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Spectrum Management: Into the 21st Century
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3.1 The legislation under which the RA operates has remained relatively unchanged since the dawn of the age of radio at the turn of the century . The basic framework has proved remarkably durable but is no longer adequate to meet the very different and more demanding requirements of the 21st century. The Government believes that the reforms proposed in this White Paper are necessary in order to provide the environment for future growth and success.
3.2 The RA has taken a number of measures to help meet demands for spectrum.
In mobile services, the RA has:
· introduced shared channels for low-traffic users;
· promoted the use of more spectrum-efficient trunking services;
· advanced the introduction of digital technology;
· assigned spectrum to narrowband channels and promoted international standards for narrowband pbr equipment;
· found spectrum for early introduction and development of competitive cellular and PCN services in line with telecommunications liberalisation policy.
In fixed services, the RA has:
· moved users to less congested higher frequencies;
· encouraged development of technologies to exploit millimetre wavelength spectrum above 30 GHz;
· required the use of more spectrally efficient technologies and matched required link lengths to appropriate bands;
· taken back spectrum into its own management from telecommunications operators to facilitate competitor access.
3.3 Despite these and other measures, lack of spectrum is already limiting growth and will increasingly do so in the future. More needs to be done. But the RA is already approaching the limits of what is possible under present legislation.
3.4 The situation is made worse by limits on the fees that can be charged for licences under the Wireless Telegraphy Act 1949 to operate radio equipment. Under existing legislation and normal constitutional principles applying to fees and charges recovered by Government, the RA is required to charge no more than is sufficient to cover its fully allocated costs. As a result, the price charged for spectrum is very small in comparison to its economic value.
3.5 The effects of this disparity are perverse.
· Users do not receive the correct signals about the value of spectrum. Because spectrum is not valued, it is often wasted.
· Licensees who no longer have a need for their assignments have no direct incentive to return them to the RA for reassignment. Because of spectrum shortages, they tend to keep assignments in case a need arises later. As a result, a self-perpetuating vicious circle of hoarding and shortage can develop.
· Because the price of spectrum is artificially depressed, investment decisions are distorted. Users have no economic incentive to migrate to uncongested frequencies or to re-equip with spectrum-efficient technology.
3.6 The present basis for charging contributes to spectrum shortages and acts to deny spectrum to fuel future growth. If more appropriate prices could be charged:
· users would make better informed choices, which would lead to a more rational distribution of spectrum, greater flexibility in spectrum management and enhanced economic and social benefits;
· potential users who are currently denied spectrum would be able to gain access and realise efficiency gains or increase output;
· their customers would benefit from innovation leading to new improved services and greater competition and choice.
3.7 The present charging regime was devised at a time of relatively low demand for spectrum. It is no longer able to accommodate the greatly increased pressures on the spectrum or meet rising demand. The resulting spectrum shortages will limit growth and delay the introduction of new services. Such delays could be very costly. For example, the economic impact study calculated that a 2 year delay in introducing PCN services in competition to existing cellular providers would have resulted in economic losses of over £2bn a year by the end of the century and the loss of over 7,000 jobs.
3.8 The Government's general policy is, wherever possible, to extend freedom to choose through market mechanisms and to reduce the bureaucratic burden of regulation. Regulation by itself will not be sufficient to meet future spectrum management challenges.
· The regulatory burden Attempting to tackle hoarding by increased regulation alone would be excessively burdensome and intrusive, as well as requiring substantial additional resources.
· Inefficiency Regulation is inherently inflexible and reduces choice. It does not allow those affected the freedom to make their own decisions based on their individual circumstances and needs. Users have to meet the regulatory requirements irrespective of whether or not this is economically desirable. They have less scope to acquire additional spectrum for potentially valuable applications or to adopt cheaper technical alternatives; and little incentive to increase spectrum efficiency beyond the required minimum. By itself, regulation results in an economically sub-optimal outcome. Market forces, on the other hand, can distribute spectrum to the most productive users at less cost.
· Ineffectiveness Relying on regulation alone would involve the RA in attempting to predict which technology and users would be most likely to be successful and rationing spectrum accordingly. Given the rapid pace of change, technical and otherwise, it is likely that this approach would not achieve the optimal distribution of spectrum and would discourage innovation.
3.9 Economic tools such as pricing are a potentially powerful addition to existing regulation-based spectrum management methods. The Government believes it is no longer sensible to maintain the existing restrictions on the use of pricing for spectrum management purposes.
3.10 The Government therefore intends to introduce legislation when Parliamentary time is available to set a new basis for determining fees for Wireless Telegraphy Act licences in the interests of spectrum efficiency. This will allow charges to take account of the opportunity cost of using spectrum instead of being rigidly tied to the RA's costs. The Government believes this will help overcome the difficulties mentioned above; accelerate some of the changes foreseen in the RA's spectrum strategy; and benefit radio users generally and the economy as a whole. In this White Paper, the term “spectrum pricing” is used to denote this new basis for setting licence fees.
3.11 It is important to emphasise that the Government views economic tools as a complement to regulation, not a replacement. The Government recognises that markets work best within a framework of fair, proportionate and effective regulation. Regulation will continue to play an important part in managing the radio spectrum.
· Giving effect to international obligations
· Defining and implementing overall spectrum strategy
· Promoting competition and innovation
· Ensuring fair and open access to spectrum for a diversity of users, including small firms, essential services and cultural, scientific and social uses
· Enforcement
3.12 The Government intends that, where appropriate, more active use will be made of licensing powers in order to promote strategic spectrum management objectives and wider Government policies. This may involve refusing applications for licences that are inconsistent with those aims; or changing allocations and assignments to accommodate new services or technical developments, such as the capability to use frequencies above 1 GHz for mobile applications. The RA will continue to develop innovative technical approaches to spectrum management and, where suitable, use regulatory powers to implement these.
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