Appendix 6 - Public Telecommunication Services

Your views on the proposals set out in this document are sought by 31 December 1999. Comments should be sent to the address below. It would be helpful if lengthy written documents could be sent via email or on disk in Word 7:

Contact Details:

Cliff Mason
Radiocommunications Agency,
Wyndham House,
189 Marsh Wall,
London,
E14 9SX.

Email cliff.mason@ra.gsi.gov.uk

Fax: 020 7211 0117

APPENDIX 6: Public Telecommunications Services

Mobile Operators

Introduction

1. The aims in this third stage of spectrum pricing implementation is to further migrate the levels of pricing of the wide range of public telecommunications services already addressed in the previous two phases towards equivalent relative levels for the amount of spectrum utilised, adjusted by appropriate modifier scaling factors to address particular spectrum or sector issues.

2. Additionally, proposals are offered for the pricing of categories not covered in the earlier phases such as cellular telephone services in the Channel Islands and the Isle of Man and Remote Meter Reading services. Fixed Wireless Access is covered in Appendix 1 as a separate topic.

3. As previously, PTN will hold discussions both individually and collectively, with the Public Mobile Communications operators to agree the application and value of appropriate modifiers. The Mobile Services Committee will discuss whether there is a need to reconvene the group to review the existing modifiers as well as whether any new modifiers need to be introduced.

Licence Classes

4. The classes to which it is proposed to apply spectrum pricing principles for the year 2000/01 include:

i) Public Mobile Operator class, which covers:

Cellular and PCN Radiotelephones;

Public Mobile Data;

Public Paging;

Public Access Mobile Radio (PAMR) including Public TETRA.

ii) Common Base Stations (CBS) licence class:

Existing CBS services including congestion factors;

New CBS services in new spectrum such as Band 1 and Band III.

iii) Licence classes being considered for incentive pricing proposals:

Fixed Wireless Access (formerly Radio Fixed Access); (see Appendix 1)

iv) Other Public Telecommunications Services

Remote Meter Reading

Spectrum Allocation for Public Services

5. Spectrum for Public Mobile Networks is allocated on an exclusive basis for a local area, regional, national or UK-wide coverage. With the exception of local area common base station services, the allocation procedure is normally through public open consultation/competition which is managed jointly by RA and DTI. Spectrum for entirely new services, or for later generation technologies of existing services may be considered in future for possible auctioning of spectrum which is made possible by the provisions of the 1998 Act.

6. Once the initial allocation is made, further spectrum may be allocated (if available) only on demonstrable need and, if not specifically provisioned for call-off under the terms of the original consultation, may also be subject to open consultation/competition. The channels allocated are considered to be uniformly ‘congested’ since, once allocated to meet the operators’ traffic demand, there is no further spectrum available for these services. The use of ‘congestion’ as a factor is therefore not appropriate in calculating fees for these services.

7. Common Base Station (CBS) assignments are made from a pool of spectrum allocated to the sector, with defined levels of traffic and customer loading required to retain existing channels or to left additional allocations. The Agency uses monitoring data (both routine and targeted) as well as customer-supplied information in order to assess the merits of applications and employs coverage-prediction software tools to make effective re-use of the spectrum. Longer term, the Agency intends eventually to replace the current fees based on the base station location (ie. within a non-, ordinary- or heavy- congested area) with a regime that calculates the fee based on the coverage area of the CBS, reflecting the percentage of congested/heavily congested coverage.

STU rate and phasing-in arrangements

8. Chapter 4 of the document "Spectrum Pricing: Implementing the Third Stage" recaps the development of the Standard Tariff Unit (STU) as a means of equitable pricing. The STU rate for mobile communications of £1.65 per MHz/km² (yielding a value of £9,900 per 2 x 12.5kHz channel nationally) which was calculated and applied in the earlier stages, was based on the relative allocations of spectrum to the range of service sectors. As allocations have changed in recent years and since further spectrum will continue to be allocated, for instance to 3^rd Generation Cellular, to Public (and in due course private) TETRA, the basic STU unit will in time need to be re-calculated. However it must be remembered that this represents only half the recommended tariff rate suggested by the initial consultancy work. The Government decided that a cautious approach to implement the £1.65 rate as appropriate with a review to assess the effect of spectrum pricing on the radiocommunication market. It is therefore proposed that, in these initial implementation years, a stable basis of £1.65 should continue to apply and that there should be no increase until a further review at the end of the implementation phase.

9. This being so, table T1 shows the steps thus far and the remaining years envisaged to phase in the £1.65 STU rate to current services. However, it is possible that amended or additional modifier rates may be applicable for particular licence categories or in particular bands.

Modifiers and Congestion Factors

10. The Modifiers Working Group of the original Spectrum Pricing Sub-Committee formulated the framework of the policy for applying a scaling factor or ‘modifier’ in cases where there was demonstrable need and five modifier types were agreed. (Appendix A) giving further information is reproduced from the second stage consultation document.

Cellular/PCN Radiotelephony

11 It was agreed last year to extend the implementation period from 3 to 4 years in order to ease in the proposed fees over a longer period. The modifiers already in place for fragmentation, for geographically restricted channels and for propagation differences should continue (subject to agreement by the Modifiers Group) as they provide a balance between the respective operators in this sector. The fragmentation modifier shall be reviewed as the migration from analogue to digital has begun and a more cohesive allocation is emerging. Having started a year before the other PMO operators, 2000/01 will be the third and penultimate year towards applying the full £1.65 STU rate.

Public Mobile Data

12 This sector uses prime mobile spectrum and, as such, the national standard value of £9,900 per 25kHz of spectrum (2 x 12.5kHz) applies. It is proposed to continue the progression toward implementing the full charge. A response to the second stage consultation asked for consideration to be given that some national channels have geographic constraints to their usage which has been accepted.

Public Paging

13 This sector is experiencing considerable growth and has been seeking additional allocations to facilitate future predicted expansion. The full rate for national mobile spectrum is therefore appropriate and the incremental fees are shown in table T1, towards the national standard rate of £9,900 per 25kHz of spectrum.

PAMR/TETRA

14 It is proposed that the modifier of value 0.7 for choice and diversity should continue to be applied for analogue PAMR services, such that the national standard rate of £9,900 is modified to £6,930 (regional £1,386 based on a reuse factor of 5) and the phased increments as given in the previous consultation shall remain unchanged.

15 The spectrum for digital public TETRA services will not be eligible for a modifier but as a new service will be entitled to a start-up escalator over 5 years, rising to the equivalent national standard value of £19,800 per channel of 50kHz (2 x 25kHz). Some channels may have geographic restrictions and this factor will be reflected in the charge.

Common Base Stations (CBS)

16 It is proposed that the modifier of value 0.7 for choice and diversity should continue to be applied for CBS services and that in bands where there is congestion, the PBR fee ratio of 1:2:4 for non-congested: congested: heavily congested areas should still hold, assuming a theoretical reuse factor of 10. In bands where there is no congestion, specifically those where new spectrum is now being made available for CBS services such as Band I and Band III, a non-congested rate should be adopted, again with an assumed reuse of 10.

Channel Islands and Isle of Man Cellular Telephony

17 In previous years, only an administrative fee for the ongoing maintenance of licences has been levied. This was because at sector level under a cost/recovery system of charging, the Cellular Telephone licence class was already fully funded by the mainland national operators and the islands’ contribution was negligible by comparison. However, on an individual basis the work of co-ordinating the islands’ local channels and services both nationally and internationally as well as the overhead of work done towards development of technical standards, planning and policy would, in real terms, have far exceeded the amounts actually levied.

18 It has been the intention therefore that, at such time as the development of fees policy and legislation would permit, a spectrally priced fee structure would be applied in a similar way as for other services. It is proposed that, based on the relative proportion of the UK population resident in the islands, a value on the order of 0.2% of the national channel fee rate (based on the £1.65 STU) should be applied per channel and that the introduction of this fee rate should be phased in over three years. This should encourage efficient use of spectrum resulting in fewer channels requiring co-ordination. It is also proposed that the same fee value shall be applied also to third generation (UMTS) spectrum in these islands.

Remote Meter Reading

This class of licence, introduced in 1999/00 is already priced closely equivalent to the £1.65 STU rate and it is proposed not to make changes therefore until the value of the STU rate is reviewed. This is not likely to be earlier than 2002/03.

Actual Values

Table T1 below summarises the headline fee rates proposed, and the corresponding values after the application of proposed modifiers.

A considerable number of responses to the May 1997 consultation paper on Spectrum Pricing made proposals that fees should be determined by a formula such as:

Licence Fee = [ Spectrum Tariff Unit (STU) ] x [ bandwidth ] x [ area sterilised ] x [ modifier ]

where the modifier is a multiplying factor which mitigates certain technical and/or economic factors relating specifically to the service considered.

It is an underlying assumption of the Government’s proposals that a uniform price is justifiable only where mobile services are perfect substitutes or where mobile allocations are interchangeable and whilst neither assumption is strictly true, it was felt appropriate to have one base price for all mobile spectrum. Differential modifiers would then be applied to address the impact of factors such as spectrum usage constraints, propagation characteristics, choice, competition, spectral efficiency, quality of service, etc., applied on a case by case examination of each service sector to be priced.

In order to take forward the issues identified in the responses to the consultation document, the Agency established a Spectrum Pricing Plenary Group which had widespread representation from the mobile radiocommunications industry. A sub-group was specifically tasked to review the candidate modifiers that had been proposed in responses to the consultation. In addition, the sub-group ascribed values to a number of the modifiers that were deemed appropriate and susceptible to quantitative analysis. A number of modifiers were also identified as being appropriate but were better addressed on a broader qualitative basis.

The modifiers group reviewed fourteen candidate modifiers in detail. After careful consideration within the sub-group and subsequent endorsement from the main Spectrum Pricing Group, this initial list was reduced to five modifiers as follows:

Spectrum Usage Constraints: Proposed Value

The full text of the findings of the sub-group as presented to the plenary group in April 1998 is available from the RA library or from the RA website www.radio.gov.uk, titled: "Report on modifiers to be used in determining administrative pricing fee charges for mobile services"

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Appendix 7