The consultative document was widely distributed and publicised, including at the Agency’s series of 1998 roadshows. A total of 31 responses were received from a broad range of interests representing public telecommunications operators, broadcasters, private business radio, public sector users, utilities, transport industries and equipment manufacturers. The Spectrum Management Advisory Group (SMAG), established to give Ministers independent strategic advice on spectrum management matters, also submitted its views. The Agency would like to thank all those that took the time to participate in this important consultation.

There was substantial and broadly based support for the concept of spectrum trading, including from the SMAG, which described trading as "an essential and inevitable progression", although responses also raised a number of issues about implementation.

There was broad agreement that a spectrum market could:

improve the economic efficiency of spectrum management;

help to ensure that spectrum was assigned to those who could produce greatest benefit from it;

provide valuable additional flexibility for spectrum assignments to be adjusted through the market in response to changes in demand.

There was also agreement that spectrum trading should be introduced selectively in a way that took account of the market and technical characteristics of the different licence classes. In principle, responses favoured giving licensees a degree of additional flexibility as to technology and use made of assignments but expressed different views as to how far this should go.

Responses emphasised the need for a clear and effective framework of regulation to provide necessary safeguards. These included:

prevention of hoarding and interference;

ensuring spectrum continues to be managed strategically;

protection of access to spectrum by small and medium enterprises;

maintaining competition;

ensuring compliance with international requirements on spectrum use.

However, there were differences of opinion about how restrictive the regulatory framework would need to be.

Over 90% in favour of spectrum trading in principle, including both simple transferability and selective application of more complex trading variants that would allow users to divide and amalgamate assignments.

80% of those expressing a view favoured allowing licensees a measure of flexibility as regards the technology used and application employed, subject to boundary conditions to ensure non-interference with other radio users and compliance with international obligations.

A 3:1 majority of those expressing a view broadly supported a phased, selective approach to spectrum trading as proposed in the consultative document.

About two-thirds of those expressing a view considered there should be no distinction in the application of spectrum trading between licences subject to administrative pricing and those that had been auctioned.

Evenly divided views on the questions of the need for sector-specific competition rules to govern spectrum trading and the conversion of current apparatus licences to spectrum property rights.

A substantial majority of responses - over 90% - supported spectrum trading within an appropriate regulatory framework, although there were differences on how restrictive this framework should be. The independent Spectrum Management Advisory Group (SMAG) described spectrum trading as "an essential and inevitable progression". Some responses favoured a greater degree of regulation than proposed in the consultative document and others less. Supporters agreed spectrum trading would reduce regulatory burden and promote innovation, competition and growth through an economically more efficient distribution of spectrum. Several, including OFTEL, urged its full, widespread and rapid introduction in as flexible a manner as possible. Some urged a more radical policy than the consultative document proposed. A minority - less than 10% - opposed spectrum trading in principle.

Simple transferability

There was over 90% agreement amongst those expressing a view that it would be advantageous in terms of administrative efficiency and reducing regulatory burden to make assignments transferable with no change of licence conditions or use.

More complex trading

Over 90% of those expressing a view were in favour in principle of more complex trading variants that would enable licensees to divide and amalgamate assignments and offer greater flexibility to provide different services. These variants were said by supporters to have the potential to benefit the economy by substantially reducing dynamic opportunity costs, facilitating competition and innovation and reducing regulatory burden.

There were differences of view, however, on the extent to which they should be applied to different service sectors and on the degree of regulation. Some thought they should be applied widely and others on a more selective basis. Some advocated a relatively free market approach while others favoured greater regulatory intervention and central spectrum management by the Agency. Some responses suggested running pilots to trial spectrum trading or limiting trading to new services, such as Third Generation and some qualified support with caveats, such as:

the objective of flexibility should be balanced against maintaining assignment quality and fairness for users of different sizes;

spectrum trading would be of benefit only in selected areas, particularly where there is opportunity for trading between organisations in a similar business, such as mobile telecommunications;

care should be taken that spectrum trading, by making it easier to acquire spectrum and providing incentives to dispose of surplus spectrum, did not preclude innovative technical solutions or restrict competition;

a completely free market might lead to spectrum prices being bid up by mobile services, pricing fixed links out of spectrum and reducing competition in telecommunications or restricting spectrum access by small and medium businesses;

spectrum trading should not be regarded as an alternative to other improvements in the Agency’s procedures, including greater transparency and the development of objective measures of efficiency in bringing spectrum into use;

for each type of usage, the Agency should analyse the costs before deciding whether spectrum trading would be beneficial;

the need to protect the international needs of the aeronautical sector.

Two responses opposed spectrum trading generally in principle, considering that the benefits claimed for spectrum trading would not be delivered by a free market or could be achieved through regulatory means, for example by the Agency reclaiming and reassigning surplus assignments, or changes to Agency procedures. A specific suggestion was that the Agency should negotiate, monitor and enforce channel loading criteria with under-utilised assignments being revoked, as has been done for common base stations. Arguments against spectrum trading included the following.

The Government should not contemplate spectrum trading before exploring to the full the possibilities for improving regulatory spectrum management.

Spectrum trading could limit access to spectrum by small and medium enterprises.

Necessary safeguards to prevent hoarding and monitor change of use would increase regulatory burden.

Trading would lead to an unacceptable increase in spectrum access costs and reduction in competition. Spectrum trading should be allowed only where there is no spectrum scarcity.

Short term market pressures would militate against strategic spectrum management and could lead to pressure for spectrum for licence-exempt services to be sold.

The taxpayer could become liable for claims for compensation if assignment quality was compromised by interference.

1) The balance between spectrum management and market forces, the proposed regulatory framework for spectrum trading and whether other restrictions would be necessary or desirable.

There was broad acceptance that some elements of regulation would be necessary in the public interest and to ensure adequate market supervision but different views about the extent of that regulation.

There was a consensus that market forces should be encouraged; that regulation should be with a light touch; that transactions should have to be notified to the Agency, possibly electronically; and that the Agency should exercise a degree of technical and regulatory market supervision. Effective market monitoring and enforcement were said to be crucial. But there were different views on how far beyond that regulation should go. Some considered that empowering a regulator to intervene in transactions could distort the market and deliver a sub-optimal outcome compared to market forces. Others felt that there could be a conflict between microeconomic and macroeconomic efficiency that would have to be resolved through regulatory intervention and that this could be done without creating unwarranted market distortion.

A number of responses favoured a lighter regulatory touch. According to this school of thought, the market should determine spectrum allocation wherever possible and technical, legal and economic flexibility should be maximised. Regulation should encourage service flexibility and be technology neutral in order not to discourage innovation. Flexibility was seen as being essential in the face of convergence.

Others placed favoured a greater degree of regulatory intervention. Spectrum should continue to be actively planned and managed by the Agency and the Agency should retain substantial regulatory tools. Regulation would be necessary, at least in some service segments, to avoid "free market excesses". SMAG considered that regulatory oversight should specifically cover European compatibility, consistency of usage definitions and licensing conditions, minimising interference and maximising efficiency, deterring hoarding (possibly by imposing geographical coverage requirements) and the national interest (eg defence). Other purposes for which regulation would be necessary included:

promoting spectrum management objectives and compliance with international obligations, interference prevention;

maintaining competition, preventing anti-competitive practices and ensuring new entrants could gain access to spectrum;

specifying operational parameters in the interests of effective frequency coordination and technical compatibility, especially where this had an international dimension or there were considerations of inter-operability or safety, eg for mobile satellite, aeronautical and marine services;

ensuring strategic considerations and quality for all users did not take second place to short term flexibility to respond to market needs;

facilitating pan-European services, although this need not preclude the use of spectrum for other services on a secondary, non-interference basis;

preventing manipulation and speculation and minimising windfall gains. ‘Use it or lose it’ provisions could play a role but might be difficult to operate and free marketeers considered them incompatible with the concept of a market;

damping short term market fluctuations;

ensuring sufficient spectrum for the emergency services;

compulsory acquisition, at a price determined by arbitration, of spectrum that was being hoarded;

preventing a mobile operator from disposing of spectrum to an extent that compromised its ability to offer a proper service. It would be for consideration whether the Agency should be empowered in such cases to reverse some transactions and on what terms and whether compensation should be payable to the purchaser.

There was divergence of opinion, reflecting the difference in views on the need for regulation, as to whether consent should be assumed if no objection to a notified transaction was received within a certain time, 14 days say, or whether positive clearance should be required. In any case, the mechanism should be relatively simple and speedy. The proposals in paragraph 3.8 of the consultative document on the circumstances in which consent might be withheld were said by one response to be reasonable.

In any event, it would be important to make market rules clear. Otherwise, regulatory uncertainty would damage market efficiency.

Views were fairly evenly divided on this issue. Several responses considered that general competition legislation, combined with existing Telecommunications Act and Broadcasting Acts provisions, would be appropriate and sufficient, without any need for additional sector-specific powers, to investigate any alleged anti-competitive practices in a spectrum market and to order divestiture of spectrum if necessary. Conflicting interpretations could cause confusion if there were sector specific rules as well.

Others considered that it would be necessary to have sector-specific regulatory powers to ensure plurality and diversity in rapidly developing markets and to ensure that all radio users, including essential services, have the right to make use of radio in ways that best meet their needs. Without some mechanism to prevent predatory spectrum acquisition across licence sectors, such as threshold conditions on ownership, as in the Broadcasting Acts, prospects for long term growth could be damaged. Spectrum trading rules should be tailored to each sector. These should be invoked only in extreme cases where a dominant position was abused.

Some responses suggested further study was necessary into whether general competition legislation would be sufficient to police a spectrum market.

Views were evenly divided, although interpretation of the responses was complicated by differences in assumptions about whether or not ‘apparatus licensing’ under the current legislation was compatible with making assignments more flexible.

Several responses favoured maximum flexibility to facilitate attaining the optimal distribution of spectrum. They advocated an approach, similar to the Australian model, based on spectrum property rights that specify interference conditions at their geographic and spectrum boundaries but otherwise impose minimal limitations on technology and the use to which the spectrum may be put. In the interests of market efficiency, users should be able to divide and aggregate spectrum holdings. This would require the development of new tools to identify spectrum interference at licence boundaries when holdings change. Others, eg SMAG, agreed with the desirability of flexibility but thought this should be achievable within current legislation.

Those against conversion to spectrum property rights saw little advantage in the change, provided there was adequate security of tenure. Apparatus licences might even be more appropriate for some uses and spectrum property rights would be an unnecessary complexity for fixed links because of their point to point nature.

It was suggested that there would be little commercial advantage to UK firms from introducing spectrum property rights unless European partners did likewise. Any move to greater service flexibility would have to be tempered by international obligations and should be on a non-interference basis with the primary service in the band in question. In particular, the international nature of mobile satellite services and the international requirements on operational parameters meant they were not suitable for conversion to spectrum property rights. It was also pointed out that it would be complex to convert apparatus licences in occupied spectrum without causing disruption to existing licensees.

Some felt it was too soon to decide whether spectrum property rights were necessary or desirable or preferred a middle way between the perceived extremes of apparatus licences and spectrum property rights.

80% of those expressing a view, were in favour of increasing flexibility of assignments but recognised that would still be a need for some restrictions to be imposed in the interests of effective spectrum management, for example to ensure compliance with international obligations on radio spectrum use and prevent interference. There were differences as to how limiting these would need to be. It was recognised that there would be a trade-off between, on the one hand, the perceived benefits of flexibility in terms of facilitating innovation and economic efficiency and, on the other hand, disadvantages of greater fragmentation of the spectrum.

Several responses considered that flexibility to change technology or use, at both assignment and allocation levels, would be essential to realise the full benefits of spectrum trading. Technically prescriptive licence conditions deterred innovation. Provided interference limits at licence boundaries, policed by the Agency, were observed, different services should be able to co-exist in the same band without interference on the basis of non-interference with the primary user of the band in question. Such conditions would be analogous to those under which certain military spectrum is shared with non-military users. For example, low power on-site private business radio might be permitted in broadcast bands and GSM operators might allow their assignments to be used for fixed links in rural areas, either by third parties or within their own networks. Even in aeronautical bands, use flexibility could be beneficial, provided existing systems were protected.

Others expressed reservations about quite such a ‘light touch’ and argued strongly that spectrum management should remain in the Agency’s hands. Specific views included:

change of use should require prior consent of the Agency and the issue of a new licence;

flexibility would increase the potential for interference. It would be difficult for any change of use to take place without impacting on other users in the same or neighbouring bands and service flexibility could cause spectrum management problems;

the potential for use flexibility would be greater at higher (GHz) frequencies where density of use is lower;

change of use could lead to interference as different uses require equipment with different technical characteristics or fragmentation of the market if incompatible technologies were allowed freedom to proliferate;

fragmentation of the spectrum would lead to increased need for guard bands;

spectrum trading should not be permitted to undermine prior commitments to band-specific technology, eg TETRA. Changing these would create uncertainty and jeopardise innovation;

broad licence categories (eg broadcasting, cellular, private business) should be retained to prevent predatory spectrum acquisition across sectors;

international agreements preclude some changes of use, for example use of UMTS bands for digital broadcasting.

In any case, the degree of permitted flexibility should be determined by the Agency and the limitations made clear to users.

As summarised above, several responses expressed views in general or theoretical terms on the general benefits of spectrum trading. Specific thoughts on how spectrum trading might be used in practice included:

Most responses expressing views on these questions (over 90%) favoured greater flexibility in the availability of trading modes. For example, many considered that the market should be sufficiently flexible to allow any potential modes of trading as it would not be possible to predict the ways in which participants would wish to trade. The issue was not which modes of trade should be allowed but how to design the market to yield the modes desired by market participants. That having been said, it was widely felt that the document identified the main trading modes and that any others would probably be variants or combinations of them.

More detailed views included the following:

mode 2 (simple assignment) was considered to be most conducive to encouraging speculation;

mode 3 (leasing) should not be allowed to become a commercial activity in its own right;

the less flexibility allowed to change services, the more likely it could be that more complex modes could be permitted without compromising effective spectrum management;

it might be simpler to allow just one mode for all spectrum trading but, in any case, it would be important to make clear to licensees which mode or modes of trade were allowed;

a detailed analysis of the applicability of the various modes to spectrum allocated to programme making and special events. This concluded that, for these services, trading would be of greatest benefit for regional, area or local channels but of limited use otherwise because of the short term or extremely localised nature of many of the assignments.

Some responses suggested the introduction of trading derivatives, such as options or commitments to future relinquishment but others felt that modes other than those in the document should not be introduced before some experience of spectrum trading had been gained.

There was a range of views. Nearly two-thirds of those expressing views, including SMAG, felt that it would be unnecessary or undesirable to distinguish in the context of spectrum trading between auctioned and administratively priced licences. Indeed, to do so would lack economic rationale and would introduce an arbitrary distinction. There would also be a lack of parity between competing services using different technology (eg GSM and UMTS), which would cause distortions that could infect capital markets. Moreover, the secondary market could provide useful information to help set administrative pricing at the right level.

About one-third favoured differentiating between services, at least initially, but did not rule out treating all licences on the same basis at a future time. For example, they felt the question required further study in the light of proposals for administrative pricing or agreed that spectrum trading could possibly be extended once administrative pricing had been fully and properly implemented.

The view was also expressed that spectrum trading should be limited to auctioned licences since the original price of these would have been determined directly by the market.

Nearly 80% of those expressing a view thought that measures to recover windfall gains from spectrum trading were neither necessary nor desirable. SMAG considered that both windfalls and speculation were an acceptable benefit for risk-takers in a free market economy.

a) Speculation

It was argued that speculation is, in fact, beneficial as it helps to spread financial risk, provide market information and reduce liquidity risk so the market functions more efficiently. In any case, preventing speculation is difficult in practice as it is problematic to distinguish between speculators and non-speculators. To be consistent, if speculation was considered undesirable, anti-speculation measures would have to be extended to the stock market as well.

It was further suggested that spectrum hoarding, which some responses associated with speculation, does not lead to misallocation of resources. Hoarding can be expected only where there is an economic gain to be derived from holding spectrum unused against future expectation of need or if there are no economic benefits from selling it. The former is better addressed through competition rules and the latter by correcting the artificially low opportunity cost of retaining the spectrum. Spectrum trading provides a mechanism to reassign the spectrum to the highest value use, which process is facilitated by speculative activity, which can also help set the correct level of licence fees. Hence speculation could help reduce the likelihood of hoarding.

Others were concerned about the risk of speculation and felt that financial gains from spectrum should come from its use, not from trading it as a commodity. One response considered that speculation could be controlled by limiting licences to fixed terms, eg 20 years, and that trading should be limited to auctioned spectrum or spectrum where speculation is prevented by linkage to a particular business activity, ie aeronautical and maritime use. Another agreed that speculation should be deterred, possibly by ‘use it or lose it’ provisions.

b) Windfall gains

The most likely cause of windfalls was thought to be too low a level of administrative pricing. Several responses stressed that the key was to set initial licence fees at the correct level, which would make further measures unnecessary, although others thought that this should not be an aim of administrative pricing.

One school of thought was that that it would be difficult in practice to identify windfall gains. Measures to eliminate them would greatly reduce the potential benefits of spectrum trading and so harm the economy. Windfall claw-back was also opposed as an unwarranted additional layer of taxation. Gains from trading spectrum should be taxed in the same way as any other business profits. OFTEL did not support clawing back windfall gains. It was debatable whether such gains were ‘at the taxpayers’ expense’. Preventing trading would not secure them for the taxpayer but would deprive the taxpayer, as consumer, of the economic benefits a more efficient distribution of spectrum could unlock.

The existence of a windfall gain could not be judged solely by comparing initial licence fees and secondary market prices. The perception that holders of administratively priced licences would benefit from a windfall gain if their licences became tradable failed to take into account the substantial sums invested in networks and the considerable risks and uncertainty they had faced. It would be difficult in practice to separate windfall gains from economic rents resulting from market experience and position, economies of scale and so on. In any case, windfall gains could arise without trading spectrum.

Taxing spectrum trading capital gains would act as a disincentive to trading and so result in loss of economic benefits and also risked undermining investment decisions. Existing apparatus licences should be converted immediately to tradable spectrum property rights without windfall taxation. The loss of licence revenue would be more than offset by the benefits to the UK economy from greater dynamic efficiency. Furthermore, there was a fundamental inconsistency between the avowed aim of spectrum pricing to improve the distribution of spectrum and using spectrum pricing to eliminate windfall gains since the willingness of a business to pay a proposed spectrum fee depends on gains it expects to make from decisions under its control, ie that are not windfall gains, as well as from windfalls.

Taxing windfall gains would also raise the issue of whether licensees should be compensated if spectrum turned out to be less valuable than had originally been thought.

Other responses expressed the contrary view that windfall gains (ie gains not arising from good management by the licensee) should be recovered for the taxpayer. It was suggested that there should be powers to recover windfall gains where these arose from:

Those most strongly in support of spectrum trading favoured its earliest possible introduction, while recognising that the pace would be limited by the need for legislative change. Long transition periods should be avoided because of the risk of creating distortions. Phasing in line with the roll-out of administrative pricing was considered illogical by some responses as the purpose of administrative pricing was to encourage more efficient use of spectrum, not eliminate windfall gains.

Nearly three-quarters of those expressing a view, however, agreed that there should be a phased, selective approach. They suggested that trading should be trialed in certain licence classes before being introduced more widely or agreed that spectrum trading should be phased in at the same pace as spectrum pricing. New services, such as Third Generation, were suggested as suitable candidates and UHF private business radio to facilitate band reversal. Further study of the effect on small and medium enterprises, especially short term hire and common base stations, was also said to be necessary.

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Over 90% of responses expressing a view favoured making Third Generation licences tradable. If this was not possible before the auction because of the need for legislation, a clear statement should be made well in advance of the auction of the Government’s intentions. It was suggested that spectrum trading might provide a mechanism for operators to provide the additional spectrum that future traffic forecasts suggest they will need. However, one response suggested that, if one of the licences was reserved for a new entrant, that licence should not be freely tradable as it would have been obtained upon more favourable terms; and another that, in view of concerns about windfalls and speculation, it would be premature to reach any conclusion.

One response opposed making UMTS licences tradable. Tradability might attract speculators and increase costs to operators. It would also be incompatible with achieving the quickest possible roll-out of networks if spectrum was acquired for trading purposes instead of use. If the spectrum was correctly packaged, there should be no spectrum to spare for trading, especially if the number of licences was maximised.

The importance of ensuring strict adherence to coverage obligations was mentioned.

Over 90% of those expressing a view favoured fixed term licences. Many responses felt that perpetual licences gave greater security of tenure, which was necessary to encourage substantial infrastructure investment and avoided uncertainty towards the end of the licence term and that licences for GSM and UMTS network operators and fixed links should be perpetual. On the other hand, there was a view that spectrum licences for national services should have fixed terms, in line with the corresponding telecommunications licences but that it was unnecessary to change the basis of perpetual licences for private business radio used by small businesses. It was suggested that, given the rate of change and obsolescence, a 25 year licence was as good as perpetual for practical purposes.

Amongst responses favouring a fixed term, here were differing views about whether, for a telecommunications system, it should be coterminous with the corresponding telecommunications licence. Given a 5 year period for network planning and a 15 year equipment lifecycle, a 20-25 year period would appear suitable for public networks. At the other extreme, a licence to cover a special event might require just a 24 hour licence. Other specific suggestions included 3-5 years depending on purpose and 1-3 years for assignments used for news gathering.

As in the case of spectrum auctions, sale of spectrum through the secondary market would require greater certainty as regards security of tenure and a reasonable period of notice should be given for termination and compensation paid where licence or equipment costs had not been fully amortised. The process for renewal or extension should be made clear.

It was suggested that, from a technical point of view, a spectrum market could equally well accommodate licences of either determinate or indeterminate length. There was an argument for leaving licence duration to be determined by market forces. Licences with weak security of tenure give spectrum managers greater flexibility, eg to refarm spectrum, but can bring economic disbenefits as licensees have less incentive to invest. It is unlikely that spectrum managers will have sufficient information to optimise licence length, which implies that this is best left to the market. If allowed, the market could develop trading instruments of the lifetime desired by customers even if primary licences remain perpetual, eg by trading ‘spectrum leases’. This could also enable spectrum managers to acquire spectrum through the market where necessary to give effect to international agreements and so provide price signals about whether or not a proposed agreement would be economically advantageous.

One response proposed that licensees should be given the option to convert perpetual licences to fixed term if they wished to gain budgetary certainty and tradability but should not be compelled to do so.

Various supplementary comments were made on aspects of spectrum trading, including the following.

Where licences were transferred with no change in conditions or usage, the Agency would be notified but consent would not be required. However, the Agency could object if the transfer affected compliance with international obligations.

Where there are changes in licence conditions or usage, the Agency would have to be consulted and issue a new licence.

Spectrum trading would be driven by existing users seeking spectrum for growth or new market entrants. Competitors would be unlikely to sell spectrum to a direct competitor so the latter could be more frequent.

The market mechanism might be similar to that for houses, ie assignments would be advertised openly but prices paid would remain confidential.

Greater openness about spectrum use, including commercial and government use, would be a key facilitator of spectrum trading. Several responses advocated publication of an assignment database in the interests of transparency.

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14) Whether it would be advantageous to develop the concept of market intermediaries.

Views on this issue were mixed. The majority of those expressing a view (75%) favoured the development of intermediaries, at least if they turned out to meet a market need but there was a general view that they should not be imposed by legislation and several responses expressed concerns.

SMAG agreed that intermediaries should be allowed to evolve in response to market needs and the Agency should continue its policy of encouraging third party involvement in spectrum management. A small brokering industry was likely to develop to meet market needs and could provide a valuable service. For example, large users, or associations of users, of fixed links might act as intermediaries for a block of spectrum. One response considered that third party spectrum management could bring opportunities to increase spectrum utilisation in private business radio.

Specific points on how intermediaries might develop in practice included the following.

Conceptually, intermediaries would be similar to the Agency’s existing contractors. They would need to possess technical, business and management skills. They would also have to act fairly and should be regulated.

This could be ensured if independent spectrum agents (ISAs) were approved by the Secretary of State to approve transactions. An ISA could carry out technical surveys to check that the buyer’s proposal was consistent with the vendor’s licence conditions and would not cause interference and then register the transaction. There could be an element of competition between ISAs.

Other intermediaries could act deal through an ISA or direct with the Agency. A technical survey would not be required until the purchaser had defined the application.

Management of bands by intermediaries would require them to keep very good records, which should possibly be in a common database format. The Agency would have a role to play in this process. Where national channels are involved, intermediaries may need to use a common spectrum planning tool.

Any intermediary should be barred from holding spectrum licences as principals as this could lead to speculative hoarding.

A ‘smart’ automated exchange that could function without brokers would provide an efficient, low cost spectrum trading mechanism. It would combine low transaction costs, market transparency, flexibility, high liquidity and certainty and be superior to a market relying on brokers. The latter would generate relatively little price information for market participants, be less efficient in terms of optimising the outcome, be less likely to satisfy participants’ spectrum requirements and be more vulnerable to undesirable strategic behaviour.

The Agency should remain the supplier of last resort. There should continue to be spectrum available from the Agency at a market rate to minimise abuse by intermediaries of their dominant positions.

There should be no dilution of central technical oversight or effective UK representation in international fora.

Other responses opposed intermediaries in principle because they would simply cause prices to be higher without adding value.

There was widespread support, as indicated elsewhere in this document, for a selective approach to spectrum trading and broad agreement (nearly three-quarters of those expressing a view) with the analysis in the consultative document of how spectrum trading might be implemented in different licence categories. A few responses thought that approach was too cautious or that spectrum trading should be introduced as widely as possible in the interests of flexibility and simplicity, especially in view of convergence, which would make it counter-productive to build in elaborate differentiation on tradability. Several responses indicated they would welcome further consultation as policy evolved. Specific comments are summarised in the table in the Annex to this summary document.

Although several responses agreed that spectrum trading could unlock potential economic benefits, there was little comment on the RIA itself or quantification of estimated costs and benefits. This because much would depend on how much spectrum was made tradable and in which bands. However, one response estimated that the costs to it and the economy as a whole of spectrum shortages could amount to several hundred million £s. Another suggested that, the Agency’s operating costs overall should reduce, despite a rise in enforcement costs if greater use and technology flexibility gave rise to more interference.

It was also argued that the advantages claimed could be secured without spectrum trading. For example, the elimination of ‘double’ licence fees where assignments are transferred could be achieved by changing the Agency’s procedures. Furthermore, trading could lead to an increase in licence fees, which would disadvantage users; and jobs created by new services would, at least in part, be at the expense of others.