Introduction of New Pricing Arrangements

Introduction of New Pricing Arrangements Under the Wireless Telegraphy ACT 1998

Proposals for changes in fee arrangements for Public Mobile Services and On-site Private Business Radio (PBR), commencing in July 1998.

INTRODUCTION

This paper outlines proposals being considered by the Radiocommunications Agency, in its first steps towards the introduction of a new regime for the management and pricing of licences issued under the new Wireless Telegraphy 1998, when it comes into force on 18 June 1998.

It is proposed to introduce spectrum pricing in three stages.

	The first stage will be in July 1998 when the changes outlined in this document are implemented. New fees are being introduced for two services - public mobile telephony and PBR on-site systems. The current regime produces considerable distortions in the fees paid by mobile users and it is intended to address these first.
	The second stage is planned for April 1999. This will continue the process for mobile telephony and PBR on-site systems and commence implementation for other mobile services and point to point Fixed Links.
	It is planned that the third stage in 2000 will start to address all other licence sectors, although congestion of services is less of an issue for these sectors.

BACKGROUND

The Radiocommunications Agency in its consultation document "Implementing Spectrum Pricing" ( May 1997), invited comments on how a new system of administrative pricing of radio spectrum might be introduced in the areas of fixed services; private business radio and public mobile communications. The consultation formed part of a continuing dialogue between the Agency, industry and users on issues associated with the pricing of the radio spectrum.

Comments received in response to this consultation showed a wide recognition that the Agency needed to break away from constraints imposed through the present cost recovery pricing mechanism in order to introduce fairer prices that reflect the scarcity and value of the spectrum being used. It was acknowledged that the existing fee regime did not provide the Agency with the tools it requires to manage the radio spectrum and meet the demands for spectrum from the dynamic and growing radio sector; and that administrative pricing provides a means of promoting spectrum management objectives.

The proposals for spectrum pricing were regarded as a starting point for the evolution of a robust system of pricing radio spectrum. Correspondents believed that the Agency should consult further with industry in order to give further definition to its proposals in terms of scope and timing. The proposals in this paper reflect that further dialogue.

PROPOSALS FOR PUBLIC MOBILE SERVICES

One of the most significant distortions of the previous cost-based pricing regime has occurred where operators of cellular and PCN mobile telephony services pay proportionally far less for spectrum than other public and private users of mobile radio. Following detailed discussion between the Agency and the four operators, it has been agreed that as a first step, a flat rate increase of 120% shall apply. The proposed new fee is equivalent to between 3p and 8p per subscriber per week according to network, although it is unlikely that subscriber charges will be adversely affected.

PROPOSALS FOR PBR ON-SITE SECTOR

Current arrangements for on-site Private Business Radio (PBR)
Under the existing cost-recovery regime, on-site PBR licence fees are the same as those applying to wide area systems (which currently charge Ł140 for up to 10 mobiles, increasing by six steps to Ł7,000 for 1000 mobile stations; with incremental increases above these levels). The principle of charging according to the number of mobiles in use enables provides an equitable distribution of fees between small and large users. However, there is less relevance to on-site systems, which provides virtual exclusive coverage, albeit on a highly localised basis.

New proposals for on-site PBR
The proposed new arrangements being introduced through the administrative pricing of Private Business Radio will recognise that spectrum being used by on-site services is limited in its coverage (normally up to 3 kilometres from a given point) and provides highly localised coverage, permitting intensive frequency re-use. It is proposed to tackle existing distortions through:

	the separation of on-site systems from wide-area systems
	the separate licensing of each on-site system
	a flat fee levy for each on-site system in place of the current "per mobile" fee.

Progress following consultation with Industry.
Following its initial consultation, the Agency has taken part in further discussion with leading radio industry representatives. In these discussions the Agency has recognised that PBR on-site users are paying significantly higher charges than operators of PBR wide area systems, given the lower proportion of coverage area.

It is proposed, in July 1998, to introduce for a flat rate fee of Ł125 for each site ( embracing all systems on each site). It is anticipated that these changes will apply to current licence holders at the time of renewal. These new charging arrangements should enable most users of single on-site systems to enjoy significantly lower fees than those charged at present. However, those operators with more than one site, can expect their fees to increase as they will be charged Ł125 for each site.

FURTHER CONSULTATION

The provisions of the new Act which require a formal period of notice to give an opportunity for any final representations to be made on the regulations, before they are laid before Parliament. It is intended to publish the draft regulations for the first implementation in early May. Additionally, further consultation will take place as spectrum pricing is introduced as follows:

(a) Public Mobile Telephony.
Continued discussion with the operators on fee levels to apply in 1999/2000 (and later years).

(b) On-site Private Business Radio
It is proposed to take spectrum congestion into account in setting fees for 1999. The May 1997 consultative document suggested that fee increases should be focused on heavily congested areas. Further work carried out with the industry confirms that parts of London are heavily congested. Most on-site users will benefit from further reductions in 1999, although PBR on-site users in areas of heavy congestion could face increases as the Agency undertakes further investigation into the varying levels of radio congestion being experienced at different locations.

The May 1997 consultative document suggested fees of Ł200, Ł120 and Ł75 in heavily congested, moderately congested and uncongested areas respectively. Further details of the definition of the heavily congested areas, together with further proposals for fee levels, will be contained in the forthcoming consultative document on the 1999 fees.

Further details of the definition of the heavily congested areas, together with further proposals for fee levels, will be contained in the forthcoming consultative document on the 1999 fees.

(c) Other Mobile Services and Point to Point Fixed Links.
Proposals will be contained in a consultative paper to be introduced by the Summer.

(d) Other Licence Business Sectors
Consultative papers will be published later this year on the application of Spectrum Pricing in other licence sectors.

YOUR VIEWS

Please send any comments on the proposed flat rate fee of Ł125 per on-site PBR system and the increase of 120% for cellular and PCN operators by 10 April to:

Matthew Neal
Radiocommunications Agency
Wyndham house
189 Marsh Wall
London E14 9SX

Tel: 020 7211 0191
Fax: 020 7211 0118
Email: neil.marr@ra.gsi.gov.uk

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