BT - Response to the Consultation Document: 3.4 and 10 GHz: Scenarios For Spectrum Packaging and Delivery

Dear Steve

3.4 and 10GHz: SCENARIOS FOR SPECTRUM PACKAGING AND DELIVERY

This is BT's response to the RA consultation regarding delivery and packaging of the spectrum at 3.4 and 10GHz which became available as a result of the failure of Ionica. First and foremost we would wish to emphasize that we believe the RA is right to be consulting on this matter now. It may be that the responses received are inconclusive or that there is no clear agreement at this moment, but that should not deter the RA from seeking to involve industry and consult openly and in a timely manner about such matters in the future.

BT notes the key objectives against which the RA has indicated the scenarios should be evaluated, and would offer the comment that although in our view each of the scenarios offered tends to uphold these objectives to a greater or lesser extent it may be that they are not all achievable either currently or with such limited spectrum. The comments we offer here are made purely on the grounds of the matters related to the packages of spectrum in question and are not a reflection of views on the relative merits of the evaluation criteria in general.

Rather than provide an academic evaluation of each of the proposed scenarios, we believe it makes more sense to offer our views concerning the best use of the spectrum with a recommendation as to the most appropriate proposal to adopt. The spectrum available is not large and the UK experience so far of providing fixed wireless access, either on a national or regional basis, has not been overwhelmingly successful. In addition, BT has already discussed in detail with the RA and Oftel the fact that, with current technology, it is very difficult to balance input costs with expected revenue, although this was predominantly in relation to our 2GHz licence. We handed this latter licence back to the RA when it became apparent that it would not be appropriate to deploy the technology to the extent required under the rollout obligation.

In essence, we believe that the spectrum in question will be best used to provide infill in rural areas once it is clear where demand is and that there is technology to support it. We note that there are a number of initiatives underway which are aimed at encouraging both the take-up and availability of broadband in rural areas. Some of these are in the very early planning stages, others are more advanced, but the common thread running through them is that the aim is to balance (and even create) demand expectations with a realistic chance of being met. In our view it is vital that these two go together, and together they underpin the twin goals of ensuring that the rural areas are not disenfranchised in e-Britain while actively using the new technologies to breathe new life into those rural areas.

We believe that the RA should in fact adopt Scenario 4 and postpone the award of available spectrum. Some of those "countryside" initiatives can be further developed and the service provider or partner may be chosen using whatever criteria are deemed right for the specific circumstances of e.g. Devon and Cornwall ("the digital peninsula") or the highlands and islands. If during discussions it becomes apparent that a radio element would be of significant benefit in the delivery of communications infrastructure, negotiations can continue with a level of confidence that spectrum is at least potentially available to the successful Telecoms partner. The viability of the business case will by this stage have already gone through some rigorous and relevant testing, providing a greater level of confidence to all concerned; including the RA, the finance community and the company involved.

BT has given the matter of the redistribution of this ex-Ionica spectrum some considerable thought in a number of different contexts. It appears to highlight some complex issues which our industry faces in this and other areas. Particularly perhaps, in the context of the award and licence payment processes. The 3.4 GHz spectrum was originally awarded using the same process and in the same context as the spectrum now used by Tele2. It is difficult to see why it should be priced differently, especially in the event that the ultimate use is not inherently different. Similarly the spectrum awarded at 10GHz was originally awarded through a competitive tender involving both 10GHz and 2GHz. Other winners of this competition are still operational, although the extent to which the spectrum is being used by them varies enormously, including no use at all. The question arises here too then; should the licence fee be the same as for those licensees? In our opinion there would need to be clear and transparent justification for any differences. Additionally, there is the question of rollout obligations: if there are to be penalties related to failure to roll-out (or to reach certain levels) - and BT certainly believes that it is important that spectrum should not be hoarded or left lying fallow where others may be in a position to use it beneficially - then these penalties should be known at the outset and they should be imposed if they exist.

Insofar as the principle of first come first served can be closely aligned with our view of the potential most beneficial use of the spectrum (rural infill) and the award of spectrum to the most viable business case, we would support further exploration of this method. However, we do believe that in any event, that is whatever method of allocation is chosen, there should be a clear understanding that beneficiaries either use it or lose it. From experience we understand that it is not always sensible to put hard and fast dates or levels to such conditions and a level of co-regulation and discretion will probably be in everyone's' longer-term interests. Perhaps the industry, under the guidance of the RA could usefully consider a set of relevant criteria for use in such cases.

Although as we have said, we believe that in the current conditions Scenario 4 is the optimum solution, our views do not in fact preclude the possibility of Scenario 3. If the consensus were in fact towards this we believe that awarding the spectrum on a first come first served basis would have some merit here too. However, this is somewhat complicated by the recent 28GHz auction if and insofar as the use to which the spectrum would be put comes into the same category (loosely FWA but not for backhaul). Winners in that auction might feel particularly aggrieved if their needs could have been met by this spectrum unless a method can be devised whereby the users of this spectrum are required to pay an analogous price for it in some way, although this could arguable be through an appropriate level of annual licence fee. We would also have concerns if this option were chosen leaving insufficient spectrum to be of use, either in the context of breaching the rural divide or anything else.

We hope that you find the above comments useful in stimulating further debate and look forward to participating in this.

Yours Sincerely

Lorraine Flawn
BT Regulatory Affairs
4th Floor Dowgate Hill House
Dowgate Hill
London
EC4R 2SU