Vodafone's Comments on the Radiocommunications Agency Strategy Document, "Mapping the Future of Convergence and Spectrum Management"

18 August 2000

Laurence Green
Radiocommunications Agency Strategy Unit
11B/20C, Wyndham House
189 Marsh Wall
London
E14 9SX

Dear Mr Green

Thank you for the opportunity to respond to this consultation. The initial section of our response makes some broader comments. The two subsequent sections deal with main questions posed in the report and the recommendations for action. I will send this document to you by email, fax and in hard copy. I am grateful for the extra time the RA has given us to respond to the consultation.

Overall Comments

Radiocommunications Agency Objectives

The recommendations for action in this report are aimed at achieving the objectives for radiocommunications. We note that the RA’s headline objectives are stated as being to manage the spectrum so as to promote the creation of wealth, competition and choice. The main objectives of regulators for related sectors vary to some extent. For example, OFTEL’s main aim is for customers to get the best possible deal in terms of choice, quality and value for money. The ITC’s mission statement says that it exists to promote and safeguard the interests of all viewers of commercially funded television, while fostering a dynamic and innovative market place. Given the move to a more converged communications environment, we think it is important that the full range of public bodies responsible for the communications sector ensure the coherency of their objectives. Otherwise proposed courses of action for certain segments of the market may not take fully into account their impact on the whole sector. Regulation in any one area of communications will increasingly have the potential to affect investments and benefits in others.

Spectrum

We support the publication of planning and assignment databases and the suggestion that cellular operators should be able to self-assign spectrum. We also support the principle of spectrum trading as long as hoarding can be avoided and this does not unfairly benefit those who did not originally pay for the spectrum or otherwise distort the market.

When spectrum allocation is being considered we hope the RA will take great care to maintain a level playing field for competitors. In this way the best companies will manage to succeed in the market and provide most services to customers, and not those companies who have been able to leverage an unfair competitive advantage in the form of cheaper spectrum.

We also hope that the RA will not consider taking back management control of spectrum that has been auctioned as we believe that this would undermine investors’ confidence and consequently benefits to the economy. We anticipate that when the initial terms of mobile operators’ licences expire that mobile operators will be able to renew the licences.

Licence exempt frequency bands can improve the efficiency of assignment processes. The risk with licence exemptions is that it is much more difficult and slower to re-farm that spectrum. We believe that technologies used for licence exempt applications should include a method for minimising interference in an unmanaged environment. For example, frequency hopping.

We would like the RA to ensure that, should any grants be used to help to clear spectrum, the grants do not amount to an effective subsidy and an unfair competitive advantage for those in receipt of them. This could happen if recipients are not forced to clear the spectrum rapidly enough.

Terminology

We note that there is no generally accepted definition for some of the key terminology in this field, especially: Internet-related terms such as ‘internet services’ and ‘TV over the internet’; ‘convergence’; ‘packet services’ and ‘multimedia’. We comment on some of these terms in our response to this consultation. We feel it would be useful if in future they are defined, or used only with care to avoid confusion.

What new demands might convergence place on the use of spectrum over the next ten years?

In the immediate future we anticipate that there will be tremendous growth in the demand for spectrum especially as mobile networks bring new services on stream. It is less certain however what the demand will be in the medium to long term. A factor here is that spectrum efficiency will increase due to technological advances. There may increasingly be a demand for spectrum by niche providers of specialised services and from owners of licences to be able to sell ([and lease)] excess spectrum or to buy additional spectrum. While we agree that there are no certain answers to the questions posed in section 2.1 on page 13 of the report we have attempted to address them as a way of dealing with this question about the effect of convergence.

What will be future traffic levels from machine-to-machine telecommunications?

We assume that machine-to-machine telecommunications excludes interactions which are deliberately initiated by people (such as downloading e-mails to read them immediately). We believe that this segment of the market will grow substantially, but it will not be a major factor in spectrum demand. This is because the majority of communications are likely to transfer relatively little information (e.g. stock control of vending machines) or to have modest requirements for delivery delay, and can use surplus capacity in the network (e.g. background delivery of e-mails).

How many people will want to watch television, or video-on-demand, on their mobile phones? Will they play interactive video games requiring symmetrical high bandwidth?

Initially, due to the cost of the services and factors such as battery life, we imagine that the demand for services over small mobile communications devices will be for short visual clips only. However, it seems possible, once the technology is in place, that customers might usually demand to see as well as to talk to others via their mobile devices.

The future demand for mobility for watching television or video-on-demand is less clear. Portable television sets, the same size as "walkmen" audio players, have been available for some years but have not become anything like as popular. New display devices are being developed, but it is not yet clear if they will gain consumer acceptance.

The games played will vary according to the practicality of playing them on particular devices. The bandwidth needed to play a game depends more on the way that the game functions than the complexity of the displayed image. If several users play games on different devices, with the software installed on each of them, the connection between them would only need to be low bandwidth.

What will happen to demand for traditional, unidirectional broadcast TV as compared with interactive TV and TV over the Internet? How will the Internet be integrated with traditional broadcast TV?

The distinction between broadcast TV, interactive TV and internet TV needs clarification. However, we anticipate there will be growth of video-on-demand and continuing demand for scheduled broadcast television. We have no view currently on the likely future demand for TV over the internet, but this will probably depend on the quality of images and the cost to view.

Interactive TV is a single service that uses a broadcast forward channel and a telecommunications return channel. For wireless provision of interactive TV, reserving dedicated spectrum for the return channel will probably not result in efficient use of the radio spectrum.

It is important to distinguish the technical requirements to achieve spectrum efficiency in traditional broadcast services, from those needed for offering video-on-demand. Digital broadcast technology using OFDM achieves a vast increase in spectrum efficiency compared to analogue broadcasting. This is partly due to the ability of multiple transmitters to use a single frequency to deliver the same content to a wide area. The requirement to deliver different material simultaneously to different users leads to the need for a totally different network.

Will all telephony services via wireline and wireless access become packet-based and integrated with other services such as e-mail and voice mail?

It is important to distinguish between a service, and the means used to deliver it. The user generally does not mind how a service is delivered, provided it meets his expectations.

We expect that the trend towards packet based transport will continue, especially in the fixed network. However, within the radio access network it will continue to be necessary to treat different services separately, in order to meet quality-of-service targets (especially delay), while making efficient use of the spectrum.

Most existing services other than moving images can be catered for by narrowband as can location services and m-commerce. High bandwidth will be used for such things as moving images. However we do not imagine there will be many restrictions on the services that can be obtained based on geographic location.

Networks will have to be open or they will lose market share. Different applications will warrant different standards – the example of video-on-demand is described above.

Internet-based services are likely to achieve very high levels of penetration. They will become increasingly customer friendly and accessible to all. We do not foresee long term problems with customer inertia. It is likely that there will be a segmentation of the services that are currently internet-based, according to the type of device on which the services will be used.

What changes in spectrum management will be required to facilitate the development of new convergent services over the next ten years?

This section deals with the recommended actions in section 5.2 of the report.

Allocation

Getting the implications of convergence for allocation policy on ITU and CEPT agendas

The RA has already been successfully in including started pushing the implications of convergence for allocation policy on to the agenda for the next World Radio Conference in 2003:

Agenda item 1.21:
"to consider the progress of ITU-R studies concerning the technical and regulatory requirements of terrestrial wireless interactive multimedia applications……..with a view to facilitating global harmonisation".

This subject is also included on the preliminary agenda for the following World Radio Conference (WRC), with a view to identifying appropriate spectrum for converged services.

The subject is therefore already on the agenda within ITU and will inevitably be placed on the CEPT agenda through European preparations for ITU meetings.

The terms "convergence" and "multimedia" can be widely interpreted. It is therefore possible that proposals could be made at the next two WRCs thatwhich are not consistent with UK objectives. We believe that the UK will have to be active in leading and shaping the work in ITU-R and CEPT on these issues to avoid this.

Convergence and multimedia are significant areas for large parts of UK industry, on which we would want the RA to consult fully as its thinking develops. We note that the current RA consultation bodies are based around the existing ITU service categories. Given the move away from categorisation according to service categories, new consultation bodies or a review of the system for consultation may be appropriate.

We agree that there is a need for a review of the existing ITU definitions. We believe that a revised method for categorisation needs to take account of the way that any given radio communications system makes use of the radio spectrum, and not only the nature of the transmission. For example, CDMA can be used either for high capacity cellular networks or for low power uncoordinated systems, but the two uses could not share the same spectrum. We therefore suggest that the following three broad categories be considered:

1/ Broadcasting
This is defined in its generic sense as delivery of common content to multiple users, and is not restricted to delivery of entertainment by radio and television.

2/ Co-ordinated communications systems
This would broadly comprise communication systems that are currently subject to individual licences. Such systems typically have requirements for defined quality of service, either through regulatory provision or commercial considerations. Cellular is an example of such a system.

3/ Uncoordinated systems
This would broadly comprise communication systems that are currently subject to class-licenses or are licence-exempt. Quality in such systems is typically "best effort" and is dependent on other users. DECT is a relevant example. The radio-communications technologiesiques in these three categories use different techniques to make efficient use of the radio spectrum in different ways. But this These techniques may not always be effective if different categories share practical if they were to occupy the same spectrum, and inefficiencies in spectrum use might result. In some circumstances, systems from different categories might be able to share spectrum, but this would need to be considered on a case-by-case basis, taking their individual characteristics into account.

Identifying experimental bands above 2GHz that might be allocated to bit transport on a CEPT-wide basis

It is suggested that experimental bands above 2GHz for bit transport should be identified. We understand that these could become could become permanent allocations. There is a tremendous risk of severely undermining the enormous investments made in 3G licences through such allocations if the cost of the new bands is too low, and the cheap spectrum can be used to compete with 3G licencees. It may be that an auction alone would not be a fair way of allocating such bands. It might, for example, be fairer to impose a minimum time period before new spectrum of certain frequencies is released.

If the total market for 3G services is not great enough, then the prices obtained at auction for new spectrum may be far less. The amounts obtained might also be significantly reduced if the frequencies are allocated in the near future. This is because potential investors might worry that they, like the 3G operators, could have their investments undermined by the early allocation of additional spectrum. The lack of significant upfront costs might, nonetheless, enable operators using the newly released spectrum to heavily undercut the prices of 3G licencees. This is because the new operators would not have to service huge licence debts.

The Information Memorandum for the UK auction clearly stated the intention of the UK Government to make the extension band identified at WRC 2000 available for IMT-2000. The 3G operators and the RA were [clear?] that the extension bands were to be made available for IMT 2000. Operators depended on this when making valuations of 3G licences. It would hugely undermine investors’ confidence if the extension band was considered for other purposes. We would strongly urge the Government to keep the extension band for IMT-2000.

Seeking alignment of allocation definitions used in spectrum policy and the ITU RR with the service definitions in UK telecoms and broadcasting legislation To make efficient use of the spectrum, it is important that the systems, operators and/or users sharing an allocation make use of it in a way that is compatible. It is not apparent why the service definitions in UK telecoms and broadcasting legislation will always give rise to usage which is compatible in terms of spectrum efficiency.

Spectrum Release

Review opportunities for release of spectrum for wide area mobile uses in the 2-5GHz range and for wireless local loop access and short range uses above 5GHz

We make the same points here as for the answer to the recommendation on the allocation of experimental bands above 2GHz.

The breakpoint of 5GHz between wide area and WLL/short range is appropriate for the UK. But the threshold would probably breakpoint may need to be lower in less developed or lower population density countries, where coverage of large areas with few users is required.

Where practical, retain and/or take back management control of bands in the frequency ranges that may need to be made available for new uses

If management control of auctioned spectrum were retained or taken back, current and future investments would be put at risk. We therefore hope that the RA would not consider retaining or taking back control of auctioned spectrum.

Continue the highly productive dialogue with the military authorities and other public sector users concerning the potential for further sharing of spectrum with private sector applications As the military authorities are users of the spectrum, there is an inequality between "taking back management control" for the civil users, and continuing a "productive dialogue" (and only sharing) for the military.

Assignment and licensing

Adopt modified administrative procedures

We strongly support the suggestion that cellular operators should be able to self-assign spectrum. We also support the publication of planning and assignment databases. Making services frequency bands licence-exempt can improve the efficiency of assignment processes. However, it does carry a risk in the longer term because it is far more difficult and slower to re-farm spectrum which is licence-exempt than whenre users are known. All technologies for licence-exempt applications should include a technique to minimise interference in an uncoordinated environment (such as dynamic channel allocation or frequency hopping). These are generally most effective when a frequency band is dedicated to a single technology, because the interference minimisation technique can be optimised. On the other hand, if a frequency band is made available for a category of use, this enables the market to choose the most effective technology and "future-proofs" the use of the spectrum by facilitating evolution. More research is needed into the most effective way to make spectrum available for licence-exempt applications. To minimise this problem, where possible, spectrum should not be made licence exempt for a single technology but for a category of use. Systems should employ a means of interference minimisation that is not technology-specific. This will help to "future-proof" the use of the spectrum.

Adopt a package of market strategies, involving spectrum trading and re-farming through newcomers buying out incumbents

We support the principle of spectrum trading provided that spectrum hoarding can be avoided, and that this does not unfairly benefit those who did not originally pay for the spectrum or otherwise distort the market. The combination of an absence of free market control of all spectrum and the auctioning of spectrum means that the RA’s responsibilities become much more onerous if trading is also to be allowed. In this environment the RA’s decisions with respect to spectrum allocation will have dramatic implications for investment and market players.

Where the market strategy is not feasible, consider the use of selective government grants to improve spectrum efficiency and speed up refarming where this offers value for money

Where grants are made available to clear spectrum the danger arises that those in receipt of them could be receiving a subsidy and hence gain an unfair competitive advantage. This would occur if the recipient of the grant was not forced to clear the relevant spectrum rapidly enough. We would therefore like the RA to ensure that if grants were made available, no recipient would be given such an unfair advantage.

Yours sincerely

[signed]

Patrick Ward UK Regulatory Affairs Director

Vodafone

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18 August 2000 Vodaphone