Spectrum Management: Into the 21st Century Introduction

1.1 This White Paper sets out the Government's proposals for a framework of spectrum management to meet the challenges of the next century.

The economic importance of radiocommunications

1.2 A modern economy relies critically on its communications infrastructure, of which radio is a key component. Radio is used by businesses of all sizes throughout the economy. It provides essential communications for the armed forces and emergency and safety-of-life services and also has a number of scientific, social and hobby applications. Radio makes a substantial contribution to wealth creation, competitiveness and employment.

The Econimic Contribution Of Radio

· wealth creation over £10bn a year at 1994 prices, amounting to 1.5% of UK gross domestic product when manufacturing, retail and service activity associated with radio are all taken into account

· competitiveness £7-11bn of efficiency gains and consumer benefits

· employment over 300,000 jobs

World-class innovation and competition

1.3 The UK is at the forefront of introducing new radio-based services and applications and of developing new technology, especially to promote competition in telecommunications and broadcasting. The UK is a world leader in the use of radio.

The UK Has Pioneered:

· cellular telephony services;

· personal communications networks (PCNs), such as Orange and Mercury One 2 One;

· radio fixed access as a flexible and cost-effective means of promoting competition in telecommunications;

· extending the usable spectrum, for example by exploiting millimetre wavelengths for fixed services.

UK World Radio Rankings

Future growth and success ....

1.4 Radio is set to become even more important to the economy. Users are increasingly demanding mobile communication and access to the information superhighway free from the constraints of physical connections. Radio is the only medium that can deliver this. As an example of the growing economic impact of radio, the contribution of cellular telephony and PCNs to GDP is forecast to rise from £1.23bn to over £4bn by the end of the century, with efficiency and other user benefits up from £3bn to £13bn and associated employment from 41,000 to 90,000 over the same period .

1.5 Continued growth in the use of radio will bring with it a corresponding increase in demand for spectrum. Future success and competitiveness will depend critically on meeting this demand. As explained in the next chapter, the usable portion of the radio spectrum is limited and becoming increasingly congested. Without further measures to increase the efficiency with which it is used, spectrum shortages will limit the future economic growth and other benefits derived from radio. Existing services will be prevented from expanding and the introduction of new advanced applications will be held back.

.... require effective spectrum management

1.6 It is crucial that the best possible use is made of the radio spectrum. In March 1994, the Radiocommunications Agency (RA) of the Department of Trade and Industry, which is responsible for the management of most non-military radio spectrum in the UK and for representing the UK in international discussions on radio matters, published a consultative document on how to deal with the fast-growing demand for spectrum.

Consultation on future spectrum management ....

1.7 The consultative document sought views on a number of suggestions to reform spectrum management. These covered both spectrum pricing and the organisation of spectrum management.

1.8 On pricing, it sought views on auctions and on administrative pricing, where prices are set according to a formula that takes into account factors such as bandwidth, frequency, location and coverage area. It suggested that auctions and administrative pricing could be applied selectively to different parts of the spectrum depending on economic and technical factors. It further considered the possibility of secondary trading. The consultative document made clear the Government's view that spectrum prices should be set at the minimum level necessary to achieve spectrum management objectives and not used as a means of taxation to raise the maximum revenue.

1.9 On organisation, it sought views on the definition of the core activities of the RA that should remain within Government and the possibility of devolving some functions to private sector spectrum management organisations (SMOs). These could be either self-managed by the users themselves or run on a commercial basis by third parties.

.... and the responses

1.10 Over 400 substantive responses were received from a wide range of radio users, industry bodies and others . The Government is grateful to all who responded. Their input has been extremely valuable and helpful in determining future policy.

Summary Of Responses To Consultation

· Pricing A substantial majority (over 70% of those expressing a view) agreed in principle that pricing reform was desirable and necessary. There was a marked preference for administrative pricing over auctions but recognition that selective application of auctions could be beneficial in some cases. Concerns were expressed that spectrum prices should not be set at levels that priced small businesses or non-business users out of the spectrum.

· Secondary trading Views were mixed. There were concerns about possible anti-competitive practices and the effect on small businesses but a feeling that transfers of licences between businesses should be made administratively simpler.

· Organisation There was considerable support for self-managed SMOs (over 90% of those expressing a view) but widespread opposition (over 80% of those expressing a view) to commercial SMOs. There was unanimity that the RA should continue to have an enforcement role, although some support for giving SMOs limited responsibilities in that area.

· RA’s functions There was widespread concern to retain the RA’s core spectrum management and enforcement functions in the public sector in order to safeguard standards of impartiality, independence and accountability. But some scope was seen for the RA to contract out more.

1.11 The Government has considered the responses carefully and taken them fully into account in the proposals described in the following chapters.

Contents