Spectrum Management: Into the 21st Century Executive Summary

1. This White Paper announces the Government's intention to bring forward legislation to permit the use of pricing as an aid to effective spectrum management in the 21st century. It also sets out, and seeks views on, detailed proposals on how spectrum pricing should be applied, subject to Parliament passing the legislation.
2. Communication is crucial to the modern economy. Radio is essential to the information society as it is a uniquely versatile and cost-effective communications medium. But spectrum is a finite resource. Its effective management is key to providing an environment in which radio can make the greatest possible contribution to national competitiveness, as well as to cultural, scientific and social life.

   Economic contribution of radio

3. Radio makes a substantial contribution to the economy:

   · over £10bn a year of UK GDP through the provision of radio services, equipment manufacture and supply and retailing;

   · £7-11bn efficiency gains through more effective and cheaper communications as well as other economic benefits to users;

   · 300,000 jobs in radio service provision, equipment manufacture and distribution and retail activities.

4. The provision of radio-based services and radio equipment is a dynamic sector of the economy. Forecast growth will place increasing strains on the limited radio spectrum that is available. Spectrum congestion is already a problem for some services and in some parts of the country. If demand for spectrum cannot be met, there will be significant economic loss.

   Effective spectrum management is the key

5. The Radiocommunications Agency (RA), which is responsible for the management of most non-military spectrum in the UK and for representing the UK in international bodies, has fully explored existing regulatory measures to manage the spectrum effectively. These are no longer sufficient and new measures are needed to augment them.

   A new approach to spectrum pricing

6. At present, radio licence fees have to be set at a level to recover the costs of managing the spectrum. Therefore, they do not reflect the value of the spectrum. This exacerbates and perpetuates spectrum shortages. There is little incentive for spectrum efficiency and hoarding is encouraged. Following publication by the RA in March 1994 of the consultative document ‘The Future Management of the Radio Spectrum’, the Government intends to bring forward legislation to enable new economic spectrum management tools to be introduced for use in conjunction with existing methods. The new powers would be implemented through secondary legislation made under the provisions of the Bill.
7. The legislation to introduce spectrum pricing will break the link between the RA’s fully allocated costs and licence fees, which will allow charges to reflect more closely the value of the spectrum. This will provide users of congested frequencies with incentives to migrate to less congested frequencies; to re-equip with more spectrum-efficient equipment; to move to more spectrum-efficient services; and to cease hoarding spectrum. The resulting increase in spectrum efficiency will bring significant economic benefits.

   Spectrum pricing will be focused

8. This White Paper presents detailed proposals for a regime of spectrum pricing encompassing both auctions and administrative pricing. Auctions have a number of benefits, including economic efficiency, and are the Government's preferred method. But, despite their advantages, they are not suitable for all circumstances and are likely to be applied to national and regional services where there are more well-qualified applicants than can be accommodated in the spectrum available. There will be safeguards against anti-competitive practices and to ensure continuing access for small businesses and non-business users.
9. Administrative pricing will complement regulatory spectrum management. It will be driven by spectrum management requirements, not revenue-raising. It will be focused on services and parts of the country where there is, or is likely to be, insufficient spectrum to meet demand, and initially on mobile radio and certain point to point fixed links serving major cities where congestion is most critical. In the rest of the country and for other services, spectrum pricing will not lead to increases from existing levels in real terms and there could be reductions.
10. As recommended in a study by National Economic Research Associates and Smith System Engineering Ltd, it is proposed that charges should be based on the least-cost practicable option for enhancing spectrum efficiency; and that they should vary according to factors such as bandwidth, coverage, degree of sharing and geographical location. In order to enable the effects of pricing to be monitored and to minimise the rise in fees, the Government proposes that only half the amount of the increases suggested by the study should be implemented and phased in over 3 years. The effectiveness of the policy would then be reviewed and an assessment made of whether there is a spectrum management need for additional increases. There will be safeguards for essential public services that use radio and concessions for charities providing safety-of-life services.
11. Charges will be set to avoid distorting competition or pricing small businesses out of using radio. The projected increases in charges are a demonstrably small proportion of turnover or total radio system costs of small business users.

    Broadcasting

12. The 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. But spectrum pricing could play a role in promoting and accelerating the transition from analogue to digital broadcasting services. The adoption of digital broadcasting is key to the Government's long term spectrum strategy since it has the potential to generate exciting wealth creation opportunities through the release of valuable spectrum for new broadcasting use or other applications. The Government wishes to promote the earliest possible date for completion of the switch to digital. The use of spectrum pricing will be considered in the review that has been announced to establish a timetable for the withdrawal of frequency channels used for analogue broadcasting.

    Funding to facilitate change

13. Provision will be made through legislation to permit selective payments to users for the purpose of accelerating necessary changes in spectrum use, for example by encouraging migration to other parts of the radio spectrum or the introduction of spectrally efficient technology. Such payments would reinforce the effects of spectrum pricing and would be made only where justified in value for money terms.

    Secondary trading

14. The Government does not intend to legislate at this stage for a secondary market in spectrum. However, the RA is considering ways in which transfers of licences to the new owners when businesses or radio systems change hands can be made administratively simpler.

    Organisation of spectrum management

15. The Government intends to retain in the public sector the core functions of international representation, strategic spectrum planning, allocation to essential public sector users, strategic research management and policy development, oversight of spectrum management organisations (SMOs) and enforcement. The Government wishes to encourage applications to the RA from private sector bodies wishing to take on technical assignment tasks outside the core functions for particular blocks of spectrum. A number of such bodies are already in existence and the RA will consider all such applications positively. The RA will also be devolving further technical assignment work to its local offices.

Comments on any aspect of this White Paper should be sent by 25 October 1996 to:

or to laurence.green@lond02.dti.gov.uk by e-mail.

The Government would welcome views on any aspect of this White Paper and, in particular, on the following issues:

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