agency to estimate the likely outcome of an auction in setting administrative prices to be imposed following a comparative selection.

Additionally, there is a need to introduce this technology in the shortest possible timescale. The experience of overseas award processes suggests that a comparative selection (beauty contest) would take longer to run than an auction, because of the time needed to prepare and assess applications. It is felt also that the clarity and transparency of auctions make them less vulnerable to the threat of legal challenge which could unhelpfully delay the licence award process.

Noting the above discussion, the Government has therefore decided to offer licences in the 28GHz band by an auction in September 2000.

The number and size of licences are connected. The spectrum available in the 28GHz band for BFWA is 672MHz.is two 336 MHz paired blocks. (Paired channels allow communications in two directions.) Responses to consultation have varied on bandwidth requirements but most have favoured either 2 x 56MHz or 2 x 112MHz channels per licence (to enable two way communications). Either four "duplex" channels of 56MHz (allowing for 28MHz guardbands to prevent interference between adjacent channels in the same area) or three "duplex" channels of 112MHz could be allocated. The wider bandwidth has two main advantages. It gives operators the flexibility to co-ordinate use with each other in order to avoid interference. This enables best use to be made of spectrum that might otherwise be sterilised unnecessarily for inter-operator protection, thereby encouraging more efficient spectrum use. There is also an advantage in terms of service provision – put simply, the wider the channel the more customers can be served and/or faster data rates provided.

In order to ensure that there is effective competition both between BFWA operators and with operators of competing technologies (i.e. ADSL and cable modems) there should be a minimum of three licences in any licence area. This will mean that, for example, should an incumbent telephone and cable operator in a region each win a BFWA licence there would still be an opportunity for another competing company. Market analysis suggests that the number of viable operators supportable within a region will be limited to no more than three or four operators, an opinion shared by the industry consultative group. Encouraging the early development of services, recognising the advantages of wider bandwidths and making the most efficient utilisation of the spectrum available points to three equal licences in a region, each of 2 x 112MHz. However, promoting effective competition in the market might equally point to differentially sized licences with the reservation of one or more packages to encourage new entrants. Views are particularly sought on this issue.

In response to a questionnaire issued in January, the responses from Industry suggested several factors which ought to be taken into account in defining licence areas, including propagation, topography, population, business viability and co-ordination requirements. Technically, BFWA is a localised service with radio signals at 28GHz travelling on average 5km. Economically, licence coverage areas must be at least regional in character to allow the radio spectrum to be used efficiently, minimise co-ordination problems between neighbouring operators and provide operators with commercially viable business areas. Operators may have a variety of requirements for licence areas perhaps ranging from small companies with limited financial resources that would like to be able to develop services in small regions, to large companies that want to maintain or establish a national identity in providing BFWA services. Regional licensing will maximise the opportunity for smaller companies operating at a local level. Larger operators wishing to build a national service will be free to do so by applying for and aggregating areas.

In deciding how to define licence regions there is a need to balance spectrum management, commercial viability and competition considerations. Different operators may use the same frequency in adjacent licence regions and, in order to avoid interference, will need to co-ordinate their operations at the borders. Larger licence coverage areas reduce the overall need for co-ordination. Most potential operators consulted indicate they would opt for regional to large regional coverage to minimise the burden and efficient spectrum management also points in this direction. However, a larger number of smaller areas might encourage smaller local companies to bid for licences, to provide a focussed service in their area of operation.

Market analysis suggests that the market for BFWA services may support a limited number of companies and the smaller the licence region the less attractive will be the business opportunity – too small a region will seriously limit the viability of three operators. Conversely, competition considerations may point to smaller rather than larger.

Balancing these conflicting considerations suggests that England might be divided into between ten and twenty regions, plus Scotland, Wales and N. Ireland as single individual licence areas. The Channel Islands and Isle of Man would be licensed as separate entities, subject to the confirmation of respective authorities that they would wish to deploy such services within their territories. Proposals to define viable regions based on analysis of the market information will be put to the industry consultative group for consideration by the end of April 2000.

Scope of services

A primary objective is to make available the 28GHz band for the early introduction of BFWA services and in principle it is desirable to restrict operators as little as possible. However, some companies have argued that the ability also to provide links to support other wireless telecommunications services alongside BFWA would enhance the business opportunity and encourage the roll out of services. There is concern that this would encourage bids for licences in order to acquire spectrum to resource these infrastructure fixed links, possibly to the exclusion of providing BFWA in a timely manner, if at all. Depending on the technology to be resourced, the spectrum available to an operator may not allow the provision of both links and BFWA. It is therefore intended to restrict the licensees to using the spectrum solely for BFWA and, where technically feasible, associated BFWA infrastructure links.

There exist already providers of broadband access via other competing technologies to BFWA and it is seen as important to encourage new entrants to promote healthy competition on pricing and speed of rolling out services. Many respondents to the consultation document suggested there was a possibility that an incumbent operator might seek to acquire licences for strategic reasons, in order to prevent competition rather than for commercial development.

This threat will be addressed through the imposition of a ‘use it or lose it’ (UIOLI) obligation on all successful applicants. This could be based on evidence that licensees had constructively built out services, without setting specific coverage targets. This would address the danger of incumbents strategically applying for spectrum, but it is also justifiable to place it on new entrants to encourage early and effective use of the spectrum resource. It would in addition guard against the possibility of speculative bidding for licences. The intention is therefore to design a suitable licence condition that guards against spectrum hoarding while avoiding unnecessary interference with legitimate commercial strategies.

Following the announcement of the proposals the Government is required by the EC Licensing Directive to allow interested parties to express their views, since it will be limiting the number of licences to be granted. Four weeks will be allowed for this consultation, closing on 19 May 2000, to consider whether anything emerges that points to a modification of the proposals.

Comments in writing, indicating any parts which respondents wish to be treated as confidential, should be addressed to:

Cliff Mason
Broadband Fixed Wireless Access Section
Radiocommunications Agency
11B/21D Wyndham House
189 Marsh Wall
London E14 9SX

e-mail: cliff.mason@ra.gsi.gov.uk

Details about BFWA are regularly updated on the Agency’s website at www.radio.gov.uk

Responses to "Proposals For The Licensing Of Radio Spectrum At 28 GHz"

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