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Spectrum Management: Into the 21st Century
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5.1 The preceding chapter sets out the main principles that the Government believes should underlie spectrum pricing. This chapter explains which services are envisaged as being significantly affected by spectrum pricing, initially and in the longer term. Subsequent chapters set out detailed proposals on how auctions and administrative pricing might be put into practice, subject to the passing of the necessary legislation.
5.2 As explained above, it is envisaged that spectrum pricing will be combined with regulation. The balance between them will depend on the characteristics of the service in question and on spectrum pressures. It will be a cardinal feature of the new regime that pricing will be driven by spectrum management objectives, not revenue raising. Accordingly, spectrum pricing is unlikely to lead to higher charges for a number of services, for example where:
· there is no actual or foreseen excess demand for spectrum;
· users (because of international constraints for example) have little or no freedom to move to alternative frequencies or increase spectrum efficiency by technical means, and so have little scope to respond to price signals;
· users (for example in the maritime and aeronautical sectors) have the ability to transfer their licences to other administrations.
5.3 The main licence categories to which one or more of the above apply include:
· maritime radio, except maritime business radio, which is analogous to pbr and should be charged for on a similar basis;
· aeronautical radio insofar as equipment standards are governed by international requirements;
· amateur and Citizens' Band radio;
· mobile satellite telephony;
· spectrum below 30 MHz and above 30 GHz.
5.4 In these cases, the Government sees no current need for spectrum charges to be set any higher in real terms under the new regime than present licence fee levels; and they might be set lower.
5.5 It is not envisaged that spectrum pricing would apply to equipment that is licence-exempt or non-licensable, including:
· short range convenience devices, such as radio-operated car alarms, and mobile and cordless telephone handsets;
· receive-only equipment ;
· industrial, scientific and medical equipment and microwave ovens.
5.6 Increases will be focused initially on services where demand is most pressing, ie on mobile radio services and certain point to point fixed links. As described in more detail below, charges for these services will also reflect geographical variations in spectrum pressures and will be increased initially only in those major urban areas where there is serious congestion. Many services and most of the country will not experience increases in spectrum charges and may even benefit from reductions from present levels.
5.7 Mobile radio encompasses private business radio (pbr - self-provided systems), public access mobile radio (pamr - trunked mobile radio systems provided by a third party operator), common base stations (cbs - regional pbr services provided by a third party operator), digital and analogue cellular telephony systems (Cellnet and Vodafone) and PCN (Orange and Mercury One 2 One). It also includes maritime business radio, which competes for spectrum with pbr and provides a similar type of service. In all these services, there is either significant congestion at present in parts of the country or congestion is likely to develop over the next 5 years unless users take steps such as releasing underutilised spectrum or increasing spectrum efficiency. Otherwise, it will be possible to accommodate growth only by displacing existing users.
5.8 Fixed links operate in a range of bands from 1.4 to 55 GHz. Bands below 2 GHz are used for low capacity links and, although the 1.5 GHz band is, in accordance with international Radio Regulations, having to be cleared to make way for digital audio broadcasting, the RA does not anticipate a requirement to increase spectrum charges there. Bands above 2 GHz are mainly used for core trunk telecommunications network infrastructure. There is actual or forecast congestion in the bands between 4 and 15 GHz, especially for links connecting major centres of population. Spectrum pricing will therefore be focused on these bands and links. Above 15 GHz, there is expected to be sufficient spectrum to meet needs for at least the next 5 years and so there are no current plans to increase charges, although the position will have to be kept under review in the light of spectrum pressures. It is envisaged that the RA’s ‘link length’ policy, whereby a fixed link is assigned the highest frequency that enables the desired distance to be covered, will continue in force in order to make the most efficient possible use of the higher, less congested bands.
5.9 There are other services where the Government does not intend to increase spectrum charges immediately but where there may be a need to do so in the future if spectrum pressures develop. These include the following.
· Aeronautical use Despite the need to secure international agreement on equipment standards, there may be a role for pricing to promote greater spectrum efficiency, for example in radar and radio navigation. In particular, the use of radar within the uhf broadcasting bands (channel 36) is not an international allocation and movement to elsewhere in the spectrum would probably not require modifications to on-board equipment. Spectrum pricing might also be used in the case of terrestrial flight telephone systems, once the service is established, to encourage the use of technology that does not radiate excessively and sterilise spectrum that could be used for other applications.
· Services ancillary to broadcasting and programme making Spectrum is used by broadcasters and the wider entertainment industry for making programmes, including outside broadcasts, electronic news gathering, concerts and stage shows. This is administered through contracted out arrangements. Spectrum is characteristically required at short notice on a temporary basis. Current allocations range from 47 MHz to 48 GHz and are in numerous relatively small blocks of different usefulness. Much of this spectrum is shared with other services and is subject to geographical or other restrictions. The Government does not consider that spectrum price increases are necessary at present for these services. However, spectrum pressures are increasing with the growth in broadcasting and programme making as well as the increasingly sophisticated use of radio in the entertainment field.
· Point to multipoint fixed links These are used to enhance telecommunications competition by providing new market entrants with a flexible and economic alternative to cable for accessing individual subscribers and to deliver advanced IT and multimedia services, such as microwave video distribution systems, interactive multimedia services and video on demand. Licences are being awarded to run radio fixed access services at 2 GHz and 10 GHz. In order to avoid disrupting the operators' business plans and in the interests of promoting competition, the Government does not intend at present to increase spectrum prices for these services. But, if spectrum pressures develop, it may become necessary to introduce auctions to select any additional operators or to increase administrative prices once existing services are established.
· Point to multipoint links are also used for video surveillance security systems. There is no current spectrum management need to increase spectrum charges for these.
· Paging uses little spectrum and is very spectrum-efficient. Paging spectrum might in future be charged for on the same basis as neighbouring services, but there are no plans to do so at present.
· Satellite earth stations These share spectrum with point to point fixed links so ought, arguably, to be charged on a similar basis. On the other hand, the effect on fixed links use is not, in practice, significant at present; and, if earth stations were moved elsewhere in Europe in response to increased charges in the UK, this could reduce spectrum efficiency since international coordination requirements could have the effect that the frequencies in question would not be usable by any other service in most of the UK. For these reasons, the Government does not intend to increase spectrum charges for earth stations at present. The position will be kept under review in the light of spectrum pressures and any changes in international coordination requirements.
· Radioastronomy and space research The Government considers such research to be a valuable scientific use of spectrum. In some cases, the choice of frequencies is dictated by fundamental laws of physics and chemistry since the molecules being observed emit only at certain wavelengths. Nonetheless, radioastronomy does deny spectrum to other valuable services. This raises questions about whether pricing might in the longer term be used to encourage laboratories to locate in more remote areas and to encourage radioastronomers to give up spectrum they do not need kept silent. Account would have to be taken of international obligations to keep some bands silent.
· Meteorology uses spectrum in the prime 400 MHz range for radiosondes (weather balloons) and 1.6 GHz and other bands for satellite observations and communications. Spectrum pricing could provide an incentive to use transmitters at higher frequencies or with lower frequency drift that would enable some of this valuable spectrum to be reallocated.
5.10 The Government has no immediate plans to increase spectrum charges in real terms for the services mentioned in the preceding paragraph, but it may become necessary to do so at some future time for spectrum management reasons. The Government proposes to keep the situation under review in the light of trends in spectrum use and the demand for, and pressures on, spectrum. If increases become necessary, the spectrum might either be auctioned or priced administratively on the same basis as competing services or other services using similar frequencies.
5.11 Particular considerations apply in relation to broadcasting. These arise from the legislative framework established in the Broadcasting Act 1990 and proposed in the Broadcasting Bill currently before Parliament and from the BBC’s Charter and Agreement.
5.12 The broadcasting spectrum is currently managed by the Radio Authority (RAu) and the Independent Television Commission (ITC) under the Broadcasting Act 1990 and by the BBC. In the independent sector, the RAu and the ITC are responsible for issuing broadcasting licences under the Broadcasting Act and for packaging the available spectrum into frequency assignments for use by individual national and local broadcasters. The broadcasters are responsible for arranging transmission of their output. Transmission is, in many cases, by a third party and is required to be licensed under the Wireless Telegraphy Act. The BBC is currently both a broadcaster and a transmission provider and pays a Wireless Telegraphy Act licence fee in respect of the latter activity.
5.13 A number of Broadcasting Act licences are subject to competition, which imputes a market-determined scarcity value for spectrum. Moreover, because of broadcasters’ public service obligations and the large number of receivers in service, broadcasters have little scope to increase spectrum efficiency using existing analogue technology.
5.14 The spectrum pricing legislation will address the way in which fees are charged for licences under the Wireless Telegraphy Act 1949. It will not affect the licensing of independent broadcasters under the Broadcasting Act 1990 and the Broadcasting Bill currently before Parliament nor the BBC’s position under its Royal Charter and Agreement. The Government does not intend to require broadcasters to undergo auctions for spectrum access as well as to compete for broadcasting licences. The Government intends to treat the transmission arrangements of all broadcasters on a similar basis.
5.15 Broadcasting is likely to undergo major changes over the next decade or so. Digital broadcasting offers the prospect of considerable spectrum efficiency gains. Its adoption is key to the Government's long term spectrum strategy as it has the potential to generate exciting wealth creation opportunities and lead to the release of valuable spectrum for new broadcasting use or other applications. The Government therefore wishes actively to promote the switch to digital.
5.16 The Government has introduced a Broadcasting Bill, currently before Parliament, to establish structures for the provision and regulation of digital broadcasting. As part of its strategy for unlocking the potential of digital broadcasting, the Government has announced a review after five years from the start of new digital services, or sooner if penetration of digital sets reaches 50% of households, to establish a timetable for the withdrawal of the frequency channels used by analogue television services. The use of spectrum pricing to accelerate this process will be considered as part of this review.
5.17 For example, Wireless Telegraphy Act charges for digital transmissions could be set below those for analogue in order to encourage the switch to digital. Another possibility is that spectrum currently occupied by analogue broadcasting could be auctioned in the future for new applications. With the necessary safeguards, this could conceivably take place before it is cleared of all existing users. The new licence holders could have a commercial incentive to facilitate earlier access to the spectrum by subsidising the cost of transferring to digital or providing viewers with set-top converters so that the analogue transmissions could be switched off sooner.
The Government would welcome views on how spectrum pricing should be applied.
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