Study of Market-based Exclusive Spectrum Rights

3. International Trends in Spectrum Management

3.1 Introduction

In recent years, spectrum management policy has evolved considerably in a number of other countries reflecting changing demand and supply for services reliant upon radio spectrum. The most significant developments to have occurred are the increasing use of market-based mechanisms and the relaxation of constraints on use and technologies.

In most countries, the use of radio spectrum has been, and in many cases remains, very closely managed and supervised, in accordance with an agreed international framework established by the Member States of the International Telecommunication Union (ITU), a UN specialized agency. Such management is predicated on a need to minimize harmful interference and has resulted in the application of what is sometimes referred to as the "command and control" model.

In the traditional model, a spectrum manager specifies detailed rules and constraints affecting how, where and when spectrum can be used and who has access to spectrum. Minimizing harmful interference lies at the heart of the traditional model which places an emphasis on the technical management of radio spectrum. As a consequence, different services are sometimes allocated to different frequency bands, although in most frequency bands, more than one radio service is allocated, and sharing between services takes place under specified technical criteria.

In circumstances where the demand for radio spectrum is below the available supply and innovation is occurring steadily and predictably, as in the past, the traditional model works adequately. In recent years, however, demand for spectrum use has grown significantly, particularly in those frequency bands designated for mobile communications. Furthermore, applications such as mobile telecom services, fixed broadband wireless access services, high definition terrestrial TV services, mobile terrestrial TV services, etc.,Footnote 1 are able to work in the same frequency bands.

The economic value associated with contemporary uses of radio spectrum is often considerable and has grown significantly in recent years. The economic significance and intensified competition among the many different applications using spectrum, particularly for bands lying below 3 GHz, is undermining the effectiveness of the traditional model. As the traditional approach targets technical factors and focuses primarily on harmful interference, it is relatively inflexible and less amenable for dealing with criteria such as economic efficiency.

The inflexibility of the traditional model has been highlighted by a number of commentators. The traditional model usually works by subjecting new equipment to tests regarding interference and this can cause excessive delays to the introduction of new servicesFootnote 2. The traditional model can also lead to costly regulatory errors, such as those which have occurred in Europe, where regulators reserved certain valuable frequency bands for new services such as the terrestrial flight telephone system (TFTS) and the European radio messaging system (ERMES) that have failed to deliver the benefits proclaimed by proponents.

By contrast, in some countries, a more liberalized approach has been taken towards managing the radio spectrum. Most notably in the United States, this has resulted in considerable innovative activity. The use of WiFi, WiMAX and UWB in the U.S. emerged many years before its deployment in many other countries, largely as a result of regulatory actions designed to promote flexibility and unlicensed use.

In recent years, there has been a shift away from relying predominantly on the traditional model, most notably in countries where demand for radio spectrum use is rising fast. These trends in spectrum management policy are discussed in this chapter.

The aim of this chapter is to describe approaches to a system of reformed spectrum management that incorporates a greater reliance on market-based elements, increases flexibility and is forward-looking. To this end, the chapter describes and evaluates the different routes by which some other countries and regions have reformed their systems of spectrum management, or wish to do so. The chapter examines the model of spectrum management in use in the selected countries and regions and the extent to which the countries operate, or intend to operate, flexible systems that permit a more efficient use of radio spectrum.

Two features of more progressive spectrum management policies are liberalization and flexibility.

Liberalization is the extent to which spectrum usage rights can be managed through market-based mechanismsFootnote 3. This covers competitive assignments (such as auctions) through to secondary trading. Within this environment, management is delegated as much as possible to participants within the spectrum arena. Spectrum management agencies in this setting perform the role of 'light-handed' regulation.

Flexibility involves the relaxation of constraints on usage and technologies (either as a commons or in the form of managed shared use), as well as the possible expansion of licence-exempt frequenciesFootnote 4. Very few countries have opened up large parts of the spectrum as a genuine commonsFootnote 5. In practice, most countries regardless of whether they employ the traditional method of spectrum management or more liberalized approaches use licence-exempt bands which permit shared use by certified equipment; for example, use by low power devices (e.g. WiFi) in the 2.4GHz band is often licence exempt.

The benefits of liberalization are strengthened in the presence of greater flexibility and the benefits of flexibility are greater within a liberalized environment. Thus liberalization and flexibility are closely intertwined.

This chapter is divided into two parts:

Part 1 looks at changes to spectrum management policy that have occurred, or are occurring, in a number of case studies comprising countries, regions and institutions. These include the United States, Australia, New Zealand, the European Union, the United Kingdom, Japan, Guatemala, El Salvador, the ITU and the WTO. The main trends occurring are the introduction of market-based mechanisms to handle spectrum allocated and assigned on an exclusive-use basis and increased flexibility. Some countries have progressed much more than others; major changes have already occurred in the United States, New Zealand and the United Kingdom.

In Part 2, we focus on a number of themes associated with new spectrum management policies. These include spectrum trading or secondary trading, auctions, administrative incentive pricing (AIP), digital switchover policies in broadcasting, and the management of public sector use of radio spectrum. We also illustrate their applications in different countries. We conclude the chapter by drawing together the key trends identified.

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Part 1: International Legal, Regulatory And Policy Framework in Liberalising Countries

Here, we consider the institutional components of spectrum management in some key countries and regions: the United States, Australia, New Zealand, the European Union, the United Kingdom, Japan, Guatemala and El Salvador. We provide an overview of spectrum management policy and recent events to affect policy in these countries and regions. We conclude by presenting an overview of the institutional framework governing spectrum management at a global level, with a particular emphasis on the ITU and the role of the World Radiocommunication Conferences.

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3.2 United States

Overview of Legislation, Institutional and Regulatory Framework

The Communications Act of 1934 embodies many of the regulatory principles governing the radio spectrum and this has been substantially amended over the years, most notably by the Telecommunications Act of 1996. For simplicity, throughout this discussion of U.S. policy, the Communications Act is referred to as the ActFootnote 6. The Act emphasizes that the management of the radio spectrum should be done so as to promote the public interest, though the public interest is not defined in the Act and is left to the discretion of the FCC.

The FCC, an independent regulatory agency, is responsible for licensing all private sector and non-federal government use of radio spectrum. The Act reserves for the President the authority to assign radio frequencies for use by the federal governmentFootnote 7. He has delegated this responsibility to the Secretary of Commerce and through this office to the National Telecommunications and Information Administration (NTIA)Footnote 8, a unit of the Department of Commerce. The NTIA is part of a Cabinet agency, and thus reports up to the President, while the FCC as an independent regulatory body is, in some sense, closer to the Congress (see Figure 1).

Figure 1: National Spectrum Management

National Spectrum Management

The complex division of authority and responsibilities among the FCC, NTIA and Congress appears to have a negative impact on the coherence of the strategic planning process for spectrum management. There have been several calls for spectrum management to be placed under a single authority but this has not occurred.

Spectrum management in the United States up until recently, as elsewhere in the world, was organized along the lines of the traditional approach with a focus on frequency allocations, allotments and assignments. Administrative processes were used extensively in making allocation decisions in the public interest; the FCC took into account:

  • public needs and benefits
  • technical considerations
  • apparatus limitations

The centralized administrative approach to allocating spectrum to specific radio services and to assigning spectrum to specific users resulted, in particular, in prolonged delays in some services, most notably cellular mobile telephony servicesFootnote 9.

The Spectrum Policy Task Force (SPTF) Report

In June 2002, FCC Chairman Michael Powell commissioned a task force to perform a comprehensive review of FCC spectrum management practices. This task force created an influential reportFootnote 10 in which a move away from traditional spectrum management (which they characterized as a "command and control" methodology) towards an increased reliance on market-based mechanisms was advocated.

The SPTF report characterized spectrum management approaches as falling into three categories:

  • "Exclusive use" model. A licensing model in which a licensee has exclusive and transferable flexible use rights for specified spectrum within a defined geographic area, with flexible use rights that are governed primarily by technical rules to protect spectrum users against interference.
  • "Commons" model. Allows unlimited numbers of unlicensed users to share frequencies, with usage rights that are governed by technical standards or etiquettes, but with no right to protection from interference.
  • "Command-and-control" model. The traditional process of spectrum management in the United States, currently used for most spectrum within the Commission's jurisdiction, in which allowable spectrum uses are limited, based on regulatory judgmentsFootnote 11.

The SPTF report advocated increased reliance on both the exclusive use and the commons models, and reduced use of traditional allocation mechanisms. The report advocated a great many further market-oriented reforms, notably including:

  • Increased clarity as to the rights provided under any licence.
  • Maximum feasible flexibility for licensees, limited only by interference concerns.
  • A quantitative approach to interference, based on the interference temperature (see Chapter 2).
  • Increased use of spectrum trading, including the ability to lease spectrum on a rapid or underlay basis.
  • Recognition that reliance solely on transmitter obligations may not be appropriate in today's world and possible introduction of performance standards for receivers.

Almost five years on, some of these reforms have been implemented, at least in part. Some of them may be implemented in the next few years. It is important to note that the SPTF Report was an important statement of policy, but it is not a ruling. It has no formal, legal weight.

The President's Spectrum Policy Initiative 2003

In June 2003, President Bush created a Spectrum Policy Initiative to develop recommendations for improving spectrum management policies and proceduresFootnote 12. The initiative is chaired by the Department of Commerce and is intended to promote a spectrum policy that will foster economic growth, ensure national and homeland security, and maintain leadership in communications technology development and services, among other things. It was recognized that the current legal and policy framework for spectrum management had not kept pace with changes in technology and spectrum use. The initiative required the Department of Commerce to consult with the public and to produce, through the auspices of the Federal Spectrum Task Force (FSTF), a set of recommendations for improving spectrum management policies and procedures to increase the efficiency and beneficial use of spectrum by the federal government.

A number of recommendations were presented by the FSTF, including a need to establish economic and regulatory incentives. In this regard, the FSTF recommended developing increased economic incentives for efficient spectrum use particularly expanding the application of secondary markets.

The NTIA in cooperation with the FCC is currently implementing the various recommendations presented by the FSTF. Thus the NTIA is currently tendering a contract to estimate the opportunity cost of a variety of bandwidths which it assigns.

President's Budget 2007: Proposed Amendments to the Act

In 2006, the President's budget for the fiscal year 2007 proposed a number of key amendments to the Act in the area of spectrum managementFootnote 13.

  1. Auctions: It was proposed that the FCC be granted permanent authority to assign licences via auction (competitive bidding). The Department of Commerce has stated that "Spectrum auctions have proven to be an efficient method for assigning licences or permits for certain spectrum-based services"Footnote 14. At the present time the FCC's spectrum auction authority extends through September 30, 2011.
  2. Spectrum Licence User Fees: It was proposed that a new section be inserted into the Act which provides the FCC with authority to establish, assess and collect fees for spectrum licences not assigned by auction "to ensure that licence holders pay the opportunity costs of their spectrum use"Footnote 15.
  3. Orbital slots and satellite spectrum use for domestic satellite services: It was proposed that the FCC be directed to use competitive bidding (auctions) to assign orbital locations and spectrum used solely or predominantly for domestic satellite services, including TV and radio.

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3.3 Australia

Institutions, Regulation and Policy

In Australia, spectrum is managed by the Australia Communications and Media Authority (ACMA). The underlying legislation is the Radiocommunications Act 1992 which provides the ACMA with objectives for spectrum management, including:

  • maximize the overall public benefit from use of spectrum by ensuring its efficient allocation and use;
  • make adequate provision of the spectrum for public and community use;
  • provide a responsive and flexible approach to meeting user needs, to encourage the use of efficient technologies, and provide an efficient, equitable and transparent system of charging for the spectrum.

The Act's main provisions cover:

  • a comprehensive system of licensing radio frequency emissions under three broad licence types (spectrum, apparatus and class licences to be clarified below);
  • market-based assignment of licences (including by auction, predetermined or negotiated price) sitting side by side with traditional administrative assignment of licences;
  • rules and processes for making spectrum plans and band plans;
  • a system of registration of licences with the register to be available to the public;
  • processes for setting standards and technical regulation and device labelling;
  • procedures for review of ACMA decisions; and
  • provisions relating to charging for the use of spectrum.

Shortly after passage of the act, an independent Spectrum Management Agency (SMA) was created, financed on a cost-recovery basis. The SMA was merged in 1997 with the telecommunication regulator Austel to create the Australia Communications Authority (ACA). When the ACA was merged with the Australian Broadcasting Authority to create the Australia Communications and Media Authority (ACMA), the management of broadcast spectrum was allied with that of other frequencies.

Access to spectrum is gained through one of three forms of licence:

Apparatus licences represent the traditional form of licensing in place before the reforms of the 1990s. An apparatus licence generally authorizes the operation of a transmitter or receiver at a particular location. There are 21 apparatus licence types. Licences are issued with technical conditions to manage interference.

Spectrum licences represent the more market-oriented form of licensing in the mixed market/administrative system. They authorize the operation of (non-specified) devices within a defined "spectrum space." The spectrum space can be defined by bandwidth, geographic area and time. Licensees are free to use any type of equipment for any purpose, although they are subject to licence conditions and technical frameworks designed to minimize the risk of interference with other spectrum users.

Spectrum licences are fully tradable and can be divided and aggregated. They are issued for periods of up to 15 years (in practice the great majority of spectrum licences have 15 year terms). They are not renewable (although there are limited provisions for renewal on public interest grounds. No one has yet reached the point in time when they might need to apply for re-issue in the public interest).

Finally, class licences provide open access to spectrum on a shared basis and are the Australian equivalent to the "unlicensed" spectrum provided in some other jurisdictions.

A 2002 report by a government think tank, the Productivity Commission, noted the consequences of running apparatus and spectrum licences in tandem, and proposed a number of measures which generally promoted market-based reforms and flexibility. However, the number of spectrum licences, which grew to more than 600 in the four years following 1996, has now stabilized.

Secondary trading and auction activity are discussed in Part 2 below.

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3.4 New Zealand

Spectrum Regulation Institutional Framework

The institutional make up of spectrum regulation and governance in New Zealand is complex. Including the Ministry in charge of spectrum management, there are several main players involved in spectrum management and spectrum management policy development in New Zealand. These are:

  • The Ministry of Economic Development (MED)
  • Other government entities
  • The Spectrum Management Authority

The MED houses the Spectrum Management Authority and in relation to spectrum policy and spectrum management is responsible for policy. The groups within MED related to spectrum policy are:

  • The IT and Telecommunications Policy Group
  • The Radio Spectrum Policy and Planning Group
  • The Radio Spectrum Management Group

Other government entities include:

  • The Minister of Communications
  • The Cabinet – all spectrum allocations are subject to Cabinet approval
  • The Minister of Broadcasting
  • The Ministry of Culture and Heritage
  • Te Puni Kokiri (The Ministry of Māori Development)
  • The Commerce Commission (the competition law authority)

Together, the Radio Spectrum Policy and Planning Group and the Radio Spectrum Management Group constitute the Spectrum Management Authority (the SMA) in New Zealand. The SMA's tasks are to:

  • advise on policy, spectrum planning and allocation;
  • administer radio apparatus licences pursuant to Part XIII of the Act;
  • advise the Government on what spectrum should be allocated under the spectrum rights regime (SRR) and, where it is to be allocated to private interests, the means by which this should be done;
  • allocate spectrum on the basis determined by the Government;
  • manage certain spectrum blocks that are allocated to Government;
  • maintain and control the Register of Radio Frequencies that holds information on all radio and spectrum licences;
  • represent New Zealand at international meetings e.g. the ITU;
  • mediate in some disputes between private right holders over interference matters;
  • advise the Government on competition law.

The Chief Executive of the Ministry of Economic Development (MED) administers the Radiocommunications Act (1989). The SMA performs its tasks (summarized above) under authority delegated by the Chief Executive (known as the Secretary of Commerce until public sector reforms in 1999).

The Minister of Communications and the Minister of Broadcasting sit at the top of the decision-making process. Together and where appropriate in consultation with the Ministry of Màori Development and with Cabinet approval, they:

  • approve all primary allocations;
  • determine the spectrum which is to be reserved for:
    • social and cultural outcomes (broadcasting or telecommunications), or
    • defence purposes.

The Minister of Communications is, however, where the primary authority resides as far as the Radiocommunications Act is concerned. The Chief Executive of MED may be directed by the Minister in regard to aspects of spectrum management contained in the Act.

The Commerce Commission is jointly the Competition law authority (under the 1986 Commerce Act) and regulator of the telecom sector (under the 2001 Telecommunications Act). Merger rules and rules governing unilaterally anti-competitive practices by dominant firms are administered by the Commerce Commission. Such rules apply to primary and secondary sales of spectrum.

Figure 2: Inter-Ministerial and Agency Spectrum Management Relationships

Inter-Ministerial and Agency Spectrum Management Relationships

Source: Review of Radio Spectrum Policy in New Zealand (2005)

Overview of Management Rights and Licensing Systems

There are three licensing systems that apply to spectrum in New Zealand:

  • The Management Rights Regime (MRR) (applicable to spectrum used primarily for commercial purposes);
  • The Radio Licence Regime (RLR), earlier known as apparatus licensing, (an administrative assignment process which applies to spectrum used for applications in the public interest); and
  • General User Licences (GULs) (low-powered devices such as garage door openers and WiFi).

The licensing framework shares similarities to that in Australia and is illustrated in Figure 3 in relation to the institutional and regulatory environment.

Figure 3: The New Zealand Licensing Regime

The New Zealand Licensing Regime

Notes: *These are managed by the Chief Executive of MED through RSM. Radio licences, Spectrum Licences in State-owned MRs, GULs and GUSLs, are all created by RSM.

Source: WIK-Consult (2005)

The Radiocommunications Act 1989 was pioneering and radically changed the landscape of spectrum management. New Zealand was the first country to redefine spectrum in terms of property rights and to assign it in a tradable form. New Zealand also pioneered the application of competitive assignments based on auctions for radio spectrum, with the first auction held in 1989.

In 2005, the MED published a review of radio spectrum policyFootnote 16. The review provided an overview of current radio spectrum policies and management, and identified areas for prioritization in the coming years. This review noted that, in practice, spectrum trading has not realized the efficiencies hoped for. The small size of the market in New Zealand, entry barriers to sectors using radio spectrum (notably in mobile telecom services) and availability of alternative spectrum in the RLR licensing framework were identified as factors undermining spectrum trading.

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3.5 The European Union

Institutions of Spectrum Regulation

The European Union (EU) does not manage radio spectrum; instead the Member States supervise its management at the national level and in international coordination. However, the management of radio spectrum in EU Member States is influenced significantly and increasingly by European legislation which is aimed at facilitating harmonization of regulation and promoting competition through the liberalization of markets. The key legislation is contained in a number of directives and decisions passed in 2002.

The Radio Spectrum DecisionFootnote 17 laid the foundation for a general EU radio spectrum policy and is binding on all Member States. The objective of the Radio Spectrum Decision is to ensure coordination of radio spectrum policy approaches by facilitating harmonized conditions for the availability and efficient use of radio spectrum.

To achieve this aim, the Spectrum Decision establishes procedures in respect of:

  1. a policy framework for the use of the radio spectrum, taking into account the economic, cultural, scientific and social aspects of Community policy, as well as considerations of security, public interest and freedom of expression with the aim of optimising the use of radio spectrum and of avoiding harmful interference;
  2. a methodology to ensure harmonized conditions for the availability and efficient use of radio spectrum;
  3. the provision of information concerning the allocation, availability and use of radio spectrum in the EU; and
  4. co-ordinating the interests of the European Community in international negotiations on the use of spectrum.

The Radio Spectrum Decision established the Radio Spectrum Committee (RSC) which is given appropriate technical implementation measures by the European Commission with a view to ensuring harmonized conditions for the availability and efficient use of radio spectrum, as well as the availability of information related to the use of radio spectrum.

Technical harmonization matters in the EU are handled by CEPTFootnote 18 (European Conference of Posts and Telecommunications Administrations) which provides detailed guidance to National Regulatory Authorities (NRAs), operators and vendors, seeking to achieve harmonization throughout the region, an objective mandated by the European Union (EU). Within CEPT, the European Radiocommunications Committee (ERC) undertakes spectrum harmonization activities, which has been subsumed within the Electronic Communications Committee (ECC) of the CEPT. The main instrument for the harmonization of frequency allocations in Europe are ERC Decisions.

ERC Decisions often specify the service and the technical standards to be used. ERC Decisions are agreed by consensus and the intention to conform to a Decision is signalled by signing the Decision, an act which is strictly optional. However, if EU Member States do not support measures which the European Commission (EC) would like to see implemented it is possible that the EC would seek to have the measures implemented through EC legislation.

The European Telecommunications Standards Institute (ETSI) develops the harmonized telecommunication equipment standards that help systems to operate freely across the continent, and indeed beyond.

The Radio Spectrum Decision encourages the European Commission to organize consultations to take account of the views of Member States and all other stakeholders. To facilitate more effective consultations, the Radio Spectrum Policy Group (RSPG) was established by separate decisionFootnote 19. The advisory RSPG is composed of one high-level governmental expert from each member state and a high-level expert from the European Commission. The RSPG offers opinions on spectrum management issues on the basis of a simple majority. The RSPG is encouraged to consult extensively and at an early stage with market participants, consumers and end-users.

Since its inception, consultation has focussed on a number of issues, most notably (i) a market-based approach to spectrum management (with an emphasis on secondary trading) and (ii) increasing flexibility in use.

The RSPG launched a consultation on secondary trading of spectrum in February 2004 following a request received from the EC in 2003 for an opinion on secondary tradingFootnote 20. In November 2004, the RSPG published its Opinion on secondary trading. In August 2004, a consultancy report was submitted by the Dutch Presidency to the Council proposing "to move to a new and flexible model of spectrum allocation."Footnote 21 The Council concluded in December 2004 that one should "continue assessing different spectrum management models with a view to more flexible and efficient use of spectrum at European and global level."Footnote 22

In parallel with the consultation exercise of the RSPG, in May 2004, the EC published a 'Study on conditions and options for introducing secondary trading of spectrum in the European Community' completed by consultants Analysys Consulting Ltd, DotEcon Ltd and Hogan and Hartson LLP.Footnote 23 The study reached the following conclusion:

The net gain resulting from the introduction of secondary trading combined with flexible usage rights would amount to €8–9 billion per annum.

In its opinion, the RSPG adopted a cautious stance with regard to spectrum trading considering it to "be beneficial in certain parts of the spectrum" and that "European administrations should introduce secondary trading with due care." The RSPG favoured a phased approach and was sceptical about the application of trading in bands catering for: government services (e.g. defence) and safety of life services (e.g., for civil aviation); terrestrial broadcasting services and broadcasting-satellite services, and scientific services (e.g. radio astronomy).

In September 2005, the EC published a communication on market-based approaches to spectrum management.Footnote 24 It proposed a coordinated introduction of spectrum markets across the EU and noted that roughly one-third of the spectrum below 3 GHz could have flexible usage rights and be tradable by 2010. Alongside the market-based approach, the traditional model was expected to continue to play a role where important public interests are at stake (e.g., defence and aviation, scientific research, earth observation satellites, etc.).

The Commission has proposed that in the period up to 2010, it will put into practice at the EU level:

  • the right to trade individual rights to use frequencies in a selection of frequency bands for terrestrial electronic communications services, and
  • the right to use these frequencies in a flexible manner.

To achieve the above, the EC will propose necessary regulatory measures as part of the review of the regulatory framework for electronic communication services, which started in mid-2006.

Further, the RSPG was invited by the Commission to prepare an Opinion on a co-ordinated EU spectrum policy approach for wireless communication radio access platforms, under the acronym WAPECS (Wireless Access Platforms, later changed to 'policies' for Electronic Communications Services).

The outcome of the process led to the adoption of the long-term objective of facilitating rapid access to spectrum for new technologies. For WAPECS frequency bands, technological neutrality and flexibility in the future use of the spectrum should be ensured. Equally, service neutrality should be achieved, subject to specific obligations, in the sense that ECS in any WAPECS band should be provided over any type of network and no frequency band should be reserved for the exclusive use of a particular service. This would clearly require a transition which the RSPG believed would be facilitated by adopting implementation dates as guidelines.

This modest step forward was soon to be overtaken by more radical proposals. The Commission published some policy pronouncements relating to the fulfillment of the Lisbon Agenda under the title of i2010.Footnote 25 Initially these noted the desirability of spectrum reform in fairly general terms but subsequently in September 2005 the Commission published a Communication on a market-based approach to spectrum management in the European Union (Com (2005) 400 final) which noted that a fragmented approach to spectrum reform would make it more difficult to achieve the Lisbon objectives. Accordingly it proposed the co-ordinated removal of restrictions on spectrum use in all Member States in order to promote an open and competitive digital economy.

In practice it was suggested that substantial amounts of spectrum, including roughly one third of the spectrum below 3 GHz (the spectrum best suited for terrestrial communications), could possibly be made subject to tradable and flexible use by 2010. Clearly the Communication is a key document in which the Commission nailed its colours to the liberalization mast. If the plan were realized, it would represent a significant step towards the desired end state set out above, even though much non-telecommunication-related spectrum, which makes up much of the remaining two-thirds of spectrum below 3 GHz, would not be covered. The Communication was also a precursor of the more comprehensive proposals contained in the June Communication on reform of the ECS regulatory framework. We summarize these below, but first step back to consider the Commission's options.

Article 4(2) of the Competition DirectiveFootnote 26 states that "the assignment of radio frequencies for electronic communications services shall be based on objective, transparent, non-discriminatory and proportionate criteria." Thus the main methods of licence assignment (auctions and comparative selection) must satisfy these criteria. Article 9(1) of the Framework DirectiveFootnote 27 reiterates this position. The Framework Directive also requires Member States to "ensure the effective management of radio frequencies for electronic communications services" (article 9(1) Framework Directive). Closely related to this is the requirement for Member States to promote competition in networks and services by, among other things, "encouraging efficient use and ensuring the effective management of radio frequencies" (article 8(2)(d) Framework Directive).

Harmonization

Article 9(2) of the Framework Directive requires Member States to promote harmonization of use of radio frequencies across the EU in accordance with the Radio Spectrum Decision. Within the EU, harmonization of spectrum usage has been successfully implemented in some spectrum bands, allowing for more rapid implementation of new technologies and the reaping of scale economies. However, most frequencies are not coordinated at the EU level and diverging Member State policies continue to limit the development of the internal market.

It has been argued by the EC that introducing spectrum markets in a coordinated fashion in the EU could reduce such problems. It is believed that introducing spectrum tradability at the EU level would bring about the conditions for seamless cross-border services and rapidly improve the competitive position of the EU.Footnote 28

A recent example of pan-European harmonization has been taken in the mobile satellite services systems where the EC has harmonized via a decision for the use of radio spectrum around 2 GHz.

Spectrum Trading

Article 9(3) of the Framework Directive permits Member States to allow spectrum trading involving the transfer of rights to use radio frequencies between undertakings.

Flexible Use of Spectrum

The starting point for an evaluation of the current position with respect to flexibility of use is Article 8(2) (d) of the Framework Directive. Article 8(2) (d) provides that National Regulatory Agencies (NRAs) must promote competition by "encouraging efficient use and ensuring the effective management of radio frequencies ...".

In order for Member States to "encourage" efficient spectrum use, a necessary precondition is arguably that Member States are able to ensure flexibility in its use.

The European Commission recognizes the importance of flexibility of use in the Communication on the Review of the EU Regulatory Framework for electronic networks and services:

"Based on common EU rules, greater flexibility in spectrum management could be introduced by strengthening the use of general authorizations whenever possible. When not possible, owners of spectrum usage rights should not be unduly constrained but subject to certain safeguards, have the freedom to provide any type of electronic communications service ('service neutrality') using any technology or standard under common conditions ('technological neutrality')."

The EC regards technology and service restrictions as increasingly incompatible with convergence. The EC anticipates a trading regime that embraces flexibility, i.e., the right of a spectrum holder to use it for any service subject to technical constraintsFootnote 29. Policy in the EU embraces the principle of technological neutrality and service neutrality.

Technological neutrality means that there should be a minimum of constraints applied while ensuring that interference is a ppropriately dealt with. However, in some cases the necessary interference management imposes constraints that in practice are more beneficial for one technology than for another.

Service neutrality means that the choice of service offered via spectrum usage rights is made by the rights holder. It is widely recognized that constraining the services for which the spectrum can be used is generally not justifiable from the standpoint of technical spectrum management. However, there are broad categories defined at the ITU level through the Radio Regulations, where rules on the avoidance of cross-border interference are imposed. According to the EC, "in the field of terrestrial electronic communications, these categorizations are rapidly becoming obsolete."Footnote 30

Lack of flexibility in spectrum management has, according to the EC, led to a spectrum bottleneckFootnote 31 for new radio technologiesFootnote 32. Detailed ex ante administrative decisions and a requirement for prior regulatory approval often delays or even prevents the introduction of new products. To render spectrum distribution more flexible, the application of spectrum markets (secondary trading) and licence-exempt use ("commons" model) have been embraced by the EC.Footnote 33

The Commission's June 2006 Proposals

The Commission's Communication on the Review of the EU regulatory Framework for ECS (SEC(2006) 816–7)Footnote 34 proposes (at 5.1) that:

"Based on common EU rules, greater flexibility in spectrum management could be introduced by strengthening the use of general authorizations whenever possible. When not possible, owners of spectrum usage rights should not be unduly constrained but subject to certain safeguards, have the freedom to provide any type of electronic communications service ('service neutrality') using any technology or standard under common conditions ('technological neutrality')."

"Using criteria based on economic efficiency, selected bands agreed at EU level via a committee procedure would become available for use under general authorizations, or subject to secondary trading across the EU. Common authorization conditions for the use of the radio spectrum would also be enacted with this procedure in appropriate cases."

The accompanying staff working paper illustrates on page 15 possible decisions to be taken under the committee procedure noted above:

  • identification of the bands where the use of spectrum throughout Europe should be made subject to general authorizations only (e.g. unlicensed bands) and co-ordination of the conditions applicable in those bands;
  • identification of bands where spectrum rights should be made tradable (we assume that flexibility is intended as well).

Finally, the Impact Assessment accompanying the Communication favours the second (of three) options for spectrum management described as 'adapting the regulatory framework and improving co-ordination at EU level through the wider use of committee mechanisms.' (The rejected options are doing nothing and creating a European spectrum regulator.) It states (page 17) that under the chosen option:

"Where general authorizations are not possible, reciprocal (comity) decisions could designate exclusive spectrum usage rights in certain bands as tradable in all Member States, pursuant to a general provision introduced in the Framework and Authorization directives. In those cases, market mechanisms would replace administrative decision making for the assignment of spectrum of spectrum. Exceptions to such spectrum trading would have to be limited in time and scope and duly justified."

The proposals thus embody a strong attachment to the key concepts of technology neutrality and service neutrality (flexibility in use). They entail extensive use of the Spectrum Decision but little by way of thorough-going reform of the Directives.

An EC CommunicationFootnote 35 on activities undertaken under the RSD emphasized the strong cross-border dimension of spectrum management and the need to avoid harmful interference between countries. A coordinated spectrum policy in the EU was proposed which would lower the barriers to access to spectrum and allow for convergence by removing artificial restrictions.

Analogue Switch-off

On 8 February 2007, the EC issued another communication emphasising the need for greater flexibility in spectrum managementFootnote 36. In this document, the EC stated that the deployment of innovative wireless services and technologies is increasingly hampered by the reservation of certain spectrum bands for narrowly defined services. The policy emphasis in the communication looks at those frequency bands where there are individual rights of use (licence-exempt bands are to be considered at a later stage).Footnote 37

The EC has identified 1,350 MHz of spectrum where current legal restrictions should be re-examined with a view to permitting more flexible usage as shown in Table 1.0. These bands are today used by the broadcasting, mobile and information technology sectors. The EC is also examining the validity of the GSM DirectiveFootnote 38 with the aim of allowing operators to implement new, more efficient and innovative technologies, such as UMTS, within the 900 MHz band.

The EC is requiring Member States as a matter of urgency to remove restrictive conditions wherever possible in order to facilitate flexibility, rapid access to spectrum and competition.

Table 1.0 Initial set of frequency bands under investigation in the EU for more flexibilityFootnote 39

Initial set of frequency bands under investigation for the implementation of more flexibility (1350 MHz in total)

  • 470–862 MHz: the band is used for broadcasting today, but issues arising from the digital dividend as well as convergence of broadcasting and mobile services call for action;
  • 880–915 MHz / 925–960 MHz as well as 1710–1785 MHz / 1805–1880 MHz: these bands are used for GSM mobile services today, but issues surrounding the introduction of 3rd generation mobile services and the continuing restrictions in the GSM Directive call for action;
  • 1900–1980 MHz / 2010–2025 MHz / 2110–2170 MHz; these bands are used for 3rd generation mobile services (IMT-2000/UMTS) today, but market developments point towards the introduction of broadcasting type services as well as broadband connections in residential and rural areas in the light of convergence;
  • 2500–2690 MHz (the 2.6 GHz band); this band (still to be licensed) is intended for used by 3rd generation mobile services (IMT-2000/UMTS), but it is of equal interest for the provision of broadband using other technologies;
  • 3.4–3.8 GHz: this band is used for broadband connections to the customer's remises, but there is of equal interest for the provision of mobile services within the EU. However, it is also intensively used for satellite communications within Russisa and a number of African countries.

In response to the EC's communications, the European Parliament has published a statement on radio spectrum policy.Footnote 40 The European Parliament reaffirms the principles of technological and service neutrality. The EP also "Rejects a one-sided market model of spectrum management and urges the Commission to reform the system of spectrum management in such a way as to facilitate the coexistence of different types of licensing models, i.e. traditional administration, use without numerical restrictions and new, market-based approaches." The EP also "considers that the administrative method of allocating spectrum rights could be supplemented by Member States opening up more frequencies to unlicensed, and therefore possibly shared and by allowing spectrum trading on condition that this opening up does not harm the continuity and quality of services."

Concluding Remarks on EU Policy

The EU, led principally by initiatives launched by the European Commission, is seeking to introduce three elements to European spectrum policy and management:

  1. Harmonization across Member States
  2. Flexibility
  3. Greater application of market mechanisms – notably trading

A few Member States have implemented or are in the process of implementing 2 and 3 above.Footnote 41

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3.6 The United Kingdom

Institutional framework for spectrum regulation

In the United Kingdom, spectrum is regulated by OFCOM (Office of Communications). OFCOM has statutory duties under the Communications Act 2003 to further the interests of citizen-consumers in relation to communication matters and to further the interests of consumers in relevant markets, where appropriate, by promoting competition and to secure optimal use of the radio spectrum. Encouraged by a favourable legislative environment, OFCOM is modernizing the spectrum regulatory framework and introducing market-based mechanisms.

Spectrum regulation model

Until the late 1990s, the U.K. applied the traditional approach to most spectrum used commercially and by public agencies including some shared unlicensed access to a few frequency bands. Although this approach was regarded to be appropriate in the past, a more flexible approach was identified as required in a major review of spectrum management and policy conducted by OFCOM.Footnote 42 This document envisaged accomplishing a major switch in the balance between traditional and market-based methods of spectrum management by 2010, reducing the weight of the latter from 96 to 22% and increasing the weight of the latter from 0 to 71%. (The balance is taken up by unlicensed spectrum.) The strategic framework also envisages a large programme of spectrum awards, to be assigned via auctions.

Table 2.0 OFCOM Market-Based Allocations
Spectrum Management method % of Spectrum allocated in:
  Year 2000 Year 2010
Administrative 96% 22%
Market 0% 71%
Commons 4% 7%

OFCOM: Spectrum Framework Review Statement, 2004, p.4.

Note: Table 2.0 is based on a particular method of weighting spectrum in different frequencies, described in the source.

Thus OFCOM is currently shifting U.K. spectrum policy towards a flexible system of spectrum management through the liberalization of spectrum usage rights and spectrum trading. A gradual approach is being adopted, embracing progressively more bands and greater flexibility in use but relying on competitive assignment methods. This progression is exemplified by OFCOM's intention to apply service and technological neutrality in a forthcoming spectrum assignment involving frequencies currently used to support terrestrial analogue TV broadcasting, the proposed use of spectrum user rights in a forthcoming auction of the L Band (see Section 5.4 below – is this the correct reference?), and in other auctions.

The United Kingdom has also adopted the policy of extending market methods of spectrum management to public sector spectrum, giving public sector users the right to trade or lease their spectrum and the obligation to go into the market place to acquire additional spectrum. OFCOM is also extending the application of administrative incentive pricing (AIP)Footnote 43 to public sector uses. AIP in the U.K. is now applied, or is planned to be applied, to much of the spectrum used for defence, emergency services and public service broadcasting. This will be extended to aeronautical and maritime communications and radar.Footnote 44 A number of policy themes being adopted by OFCOM are discussed further in Part 2 of this chapter.

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3.7 Japan

Institutional framework for spectrum regulation

The Ministry of Public Management, Home Affairs, Posts and Telecommunications (MPHPT) is responsible for policy regarding frequency management in accordance with the Radio Law of 1950 as amended (Radio Law). The Radio Law requires equitable and efficient use of radio spectrum. The Telecommunications Council within the MPHPT sets out the vision for radio spectrum policy. The Telecommunications Bureau in the MPHPT acts as the spectrum management agency.

Recent PolicyFootnote 45

In August 2002, the Telecommunications Council launched a consultation process on radio spectrum policy and reported in July 2003. This led to new guidelines being published in October 2003 on spectrum refarming. At the beginning of 2002, a study group orchestrated by MPHPT commenced looking into the effective use of spectrum. This culminated in the submission to the Diet of a draft revised Radio Law to allow for refarming.

Japanese policy has focussed largely on refarming and compensation schemes. Compensation would take account of the economic costs to incumbent licensees (such as removal costs and salvage values) and use revenue from additional spectrum user fees from the new spectrum users. The MPHPT is also looking to identify more frequency bands capable of supporting the commons model.

Spectrum user fees were introduced in 1993 based on the recovery of administrative costs. There has been recent discussion within the MPHPT to revise spectrum user fees in line with opportunity cost principles.Footnote 46 The MPHPT does not use auctions to assign licences and prefers to use comparative selection methods.

Trading of spectrum appears not to be possible in Japan.

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3.8 Guatemala and El Salvador

Guatemala and El Salvador are two small Central American countries (with populations of 12,728,111 and 6,948,073 respectively) which decided in 1996/97 to adopt a simple but effective form of spectrum market which, in the case of non-public sector spectrum, gave private parties exclusive control over use of bandwidth and confined the regulator to defining, issuing and protecting spectrum rights. This account focuses on Guatemala; the regime in El Salvador is similar but less well documented.Footnote 47

In 1996, a new Ley General de Telcommunicaciones was passed which switched the management process from a top-down to a bottom-up one. Any person or firm could request title to frequency bands not assigned to other users, and those and existing assignments became usufruct titles, offering the right to use and enjoyment by the right holder and not subject to being reclaimed by the Government.

The so-called titulos de usufuncto de frecuencias (TUF) created could be leased, sold, subdivided or aggregated at will and last for 15 years (renewable on request); they are thus virtually private property. Regulation is restricted to setting aside bands for use by the state and adjudicating interference disputes which are not resolved by mediation.

A physical TUF is a paper certificate listing the frequency band, hours of operation, maximum transmitted power, maximum power emitted at the border, geographic territory and duration of right.

Following the enactment of the law, a large number of TUFs have been auctioned – 3,985 in all, between 1996 and 2004; more than 75% of them in the three years 1997–1999. See Figure 4.0 below.

Figure 4: TUFs Auctions from 1997–2004

TUFs Auctions from 1997–2004

Source: Juan Pablo Velásquez, Superintendcia, Superintendencia de Telecomunicaciones de Guatemala, 2006

The scale of a TUF is accomplished by its endorsement by the seller, the buyer registering its new rights with the independent spectrum body, SIT. The scale of such trading is discussed in Part 2 below.

According to Ibarguen, one of the prime movers behind the reform, writing in 2003,

"one of the reasons for the vitality of the TUF market may be that interference problems have been negligible. TELGUA, the largest private spectrum owner, has reported just one interference problem since 1996."Footnote 48

The system is also designed to have problems solved by private negotiation and then private arbitration.

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3.9 Global Spectrum Management: The Role of the ITU

Institutional framework for spectrum regulation

The ITU is the lead United Nations agency for information and communication technologies. As the global focal point for governments and the private sector, ITU's role in helping the world communicate spans three core sectors: radiocommunication, standardization and development. The ITU's headquarters is located in Geneva, Switzerland, and its membership includes 191 Member States and more than 700 Sector Members and Associates.

The ITU's Radiocommunication Sector (ITU-R) plays a vital role in the international management of the radio-frequency spectrum and satellite orbits, finite natural resources which are increasingly in demand from a large number of services such as fixed, mobile, broadcasting, amateur, space research, meteorology, global positioning systems, environmental monitoring and, last but not least, those communication services that ensure safety of life on land, at sea and in the skies. ITU-R is the only ITU sector which includes a treaty-based component, the Radio Regulations.

This international framework for radio regulation exists primarily to protect against harmful interference, and also for services of an international nature. Examples include satellites, maritime and aeronautical services. International harmonization of allocations and other operational matters is necessary to allow users to operate safely and effectively (e.g. international air travel, ships at sea, etc.). Supporting these objectives, the International Telecommunication Union's Radiocommunication Sector (ITU-R) provides the overall, global framework for spectrum use in the form of the International Frequency Allocation Table (Article 5 of the Radio Regulations) and the other Articles of the Radio Regulations. The International Table of Frequency Allocations allocates spectrum to broad categories of service such as fixed, mobile, broadcasting, radionavigation, etc. Services are allocated on a primary or secondary basis.

The ITU Radio Regulations

The ITU Radio Regulations (RR) and ITU Regional Agreements have the status of treaties once signed and ratified by individual Member States. New provisions in the Radio Regulations and modifications to existing provisions are written and agreed upon by ITU Member States at World Radiocommunication Conferences which are held every three to four years. Member States that do not abide by the RR cannot expect any protection from interference. Clearly it is easier for countries that are remote islands (e.g., New Zealand and Australia) to use some spectrum in accordance with No. 4.4Footnote 49 of the ITU Radio Regulations than it is for countries which are proximate to many others (e.g. the U.K. and the rest of Western Europe).

In using the radio frequency spectrum Member States of the ITU are required:

  • to endeavour to limit the number of frequencies and the spectrum used to the minimum essential to provide the necessary services and to apply the latest technical advances as soon as possible;
  • to bear in mind that spectrum and orbit resources are limited and that they must be used rationally, efficiently and economically in conformity with the Regulations so that countries may have equitable access to said resources.

It is further required that all stations must be operated in such a manner as not to cause harmful interference to the authorized radio services of other Member States which operate in accordance with the Regulations.

The Regulations therefore set out to:

  • facilitate equitable access to and rational use of spectrum and orbit resources;
  • ensure the availability and protection from harmful interference of frequencies provided for distress and safety purposes;
  • assist in the prevention and resolution of cases of harmful interference between the radio services of different administrations;
  • facilitate the efficient and effective operation of all radiocommunication services;
  • to provide for, and where necessary, regulate new applications of radiocommunications technology.

It is difficult to summarize the contents of the Radio Regulations and, in any event, it is not necessary to present the detail for the purposes of this report. It is however useful to have an overview of the issues that the Regulations address. The main body of the text is made up of several Articles supported by Appendices, Resolutions and Recommendations, the latter not to be confused with ITU-R Recommendations. Some of the most important provisions of the Radio Regulations are those, inter alia, that:

  • define the different radio services and many other important terms;
  • outline the conditions for making and using frequency assignments including the Table of Frequency Allocations;
  • specify the procedures relating to frequency co-ordination and notification;
  • describe provisions relating to interference and administrative issues;
  • specify the technical, operational and administrative constraints associated with various radiocommunication services;
  • outline provisions specifically associated with distress and safety communications;
  • outline provisions specifically associated with aeronautical services;
  • outline provisions specifically associated with maritime services.

It is important to appreciate that, while quite detailed, the Radio Regulations provide a high-level flexible framework within which administrations operate. Following the provisions of the Radio Regulations for various types of radiocommunication stations does not mean that different systems whose operations would be permitted in the international regulatory sense will be able to coexist since there is considerable flexibility in this international framework from which Member States can make choices. In the interests of flexibility, efficiency and the desire of Member States to exercise control, the Radio Regulations only assist in arriving at a situation where coexistence might be achieved.

Since one of the underlying principles of the Radio Regulations is interference mitigation, it might be useful to note provisions 1.166 to 1.169 of the RR which are set out in Table 3.0 below

Table 3.0 ITU Radio Regulations

RADIO REGULATIONS – PROVISIONS 1.166 TO 1.169

1.166 interference: The effect of unwanted energy due to one or a combination of emissions, radiations, or inductions upon reception in a radiocommunication s ystem, manifested by any performance degradation, misinterpretation, or loss of information which could be extracted in the absence of such unwanted energy.

1.167 permissible interference: Observed or predicted interference which complies with quantitative interference and sharing criteria contained in these Regulations or in ITU-R Recommendations or in special agreements as provided for in these Regulations.

1.168 accepted interference: Interference at a higher level than that defined as permissible interference and which has been agreed upon between two or more administrations without prejudice to other administrations.

1.169 harmful interference: Interference which endangers the functioning of a radionavigation service or of other safety services or seriously degrades, obstructs, or repeatedly interrupts a radiocommunication service operating in accordance with Radio Regulations.

1.167.1 and 1.168.1 The terms "permissible interference" and "accepted interference" are used in the coordination of frequency assignments between administrations.

Note: The above definition of harmful interference is also found in the ITU Constitution (Provision CS1003)

In addition to the types of interference defined above, there are also a number of "trigger" levels which are specified in the Radio Regulations with a view to determining whether co-ordination is required or not. Most of the trigger levels in the Radio Regulations are related to satellite services as these are of a more global nature. However, co-ordination trigger levels are often agreed between administrations having territorial boundaries. These bilateral trigger levels are often based on ITU-R Recommendations.

All of these interference levels, the co-ordination trigger level, the permissible interference level and the accepted interference level (once agreed between administrations) are quantified. The most fundamental of them all however, namely harmful interference, is not. In terms of international obligation therefore, it is difficult to know exactly what should be met without stepping back and taking account of the other interference levels that are defined. In any event, other administrations are not likely to accept an interference level that falls just below the harmful interference level (if this can be agreed) but above the permissible interference level even if the legal situation deems this as satisfactory.

The main question that arises from the key parts of the framework of the Radio Regulations as identified above is, "How, and under what circumstances, can you define radio operations within your own territory so that they do not cause (harmful) interference to systems managed by other administrations?"

ITU-R Recommendations

ITU-R Recommendations, as their name implies, do not have the same legal status as the Radio Regulations. They are intended to be advisory rather than mandatory. However, it can be noted that most Member States take them sufficiently seriously that they are widely acknowledged and implemented in practice.

There are some special cases in the Radio Regulations where specific ITU-R Recommendations are incorporated by reference. In these instances where the incorporation makes it clear that it is obligatory (i.e., the use of the word "shall"), the ITU-R Recommendations concerned will have a higher legal status and will be binding in the same way that the Radio Regulations are.

As noted earlier, the fundamental requirement not to cause harmful interference is not quantified and therefore difficult to assess. It is probable that any dispute regarding interference would revert to criteria that have been quantified, namely permissible interference and accepted interference or things like protection ratios or quality of service values, etc. Values associated with these criteria are likely to be based on ITU-R Recommendations. Under these circumstances, it can be seen that ITU-R Recommendations take on a level of importance not immediately obvious from their legal status.

ITU-R recommendations also play an important role in the standardization and harmonization of radiocommunication equipment. While voluntary, such "standards" offer many advantages including allowing economies of scale in the production of radio equipment, facilitating roaming, facilitating interoperability, etc. The commercial value to manufacturers of being able to say that their radio equipment meets relevant ITU-R Recommendations is significant as it instils confidence on the part of purchasers of such equipment.

The ITU and National Spectrum Management

While it is up to sovereign Member States to manage the radio-frequency spectrum nationally within the ITU's international regulatory framework, the ITU does assist in this in several ways through its Radiocommunication and Development Sectors.

ITU-R Study Groups, in which more than 1500 specialists participate, not only prepare the technical bases for ITU Radiocommunication Conferences but also develop Recommendations, Reports and Handbooks, some of which relate to national frequency management. While most of the ITU-R Study Groups deal with specific radio services (i.e., fixed, mobile, broadcasting, etc.), ITU-R Study Group 1 deals with spectrum management, including spectrum engineering techniques; spectrum management methodologies and economic strategies; and spectrum monitoring.

ITU-R Study Group 1 has published a Handbook on National Spectrum ManagementFootnote 50 (edition of 2005) to assist national spectrum managers. This handbook covers all aspects of national spectrum management; in Chapter 6, issues related to spectrum economics are addressed including the various licensing approaches, spectrum pricing and spectrum user rights.

In defining spectrum user rights, it is noted that national governments should retain sufficient spectrum rights to: (1) act as the international contact point for radiocommunication issues, (2) take responsibility for all radio signals originating on its territory, and, (3) meet its obligations under international agreements and treaties. Governments should also retain the right to reclaim spectrum before the licence has expired should it become necessary, for example, to meet the requirements of an international agreement to reallocate the spectrum on a regional or global basis.

The handbook also addresses transferable and flexible spectrum rights as well as secondary markets. It recommends that spectrum user rights be defined somewhere between total flexibility, which may result in interference to other users of the spectrum, and highly restrictive technical parameters which might not provide sufficient flexibility to achieve economic efficiency. Secondary markets are said to require both transferable spectrum user rights and a licence with adequate security of tenure and duration to operate. The handbook goes on to state that the ability to trade spectrum would encourage its efficient use by providing a mechanism for licensees to obtain an economic return on any spectrum they no longer need. Any transfer of rights would need to be registered with the spectrum management authorities and would need to be regulated to avoid abuses (e.g., there would need to be competition-related legislative provisions to prevent hoarding and price-fixing).

ITU-R Study Group 1 has also produced a Report on Economic Aspects of Spectrum Management (SM.2012–2Footnote 51 (edition of 2005). This report cites the experiences of several countries that have applied various economic techniques to spectrum management. The report also comments on transferable and flexible spectrum user rights. It notes that while auctions can be best suited to providing an initial economically efficient distribution of the spectrum resource, they will not ensure that spectrum continues to be used in an economically efficient manner in the future. As stated in the handbook referenced above, the report notes that the least restrictive form of transferable property rights permits unlimited technical flexibility without regard to an allocation structure, provided that harmful interference is not caused outside the assigned band. This system, if applied to all frequency bands, would result in an unfettered spectrum market.

The report goes on to note, however, that a totally free market spectrum approach has not been implemented by any country. At the other extreme, the most restrictive form of property rights permits transferability only within the confines of a given allocation and only within strictly defined technical parameters. This approach has the advantage of ensuring that the entity within the allocated service that values a particular frequency or band of frequencies the most will be able to use that spectrum while minimizing the possibility of interference. However, by restricting technical flexibility to ensure interference control, economic efficiency may also be significantly reduced. The report goes on to state that if property rights are simply vested in incumbent licensees, any resource rent accruing to the spectrum in question is captured by the incumbent rather than the spectrum regulator unless the rents have been captured initially via an auction or through licence fees.

The report notes that a middle course with respect to property rights is to specify emission rights within a given allocation which may be broadly defined (e.g., broadcasting or mobile). This approach which has been implemented for some frequency bands in several countries (as described in more detail in the present report) can lead to an increase in economic efficiency because technical parameters can be chosen by the licensee and licensees can freely transfer their spectrum user rights in whole or in part to entities that value those rights more highly. However, the report suggests that this freedom may increase the potential for harmful interference among licensees because technical inputs are not specified. Specifying licensees' emission rights rather than specifying what inputs licensees must use places a heavier interference control burden on licensees. However, licensees can be allowed to negotiate their emission rights (e.g., one licensee may agree to accept additional interference in exchange for monetary compensation). Depending on how often disputes requiring resolution by the spectrum regulator or the courts arise, permitting such negotiations may prove advantageous or disadvantageous.

The report observes that if spectrum trading is to be allowed, it is important that the government retains responsibility for the country's international obligations. Ways of representing spectrum users' views in the relevant international forums should be found, although in many countries, including Canada, these mechanisms already exist.

The ITU's Development Sector also provides assistance with respect to national frequency management, particularly to developing countries. This assistance takes many forms include direct funding assistance for the procurement of spectrum management equipment; provision, with the assistance of the Radiocommunication Sector, of software tools for spectrum management; sponsoring courses, seminars, studies, colloquia, symposia, etc.

Elsewhere in the present report, reference is made to a review of spectrum management in West Africa jointly sponsored by the ITU and the European Union. This review established 19 guidelines, some of which are relevant to the present report. One guideline proposed that generic licensing of spectrum should be adopted for some frequency ranges which would permit more flexibility and benefit users. Another guideline suggested that spectrum trading could be considered, likely limited to a few frequency bands in the first instance. Any trading mechanisms should minimize transaction costs and allow operators to change the use of traded spectrum within international allocations and the national frequency management framework.

One in a series of Global Symposia for Regulators sponsored by the ITU was held in Yasmine Hammamet, Tunisia, in November 2005. It established some best-practice guidelines for spectrum management to promote broadband access. One of those guidelines stated that, "Spectrum can be allocated in an economic and efficient manner, and by relying on market forces, economic incentives and technical innovations."

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3.10 Global Spectrum Management: The Role of the WTO

Institutional framework for spectrum regulation

Established on January 1, 1995, as a result o f the Uruguay Round, the WTO replaced the GATT as the legal and institutional foundation of the multilateral trading system of member countries. It sets forth the principal contractual obligations determining how governments frame and implement domestic trade legislation and regulations. And it is the platform on which trade relations among countries evolve through collective debate, negotiation and adjudication.

The WTO Agreements focus on the desirability of a market that is as free from restriction as is possible. Thus the General Agreement on Trade in Services (GATS) requires that any member/group (e.g., The European Conference of Postal and Telecommunications Administrations (CEPT)) operating under the auspices of the GATS ensure that procedures for the allocation and use of frequencies should be carried out in an objective, timely, transparent and non-discriminatory manner.

One interpretation of this, in terms of the deployment of radio equipment, is that it is not acceptable to specify national/regional equipment or interface standards to the exclusion of other standards unless it can be demonstrated that another standard will cause harmful interference.

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Part 2 Themes in Contemporary Spectrum Management

It is now helpful to discuss a number of themes that have occupied spectrum management authorities in recent years. We start by looking at liberalization of use, flexibility and spectrum trading. We then give a brief overview of the digital switch-over in broadcasting and end with the management of spectrum used by the public sector.

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3.11 Liberalization of Use/Flexibility

The traditional framework is highly prescriptive and often requires very detailed regulatory oversight. For example, it may prescribe the applications that can use spectrum (e.g., mobile services, terrestrial point-to-point links, etc.), the technology to be used, power levels, localization and height of the transmission masts, as well as bandwidth.

Liberalization means removing, or at least reducing, these restrictions. Introducing liberalization and spectrum trading in parallel would facilitate the migration of spectrum usage rights to more efficient uses. This boosts efficiency, furthers innovation and makes competition more intense. However, in so doing, it must be considered that specific restrictions are necessary to avoid harmful interference, while other requirements are necessary to satisfy international agreements.

In a fully liberalized environment, there would be no restrictions on spectrum usage whatsoever. Extensive liberalization tends to offer the advantage that each frequency band is used for the most attractive service. In other words, there are no stipulations that would create an artificial scarcity of certain applications. This would also tend to ease the scarcity of spectrum for economically attractive applications such as mobile communications or broadcasting, thereby providing a possible boost to competition in these markets. However, flexible usage has the potential to cause considerable interference; hence, in certain areas, especially internationally where it can be a treaty obligation, it can actually make very good sense to harmonize conditions of use.

Although carefully defined rights of use should impose as few restrictions as possible, it is nevertheless important to establish a series of conventions. Every system that governs spectrum usage rights has three broad dimensions:

  • the spectrum bandwidth which can be used;
  • the geographical area where the spectrum bandwidth can be used (3 dimensional); and
  • the period of time during which it can be used.

The following table provides a more detailed overview of the main elements that need to be defined in any regime governing rights of use.

Table 4.0 Elements of spectrum usage requiring definition
Element Description
Nature of rights Tradable spectrum access licences defined in terms of frequency, geography, emissions. Change of use within ITU Radio Regulations. Right to sign leasing agreements.
Type of licence Possibility of partitioning assigned spectrum into tradable units, tradability of spectrum assigned to government bodies.
Method for transferring control Spectrum regulatory authority decides on mechanism; parties apply for regulatory authority approval of an intended trade; no restrictions on transfer if new licensee agrees to meet all the conditions within the original licence.
Transfer of control Current spectrum use registered with the regulatory authority in a central database.
Aggregation/partitioning Is this permitted or not? It may not be permissible if it is exclusively reserved for a specified public use (e.g. military use).
Duration How long the spectrum may be used for; the period during which trading is possible.
Technical parameters Boundaries set for point at which negotiations between neighbours in the geographic or frequency domain (for managing interference) are triggered.
Method of changing interference parameters Framework for negotiations between spectrum users, role of regulatory authorities as referee.
Service/technology constraints Change of use allowed within ITU Radio Regulations and bilateral or multilateral agreements.
Compliance with licence conditions Ensuring that licensee and/or lessee comply with conditions and obligations.
Process for enforcing interference conditions Licensees negotiate with each other. Regulator can take action if privately negotiated solutions breach interference norms and standards.

Source: Adapted from Cave, Review of Radio Spectrum Management (2002, p. 116).

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3.12 United States

The United States has been a clear leader in regard to spectrum liberalization. Liberalized spectrum management primarily relates to the non-government spectrum, whereas the usual framework for government spectrum continues to be traditional. In most, but not all cases, industry and consumers have been pleased with the results. Some are now arguing that the U.S. needs to become much more aggressive about liberalization in order to reap the benefits of new technology, notably cognitive radio and software-defined radio.

The United States has moved progressively in the direction of flexible use of spectrum, in conjunction with generally liberalized practices. The Communications Act specifically authorizes the FCC to permit flexible use where:

  1. such use is consistent with international agreements to which the United States is a party;
  2. the Commission finds, after notice and an opportunity for public comment, that such an allocation would be in the public interest;
  3. such use would not deter investment in communications services and systems, or technology development; and
  4. such use would not result in harmful interference among users.Footnote 52

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3.13 European Union

In Europe, the Radio Spectrum Policy Group (RSPG), which advises the European Commission, is elaborating on the concept of Wireless Access Policy (formerly Platforms) for Electronic Communications Services (WAPECS). It is an attempt to move away from too narrowly specified allocations and applications, for which specific spectrum is designated. In its Opinion of November 2005,Footnote 53 the RSPG defined the WAPECS as "a framework for the provision of electronic communications services within a set of frequency bands to be identified and agreed between European Union Member States in which a range of electronic communications networks and electronic communications services may be offered on a technology and service neutral basis, provided that certain technical requirements to avoid interference are met, to ensure the effective and efficient use of the spectrum, and the authorization conditions do not distort competition." (RSPG 2005, pp. 2–3)

The objective is to ensure that spectrum is available for a wide variety of services and applications to comply with the overall policy goal of developing the EU internal market and European competitiveness. WAPECS is expected to play a direct role in the information society development.

WAPECS aims to introduce more flexibility in the use of radio frequency spectrum, taking into account that currently different platforms and technologies may provide mobile, portable and fixed access for a wide range of electronic communications services, including converging applications. Therefore different networks can provide mobile, portable, or fixed access, for a range of electronic communications services (e.g., IP access, multimedia, multicasting, interactive broadcasting, datacasting), under one or more frequency allocations (mobile, broadcasting, fixed), deployed via terrestrial and/or satellite platforms using a variety of technologies to seamlessly deliver these services to users.

Figure 5: WAPECS concept and list of abbreviations

Wireless Access Platforms, later changed to 'policies' for Electronic Communications Services concept and list of abbreviations

Source: RSPG 2005

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3.14 United Kingdom

OFCOM is liberalising spectrum management in two different ways. Licence holders can apply for a change to the usage conditions or requirements with regard to the technical parameters for their licence(s). The second course of action is to make generic licence conditions. This type of approach has the aim of generally making licence conditions as flexible and technology-neutral as possible. It creates greater forecasting security and is associated with lower transaction costs for those concerned. However, the definition of technology-neutral and use-neutral emission rights brings up complex, challenging issues. As spectrum usage rights are liberalized, OFCOM will perform a detailed review of compatibility with international commitments (i.e., directives and harmonization agreements at a European level, ITU Radio Regulations), statutory obligations, directions from the Secretary of State and general statutory principles.

In 2005, OFCOM launched the liberalization process in three licence sectors: business radio, fixed wireless access and fixed links. The extent and date of liberalization of other sectors from licence class to licence class, is going to depend, for example, on the practical viewpoint, the complexity of the coordination required and the ability of users to solve interference issues.

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3.15 Spectrum Trading/Secondary Markets

Spectrum trading denotes a mechanism whereby rights to use spectrum are transferred from one party to another for a certain price. This contributes to a more efficient use of frequencies because a trade will only take place if the spectrum is worth more to the new user than it was to the old user, reflecting the greater economic benefit the new user expects to derive from the acquired spectrum.Footnote 54 These efficiency gains will not be realized, however, if transaction costs are too high and one of the aims of any spectrum trading regime should be to keep down transaction costs. After all, the goal is to facilitate transfers by establishing a swift and inexpensive mechanism. If neither the buyer nor the seller behave irrationally or misjudge the transaction, and if the trade does not cause external effects (e.g., anti-competitive behaviour or intolerable interference), then it can be assumed that spectrum trading contributes to greater economic efficiency and boosts transparency by revealing the true opportunity cost of the spectrum. Furthermore, trading has other relevant indirect effects:

  • it enables licensees to expand more quickly than would otherwise be the case;
  • it makes it easier for prospective new market entrants to acquire spectrum;
  • if spectrum trading were combined with an extensive liberalization of spectrum usage rights, there would be a considerable incentive for incumbents to inv est in new technology in order to ward off the threat of new entrants in the absence of other barriers to entry (i.e., the unavailability of spectrum); this, in turn, would boost market competition.

Forms of Spectrum Trading

In a consultancy report commissioned by the European Commission, Analysys et al.Footnote 55 identify the following methods for transferring rights of use:

Sale – Ownership of the usage right is transferred to another party.

Buy-back – A usage right is sold to another party with an agreement that the seller will buy back the usage right at a fixed point in the future.

Leasing – The right to exploit the usage right is transferred to another party for a defined period of time but ownership, including the obligations this imposes, remains with the original rights holder.

Mortgage – The usage right is used as collateral for a loan, analogous to taking out a mortgage on an apartment or house.

In terms of the trade itself, there are a variety of mechanisms that can be used. These include:

Bilateral negotiation: The seller and (prospective) buyer directly negotiate the terms of the sale and are not subject to any particular constraints set by the regulator.

Auctions: Once a type of auction has been chosen and the rules have been decided by primarily the seller, prospective buyers have the opportunity to acquire the spectrum usage rights by bidding in the auction.

Brokerage: Buyers and sellers employ a broker to negotiate, with their consent, the contractual terms under which the transfer of usage rights can take place.

Exchange: This refers to the establishment of a trading platform, similar to a stock market, where transfers take place according to specific rules.

It is also possible to combine more than one of these approaches. Ideally, the regulatory authority should, as far as possible, leave the transfer mechanisms in the hands of the market participants.

Experience with Spectrum Trading

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3.16 United States

The United States has long recognized that secondary market mechanisms can potentially serve as at least a partial correction to misallocation of spectrum. It has also long been clear that flexibility in the use of spectrum, in terms both of services and of technology, is an important facilitator to the effectiveness of spectrum trading.

Thanks to this long history, the debate over secondary markets manifests quite differently in the U.S than it does in Europe. Licence transfers have been possible for most services for some time. The remaining regulatory open issues in the U.S. relate primarily to the appropriate degree of flexibility for various forms of spectrum leasing, and secondarily to measures to simplify transfers and to reduce or eliminate the FCC's role as a gatekeeper in the majority of instances of licence transfer.

The SPTF Report argued for a clear definition of property-like rights for spectrum, and for an enhanced ability to lease or transfer spectrum rights.Footnote 56 They promoted two alternative models of spectrum reuse: a secondary markets model, and an easementsFootnote 57 or underlay model. In the former case, the licensee determines what rights it is willing to sublicence, if any, and to whom; in the latter, the FCC would determine what rights if any must be provided to third parties.

There has been no wide scale implementation of the easements (underlay) approach. Existing licensees were understandably uncomfortable with the risk of interference, and also with the risk that easements would lead to a "squatter's rights" problem, i.e., that once someone began to take advantage of an easement, it would be difficult or impossible to evict them later (for instance, in the event that they subsequently cause interference or limit the licensee's flexibility).Footnote 58

FCC procedures for leasing of spectrum were substantially liberalized by the First Report and Order in October 2003. The new arrangements affected both mobile and fixed services, including cellular, Personal Communications Services (PCS), Specialized Mobile Radio (SMR), Local Multipoint Distribution Service (LMDS), fixed microwave, 24 GHz and 39 GHz, among others.Footnote 59

The Second Report and Order further liberalized the process. Most notably, it made overnight processing of lease applications available to a wide variety of lease arrangements where the parties certify that the arrangement does not raise any of a specified list of potential concerns (such as foreign ownership, licensee eligibility, or competition issues).

The official website location for secondary trading in the U.S., the FCC's Universal Licensing System (ULS) Application Search for Secondary Markets, is by no means easy to understand, but it does show a significant number of lease arrangements (826, involving 7450 licences) in the 30 months following April 2004.

More significant is the number of high value trades, worth over $100 million, and typically involving Verizon Wireless or another wireless purchaser. This has made the U.S. spectrum market the most active in the world.

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3.17 The United Kingdom

Trading volumes in the U.K. have been very slow since trading was first permitted. By August 1, 2007, only five extra-group trades had been accomplished, which was becoming a source of concern to the regulator.

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3.18 Australia

In Australia, trading is possible in both apparatus and spectrum licences, although the ACMA does not keep data on the former trades. In spectrum licences, the pattern of development was as shown in Table 5.0.

Table 5.0 Trading in Australian spectrum licences 1998/9–2003/4
Year Licences Traded % Turnover
1998/9 50 13.8
1999/2000 22 5.4
2000/01 47 7.7
2001/02 51 8.4
2002/03 54 8.8
2003/04 22 3.6

Source: Australian Communications and Media Authority

This looks more impressive than it is, however. About half of the trades were within the same group, rather than involving a genuine change of ownership. The evidence thus suggests a lower rate of turnover than that of real property.

Australia has, however, seen a small number of conspicuous trades which have involved change of use, notably from broadcast purposes to wireless broadband, within the same definition of property rights.

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3.19 New Zealand

As noted earlier in 3.4 above, New Zealand implemented a market-based system of spectrum allocation and secondary trading in 1989. The level of trading has been low and mainly confined to FM and AM radio broadcasting licences where there has been a great deal of consolidation through takeovers. Moreover, trades have not involved a change in use.

Some rationalization occurred regarding MDS spectrum, with most Management Rights now owned by TCNZ (the incumbent), with TelstraClear being the predominant owner of the LMDS spectrum. The MDS and LMDS spectrum is however, apparently largely 'idle'. The allocated 3G spectrum is also largely unused, although TCNZ is due to begin a 3G service in the near future and two other firms have voiced their intention to offer 3G services.Footnote 60

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3.20 Guatemala

The regime for the transfer of spectrum titles (TUFs) in Guatemala has been described above. The trading data indicate considerable activity. Moreover, as Figure 4.0 showed, it was concentrated in the earlier years of liberalization — as one would expect, there were considerable disequilibria resulting from the previous traditional regime.

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3.21 Conclusion on Secondary Trading

The experiences noted above form a mixed picture. In the U.S. and in Guatemala, there appears to be a liquid market in licences which firms can access when they need it. In the U.S. this is largely restricted to frequencies used for mobile services. There have been reports that in other areas spectrum trades do occur fairly frequently, for example with respect to the 'white spaces' spectrum under-utilized by television broadcasters. There has been some reluctance on the part of licence holders to trade, perhaps because of the relatively low value of the transaction.Footnote 61 In other countries, trading volumes have been low despite the probable existence of misallocation and mis-assignment of spectrum under the predecessor system. A number of possible explanations were put forward for this above. At this stage it is difficult to evaluate their likely force.

Are 'low' trading volumes (whatever low means) a mark of failure of the policy of liberalization and flexibility? It may be helpful here to distinguish between static and dynamic efficiency. The former probably requires, strictly speaking, a substantial shuffling of the spectrum pack, including micro changes such as switching certain fixed link users to different frequencies and macro changes such as switching broadcasters away from terrestrial broadcasting technologies altogether, in favour of satellite and cable.

Dynamic efficiency essentially means giving new competitors, or firms offering new services, a chance to enter the market place. This might be done in several ways: by a spectrum trade, by gaining access to newly released frequencies, or by leasing. From this point of view, the key issue is the height of barriers to entry by newcomers. Secondary spectrum markets are an important part of that in the longer run, but not all of it when spectrum awards are prevalent.

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3.22 Quantitative Estimates of the Impact of Liberalization

The pay-off from spectrum reform through liberalization is best reflected in the benefits which reform might confer on end-users of spectrum-based services. These services might be commercial — mobile communications for example, or they might be services provided in the public interest, for example, emergency services, where quality improvements save lives.

The mechanism by which liberalization brings quantifiable benefits can be characterized by a two-step process:

  • first, spectrum is reallocated to different services;
  • second, reallocation changes the cost of supplying these services, the competitive conditions in which they are supplied, and hence the service offerings available to end-users.

Relatively few studies have attempted to make estimates of this kind. A widely-cited example is the estimate made by consultants to the European Commission of the benefits accruing to member states as a consequence of allowing trading (change of ownership) and liberalization (trading with change of use), either in individual member states or in a harmonized fashion across all member states in the European Union.Footnote 62

In order to perform the estimates, the consultants make assumptions about the scale of trading under trading alone and under liberalization as well, and of the price changes resulting from the change in competitive pressures, which are assumed to be 3% in the case of trading alone and 15–17% in the case of liberalization. The change in consumer surplus is then estimated, by making assumptions about the relevant elasticity of demand.

These effects in terms of increased static efficiency are then augmented by an estimate of the effects on innovation (a particularly difficult task), on regulation, and on the control of interference.

In summary, the authors project benefits of €8.8 billion from trade and liberalization and €0.9 billion from trade alone. The former figures amount to 0.1% of European Union GDP.

A second estimate relies to a greater degree on observations. Thomas Hazlett and co-authors collected data in standardized form on spectrum use and prices for mobile services in Latin America.Footnote 63 They found evidence that benefits from spectrum liberalization in Guatemala and El Salvador are associated, after allowance for other factors, with expanded spectrum use in mobile telephony, more competition, and lower prices. By attributing the last effect, price reduction of 26–31%, to liberalization, the gain in consumer surplus can be estimated, via an assumption about the price elasticity of demand, to be about 29% of the size of initial industry revenues.

It is no criticism of either study to say that estimates of benefits from liberalization are inconclusive. Untangling the effects of spectrum liberalization from other simultaneous changes is difficult. Even if it can be done, the history of liberalization is still rather short. Finally, the effects of less regulation on innovation and dynamic efficiency are particularly hard to tackle. For these reasons, the case for greater use of markets will for some time continue to rest on other evidence, such as the speed with which markets can transfer spectrum compared with administrative methods, evidence of spectrum as a barrier to entry under the administrative regime and 'first principles' arguments about the superior capability of markets over central planning to deal with complex and dynamic allocation problems.

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3.23 Digital Switch-over

The management of spectrum used for broadcasting has always been severely complicated by the mingling of public policy, commercial and political considerations. In most jurisdictions outside the U.S., there is significant public sector participation in the supply of broadcasts combined with content regulation of all providers. This led to pervasive rationing of spectrum for broadcasting and the support for what was called in 1980s in the U.K. a 'cosy duopoly' of a public provider and a limited number of commercial providers.

The spread of multi-channel broadcasting based on cable and satellite technologies placed this regime under stress, but traditional analogue terrestrial broadcasters have fought hard to retain their market shares and sought help from political actors to do so, often with considerable success. Spectrum allocation and assignment policy has been a significant weapon in this process, in conjunction with the direct application of a restrictive licensing process for broadcasters.

Recently, the traditional task of spectrum regulation in broadcasting has been overlaid by the prospect of the switch-off of analogue terrestrial broadcasting. Before the switch-over of satellite services from analogue to digital can be accomplished by normal commercial processes, the subject of subsidies from the providers, as in the case of terrestrial services providing universal service, needs to be resolved In other cases, the state has been involved in controlling the process and providing household subsidies. The treatment of subsidies has created some controversy. In Italy, for example, the automatic provision of €50 digital terrestrial (DTT) set-top box to each household, a subsidy which discriminated against other platforms, benefited the commercial interests of the Prime Minister and is now being investigated by the European Commission as a state aid.

In light of these developments, this section focuses particularly on the spectrum policies associated with digital switch-over in Europe, Japan and the United States.Footnote 64

Europe

The nature of terrestrial broadcasting signals requires careful planning of frequencies in a crowded place like Europe. This was most recently accomplished at the ITU Regional Radiocommunication Conference (GE06) which established detailed allotments to each country in Europe, Africa, the Middle East and Iran, based on prospective digital transmission to replace the analogue regime agreed in television in 1960. Within the European Union, the latent latest date for analogue switch-off is 2015.

GE06 was held within the framework of the allocation of the relevant frequency bands (174–230 MHz and 470–862 MHz) to broadcasting. However, it leaves significant scope for flexibility in implementing the plan. First, there is a high degree of flexibility regarding the location of transmitters within the service area and interference envelope in the plan.

Secondly, and more significantly, many countries, including the 27 members of the EU, signed a declaration permitting use of services other than broadcasting, provided they did not cause interference to allotted broadcast frequencies and would not receive any protection from interference beyond what would be granted for broadcasting use.

This is a major liberating factor for counties such as the U.K. which wish to deploy the released spectrum for alternative uses via an auction process but, as a recent paper by the Radio Spectrum Policy Group (an advisory body to the European Commission) makes clear, there are limitations:Footnote 65

  • The use of these bands for digital services will continue to be constrained until protection of analogue transmissions has ceased, which is generally expected in 2012, but sooner in some countries in the EU.
  • The use of these bands by other existing services, including secondary services, may be a constraint.
  • Although the planned modification procedure provides a suitable framework for administrations to adjust their entries in the plan as future requirements arise, it should be recognized that the flexibility left to administrations for developing the plan has already led to significant variations in the entries, hence in the ability of harmonising usage in the future.
  • In many countries, the implementation of mobile multimedia services may require departing from the reference planning configuration adopted at RRC-06, hence entail delays and network costs.
  • For reasons related to handset design and cost, a minimum frequency separation will be needed between the channels used for multimedia reception ("downlink ") and the frequency used for transmission by the mobile terminal ("uplink ").
  • Although other services may be operated within the limits of the envelope of an entry in the Plan, and hence receive indirect recognition and protection, it is not possible to notify the ITU mobile uplink transmissions in this band and this situation may be perceived as a lack of full international regulatory recognition for such uplinks and this may be alleviated by seeking an additional allocation to the mobile/fixed service in the entire UHF band at WRC-07 or 11 under conditions which ensure that the broadcasting service is not adversely impacted.
  • Use of fixed/mobile uplinks would also require guard bands with television or sound broadcasting, hence making their coexistence and coordination difficult.
  • Harmonization of part of the VHF band for mobile uplinks is less attractive due to its small size. This does not prevent some types of communication networks from coexisting successfully with broadcasting in this band, although not without inefficiencies. Therefore, no specific action seems necessary in that band at this stage. More studies may be required to assess the possibility of further sharing arrangements in the future.
  • Technical constraints to the frequency planning could arise to ensure coexistence of broadcasting networks intended for fixed rooftop reception and broadcasting multimedia networks (including mobile or fixed networks) intended for indoor portable reception. Studies are urgently required to ensure that the appropriate measures are identified to overcome these constraints.

Subject to these limitations, it is clear that some European countries are likely to go ahead with flexible use of the spectrum which will be released. However, there are significant exceptions. In France, the regulation of spectrum is delegated to a telecommunication regulator (ARCEP) and a broadcasting regulator (the HCA). This institutional arrangement and the French attachment to broadcasting enshrining national cultural values will be an impediment to a flexible policy. In Germany, broadcasting and telecommunications are regulated at, respectively, the Lander (regional) level and Federal level and this system will also make flexibility harder to achieve.

The U.K. spectrum regulator (OFCOM), by contrast, has taken steps already to consult on flexible ways of allocating the 112 MHz likely to be freed at analogue switch-off which, in the U.K., will start at Whitehaven, Cumbria in late 2007Footnote 66 and be completed by 2012. The relevant OFCOM consultation documentFootnote 67 envisages auctioning the spectrum with the possibility of limited holdback for community broadcasting and innovative uses, but not, for example, for DTT high definition channels, though broadcasters can bid for spectrum for this last use. Spectrum used for downlinks for satellite television, chiefly of Sky services, has not yet been resolved.

The European Commission itself has a general policy in favour of flexibility (see above) but the Commissioner for the Information Society and Broadcasting (Ms. Reding) favours intervention to establish a single market for mobile broadcasting. This may involve a Directive reserving a specific frequency for this purpose.Footnote 68

The United States

There is a very strong interplay in the U.S. between broadcasters' commercial interests on one hand and the Congress and regulator (the FCC) on the other. These links have been reflected in policy towards all broadcasting platforms, including cable, satellite and terrestrial. It has been illustrated by the battles over the digital switchover in the U.S.

This transition will clear 108 MHz of spectrum for other valuable uses.Footnote 69 Pursuant to the 1997 Balanced Budget Act, the FCC reallocated 108 MHz of the 402 MHz that had been allocated to terrestrial television broadcasting, leaving 294 MHz for TV. Twenty-four MHz of the 108 MHz was allocated for public safety and 6 MHz, which has already been auctioned, was allocated for commercial guard bands. The rest was allocated for flexible use — 30 MHz in the upper 700 MHz band and 48 MHz in the lower 700 MHz band, 18 MHz of which has already been auctioned. The 700 MHz band is adjacent to the cellular band. Even though this 108 MHz of spectrum has been reallocated, it is still largely occupied by broadcasters. In the lower 700 MHz band, there are 94 analogue TV stations and 168 DTV stations. And in the upper 700 MHz band, there are 97 analogue TV stations and 20 DTV stations. Completing the DTV transition would make this spectrum available for highly valuable commercial and public safety uses.

In the United States, the government has been heavily involved with managing the transition from analogue to digital television. After adopting the ATSC standard for terrestrial digital television transmission in 1996, the FCC set 2006 as a target date for completing the transition, with provision for reviewing this decision every two years. The 1996 Telecommunications Act provided that, if the Commission issued "additional licences for advanced television services," they should go to existing licensees and the Balanced Budget Act of 1997 set a target deadline of 31 December 2006 for switching off analogue television. However, the legislation permitted television stations to retain their analogue authorization beyond that date in markets where household penetration of DTV reception equipment is less than 85 per cent. Recent legislation requires the end of analogue television broadcasting by 17 February 2009 and provides for a digital-to-analogue converter box subsidy.

The key element of the 2006 Act is that, unlike its 1997 predecessor, it sets a 'hard date' for the switch-off of analogue services. This means that analogue stations have to cease transmissions everywhere regardless of the take-up of digital equipment in the market served.

To facilitate take-up as the deadline approaches, the 2006 Act makes a provision of $990 million to provide up to two $40 coupons to subsidize the purchase of 20 million set-top boxes, and administrative expenses. NTIA issued a decision on procedures for this in February 2007.Footnote 70 Since 1 July 2005, there have been requirements on manufacturers to ensure that new sets have tuners of the chosen (ATSC) standard.

A heated debate has also occurred in the United States over whether 'white spaces' in TV bands should be available for unlicensed use for wireless broadband.Footnote 71

Japan

Japan has six nationwide analogue channels and DTT was launched in three metropolitan areas in December 2003 and extended nationwide in the following three years. Analogue switch-off is fixed for 24 July 2011. All broadcasters must simulcast until then.

The Japanese Ministry of Internal Affairs and Communications has commissioned a report on use of the released spectrum. A recent presentation by Nakamura of Waseda University anticipates that VHF spectrum will be released for mobile and digital radio use after switch-off.

Each DTT channel in Japan is divided into 13 segments (plus one segment for separating channels). HDTV occupies 12 segments, while the 13th will be used for mobile devices.

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3.24 Managing Public Sector Use of Spectrum

A great deal of spectrum is used to provide services in the public interest, such as defence, emergency services and other widely varying services of national, regional and local governments. In some countries, this spectrum is provided either free or charged at a preferential rate. In other countries, public sector users are charged on the same basis as private sector users.

In the U.K., public sector spectrum use accounts for just under half of all spectrum used below 15 GHz which represents the bulk of valuable frequencies. In other countries too, military use of spectrum, particularly for radar and communications, accounts for most of public sector use. In the presence of international military alliances, such as NATO, military spectrum uses are often harmonized internationally.

In most jurisdictions, private and public sector spectrum allocations are managed in a broadly similar way by the same independent agency or government department. A major exception is the United States where spectrum used by the Federal Government is managed by the NTIA.

Historically, public sector organizations, especially national defence departments, were accorded high priority in spectrum use. Under the traditional regime, they were allocated spectrum for an indefinite period. This encouraged them to seek spectrum now, if they thought they might need it in the future. But as demand for commercial spectrum grew, attention became increasingly focussed on the issue of whether public sector bodies used spectrum inefficiently, in other words, whether they had appropriated too much.

In May 2003, as noted above, President Bush signed an Executive Memorandum requiring the NTIA and other federal departments to improve the efficiency of spectrum use. This includes the promotion of market-based economic instruments in spectrum management.Footnote 72 In the same year, the U.K. Government commissioned an independent audit of spectrum holdings focussing particularly upon public sector spectrum use.Footnote 73 In 2006, the Australian spectrum regulator commissioned a similar study. The purpose of an audit is to inquire whether there is scope for re-allocation from public to private sector or within the public sector. The next step is how to correct any misallocations. We address this issue by first asking whether the instruments of spectrum management discussed above largely in relation to private sector uses can be applied to the public sector.

Is Public Sector Use of Spectrum Special?Footnote 74

Spectrum is one input among many in a variety of production processes. In a market economy, inputs such as land, labour and capital equipment are distributed throughout the economy via a market process: the provider of capital or employee moves to whichever activity offers the best rewards. We also know that if markets in the economy for inputs and outputs are workably competitive, this system will promote economic efficiency as inputs are put to use where they yield the highest returns.

The question now confronted is: does this argument apply in the case of public sector trading? At first sight it may seem incongruous to require a public sector body such as a fire service or a defence force to compete in a market place for spectrum with commercial providers of services such as mobile broadcasting. However this is exactly how public sector organizations acquire other inputs – such as employees, vehicles, land, and office space. In relation to these inputs (with the exception of a compulsory military draft in the case of labour), public sector bodies have to go into the market, for example buying or selling land, hiring workers or leasing buildings.

The argument for special arrangements for spectrum for the public sector seems to be that a) it is indispensable to the provision of service such as defence radar; b) the service itself (such as an ambulance service) has a very high priority and c) under past spectrum management practice, the only way to acquire spectrum was by administrative methods.

The use of markets to allocate other equally indispensable inputs into vital public services appears to negate propositions a) and b) above, and c) could be resolved by the development of a spectrum market place. In order to meet the needs of public sector users, the market would have to cover a large number of frequencies (to permit substitution) and trading opportunities would have to occur on a predictable basis, so that public sector users, like commercial users, could plan their spectrum transactions in advance. There might also have to be an 'over-ride' system to deal with national security emergencies but this would be an exception rather than the rule.

There is a further dynamic which makes market participation by public sector spectrum users more palatable. In many countries, public sector bodies are perceived as having built up excessive spectrum holdings under the traditional method of spectrum management and in bands where there had been plenty of spectrum. In net terms, therefore, they are likely to be suppliers of spectrum to commercial users rather than net demanders. This is illustrated by the significant returns of spectrum to the regulator made in recent years by the French and U.K. Ministries of Defence. There may be exceptions, for example, additional spectrum needed to provide emergency services with wireless broadband communications, but the basic flow of spectrum should be from public to private, by means of transactions made either by the spectrum users themselves or via the spectrum regulator.

This assimilation of public sector spectrum to the growing market place for commercial spectrum is precisely what the U.K. spectrum regulator, supported by the U.K. Government, is putting into practice. As proposed in the Independent Audit noted above, the policy of allowing public sector users to sell, lease or share their spectrum, and of requiring them to acquire new spectrum in the market place, is now in the course of implementation in the U.K.Footnote 75

If, however, public sector spectrum users are to participate firstly and effectively in spectrum markets, certain preconditions may have to be fulfilled. In many jurisdictions, government departments, for example, are not issued with detailed licences specifying rights and responsibilities. If public sector spectrum is to become tradable, the associated property rights must be fully determined. Secondly, public sector spectrum use is, often for good reasons, swathed in secrecy. Whenever possible, information necessary for potential users to make decisions about the purchase, leasing and sharing of such frequencies has to be made available.

Intermediate Steps to Encourage Efficiency in Public Sector Spectrum Use

Eliminating the boundary between private sector and public sector spectrum markets is a bold, if logical, step and one that many spectrum regulators are as yet unwilling to take. For example, the European Commission in its 2006 proposals for spectrum reform advocates a market for much of the commercial spectrum but makes a broad exception for public service spectrum.

It is therefore useful to consider intermediate steps on the way to the application of market instruments; many of these are being considered as part of the U.S. Government's steps towards reform:

  1. Valuation of spectrum. Public sector spectrum clearly has an opportunity cost, which is demonstrated either (in a market system) by the price realized by the auctioning or secondary trading of adjacent commercial spectrum or can be computed by direct calculation of the opportunity cost.Footnote 76 The estimation of the value of spectrum used by each public sector user can crystallize and confirm intentions to interrogate those bodies vigorously as to whether their need for frequencies is fully justified.
  2. Incorporation of valuations in investment decisions. In all uses, spectrum costs represent only a part of the full costs of providing the service to end users. In most countries, the remaining costs and sometimes the associated benefits of a project such as a new weapons system are subject to some form of investment appraisal, for example, of the project's lifetime costs. If a valuation of spectrum were available, it would be a simple matter to incorporate it as one of the costs of the project. This would encourage those engaged in procurement to examine the scope for substitution between spectrum and other costs. Such a requirement can be imposed in most countries by the Ministry of Finance or Treasury department, which supervises government spending.
  3. Compensation of public sector users. This is a method authorized by the United States Congress through the Commercial Spectrum Enhancement Act (2004). An example situation and application of the method follows:

    Suppose some public sector (say, military) spectrum both has a valuable private use and can be replaced by alternative frequencies where the department has an estimate of the cost of transition to the new frequency and the FCC conducts an auction of spectrum in current use, with a reserve price equal to 110% of the estimated displacement cost. If the auction proceeds exceed the 'reserve price', the sale goes ahead; otherwise, as the spectrum has been shown to be more efficiently employed in its current use, it does not. This can be seen as a form of 'market testing'. Care must be taken, however, to ensure that the costs of the transfer are not inflated by a public sector body seeking to get its hands on as much as possible of the auction proceeds. In many cases, this will only have distributional consequences. But if the costs are greatly exaggerated, the effect may be to prevent what would have been a beneficial reallocation.

    The approach was tested in 2006 in an auction of licences in two bands, known as AWS-1. The cost of displacement was about $1 billion, and the auction revenues amounted to about $13 billion.Footnote 77 This provided a powerful illustration of the potentially beneficial effects of reallocating public sector spectrum to more productive uses.

  4. Use of administrative prices. A further major step which has already been done in some countries is to impose a spectrum charge payable to the central government treasury. Such charges are analysed above.
  5. A market place with special pre-emption powers for the public sector. The final step in the use of market methods is to allocate and assign public sector spectrum on the same footing as private sector frequencies. There may still be a need for arrangements to allow traditional methods to be used in an emergency to get spectrum for a vital and urgent purpose. The U.K. arrangements for public sector spectrum allocation contain such a provision. If it is not to undermine the discipline imposed by the market, there should be two conditions: first, the public sector user receiving the spectrum should pay a price at least equal to the market price; second, the procedure should be used sparingly and in strictly defined circumstances, otherwise users will not take responsibility for planning to meet their own needs.

This section has described incremental approaches to improving efficiency in spectrum use by the public sector in the form of a 'ladder' of options. Not all public sector users need to be on the same rung, but it is reasonable to expect the regime to get all users up at least as far as the incorporation of spectrum valuation in major procurement decisions.

Footnotes

Footnote 1

These services are able to function within the UHF band of frequencies (300MHz up to 3GHz).

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Footnote 2

See Hausman, J. and T. Tardiff, "A cost of regulation: delay in the introduction of new telecommunications services" in The Economics of the Information Society< /em>, edited by Alain Dumont and John Dryden, European Commission/OECD 1998.

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Footnote 3

In some cases market-based methods of spectrum management need to be assisted in the early stages by administrative intervention. This is particularly the case with regard to the pricing of radio spectrum. While secondary trading offers the possibility of spectrum commanding market prices, in practice thin volumes of trade in the initial stages tend to diminish the benefits of relying on the price mechanism. In some countries, notably the U.K., spectrum prices are largely determined administratively, based on economic principles – known as administrative incentive pricing (AIP).

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Footnote 4

We use the terms unlicensed, commons, open access, and license-exempt interchangeably here. The precise formulation of commons spectrum (the most general term) may vary from country to country and from band to band.

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Footnote 5

Recently the FCC in the United States has designated 50MHz of frequency in the 3.65GHz to 3.7GHz band as a commons.

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Footnote 6

Where we cite specific provisions in the Act, we will use section numbers that correspond to the Act as codified at 47 U.S.C. This will facilitate cross-checking with FCC documents, which use the same convention.

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Footnote 7

See 47 U.S.C. section 301: "The Commission may, consistent with the public interest, convenience, and necessity, make regulations..." but "The provisions of this section shall not be applicable to equipment and systems procured for use by the United States or any agency thereof. Devices and home electronics equipment and systems for use by the Government of the United States or any agency thereof shall be developed, procured, or otherwise acquired, including offshore procurement, under United States Government criteria, standards or specifications designed to achieve the objectives of reducing interference to radio reception and to home electronic equipment and systems, taking into account the unique needs of national defence and security."

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Footnote 8

This delegation is effected by the National Telecommunications and Information Administration Organization Act of 1992. See in particular section 103(b)(2)(A), which delegates the authority "... to assign frequencies to radio stations or classes of radio stations belonging to and operated by the United States, including the authority to amend, modify, or revoke such assignments..." The NTIA was established in 1978 as a result of a major Executive Branch reorganization. This reorganization transferred and combined various functions of the White House's Office of Telecommunications Policy (OTP) and the Commerce Department's Office of Telecommunications (OT).

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Footnote 9

It has been claimed by some that these services were delayed for almost 20 years. See Jeffrey Rohlfs, Charles L. Jackson and Tracey E. Kelly (1991) "Estimate of the loss to the United States caused by the FCC's delay in licensing cellular telecommunications" NERA Inc., November 8.

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Footnote 10

FCC, Spectrum Policy Task Force Report, ET Docket 02–135, November 2002. See http://www.fcc.gov/sptf/reports.html.

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Footnote 11

SPTF Report, page 5. See also page 35. Note, incidentally, that the command-and-control model also generates many licences that are exclusive; however, these licences are generally not flexible.

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Footnote 12

See "Spectrum Policy for the 21st Century – The President's Spectrum Policy Initiative: Report 2, Recommendations from State and Local Governments and Private Sector Responders", NTIA, Washington DC, June 2004, available at www.ntia.doc.gov.

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Footnote 13

See http://www.ogc.doc.gov/ogc/legreg/letters/109/TelecomsectionalJun3006.htm

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Footnote 14

op cit.

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Footnote 15

op cit.

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Footnote 16

"Review of Radio Spectrum Policy in New Zealand." MED 2005.

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Footnote 17

Decision No 676/2002/EC of 7 March 2002 on a regulatory framework for radio spectrum policy in the European Community (Radio Spectrum Decision).

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Footnote 18

CEPT is the European Conference of Postal and Telecommunications Administrations and comprises 47 European states. The harmonisation work it undertakes in the field of radiocommunications is overseen by an Electronic Communications Committee.

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Footnote 19

Commission Decision 2002/622/EC of 26 July 2002 establishing a Radio Spectrum Policy Group.

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Footnote 20

The RSPG Opinion on Secondary Trading of Rights to use Radio Spectrum, RSPG04–54 Rev. (final), 19 November 2004.

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Footnote 21

Rethinking the European ICT agenda: Ten ICT breakthroughs for reaching Lisbon goals, PricewaterhouseCoopers for the Ministry of Economic Affairs, The Netherlands, available at http://ec.europa.eu/information_society/eeurope/i2010/docs/events/
rethinking_the_european_ict_agenda.pdf
, August 2004.

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Footnote 22

Council Resolution 10 December 2004, see 15472/04 (presse 345).

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Footnote 23

Conditions and options in introducing secondary trading of radio spectrum in the European Community, available at http://ec.europa.eu/digital-agenda/en/news/study-conditions-and-options-introducing-secondary-trading-radio-spectrum-european-community

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Footnote 24

Communication from the Commission to the Council, European Parliament and the European Economic and Social Committee and the Committee of the Regions, "A market-based approach to spectrum management in the European Union", COM(2005)400 Final, 14 September 2005.

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Footnote 25

At a European Summit in March 2005 held in Warsaw, Poland, EU leaders renewed their partnership for growth and jobs, including by building a fully inclusive information society, based on widespread use of information and communication technologies (ICTs) in public services, SMEs and households. This initiative was building on the 'Lisbon Agenda' where EU leaders sought to make the EU the most competitive and dynamic knowledge-driven economy by 2010. The policy is known as the "i2010 – A European Information Society for growth and employment" initiative and was launched by the EC on 1 June 2005 as a framework for addressing the main challenges and developments in the information and media sectors up to 2010.

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Footnote 26

Commission Directive 2002/77/EC on competition in the markets for electronic communications networks and services [2002] OJ L249/21

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Footnote 27

Directive 2002/21/EC on a common regulatory framework for electronic communications networks and services [2002]OJ L108/33

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Footnote 28

Com(2005) 400 Final 14 September 2005.

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Footnote 29

Technical constraints deal largely with mitigating the effects of harmful interference.

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Footnote 30

COM(2005) 400 Final.

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Footnote 31

A study by the European Regulators Group (ERG) published in September 2006 highlighted a few bottleneck/competition problems in the mobile communications sector. Spectrum Allocation and bottlenecks/competition problems, ERG(06) 45b.

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Footnote 32

COM(2005) 411 Final 6 September 2005.

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Footnote 33

Spectrum Allocation and bottlenecks/competition problems, ERG(06) 45b.

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Footnote 34

Communication from the Commission to the Council, the European Parliament, The European Economic and Social Committee and the Committee of the Regions, "On the review of the EU Regulatory Framework for electronic communications networks and services" SEC(2006) 816 and DEC(206) 817, 29 June 2006.

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Footnote 35

Communication from the Commission to the Council and European Parliament "A forward-looking radio spectrum policy for the European Union: Second Annual Report", COM(2005) 411 final.

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Footnote 36

Communication from the Commission to the Council and European Parliament, The European Economic and Social Committee and the Committee of the Regions "Rapid access to spectrum for wireless electronic communications services through more flexibility", COM(2007) 50 Final, 8 February 2007.

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Footnote 37

In a consultancy study on flexibility and licence-exempt bands undertaken for the EC, it has been suggested that "private commons may play a limited but potentially useful role in meeting demand for collective spectrum use for certain types of user. However, in practice we believe that most decisions on whether to designate spectrum for collective use will need to be made administratively." See "Study on Legal, Economic & Technical Aspects of 'Collective Use' of Spectrum in the European Community, Mott MacDonald, Final Report, November 2006.

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Footnote 38

Council Directive 1987/372/EEC reserving the 900MHz for GSM mobile services.

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Footnote 39

Source: From an original appearing in the Annex to COM(2007) 50 Final, 8 February 2007.

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Footnote 40

Excerpt from "Texts adopted by the European Parliament at the sitting of Wednesday 14 February 2007", P6_TA-PROV(2007)0041, "Radio spectrum: European Parliament resolution Towards a European Policy on the radio spectrum (2006/2212(INI)). This is provisional and the final version is expected shortly.

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Footnote 41

Within the EU, these are Austria, Denmark, Finland, Hungary, Italy, The Netherlands, Portugal, Slovakia, Sweden and the United Kingdom.

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Footnote 42

Spectrum Framework Review, OFCOM 2004. Available at http://www.OFCOM.org.uk

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Footnote 43

Administrative Incentive Prices: intended to encourage licensees of non-auctioned spectrum to use their spectrum rights efficiently; legislation enables annual licence fees to be set above administrative cost to reflect a range of spectrum management objectives (efficient management and use, economic and other benefits, innovation and competition), having regard in particular to availability and present and expected future demand for spectrum. OFCOM has been using AIP since 1998 and revised the approach in 2004. There AIP is used to value spectrum at its marginal value as a proxy for the opportunity cost to the representative spectrum user in those bands where AIP fees were charged.

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Footnote 44

See OFCOM , Spectrum Framework Review-the Public Sector, July 2007

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Footnote 45

Based on "Frequency Open Policy in Japan", February 2004, Radio Department, Telecommunications Bureau, MPHPT and on information available at http://www.tele.soumu.go.jp/e/index.htm.

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Footnote 46

"Strategies for future spectrum management in Japan", MPHPT, October 2005.

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Footnote 47

See G. Ibarguen, "Liberalising the radio spectrum in Guatemala", Telecommunications Policy 27, pp. 143–554, 2005. T. W. Hazlett, G. Ibarguen and W.A. Leighton, Property Rights to Radio Spectrum in Guatemala and El Salvador: An Experiment in Liberalisation, available on SSRN.

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Footnote 48

Op.cit. fn 47

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Footnote 49

RR 4.4. Administrations of the Member States shall not assign to a station any frequency in derogation of either the Table of Frequency Allocations in this Chapter or the other provisions of these Regulations, except on the express condition that such a station, when using such a frequency assignment, shall not cause harmful interference to, and shall not claim protection from harmful interference caused by, a station operating in accordance with the provisions of the Constitution, the Convention and these Regulations.

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Footnote 50

http://www.itu.int/pub/R-HDB-21/en

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Footnote 51

http://www.itu.int/pub/R-REP-SM.2012/en

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Footnote 52

47 U.S.C. 303(y).

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Footnote 53

RSPG – Radio Spectrum Policy Group (2005), Opinion on Wireless Access Policy for Electronic Communications Services (WAPECS): A More Flexible Spectrum Management Approach, Bruxelles, Radio Spectrum Policy Group.

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Footnote 54

Cave and Webb (2003), Designing property rights for the operation of spectrum markets, Papers in spectrum trading, University of Warwick, Warwick Business School.

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Footnote 55

Analysys, Dotecon, and Hogan and Hartson (2004), Study on the conditions and options in introducing secondary trading of radio spectrum in the European Community. Final report for the European Community, Cambridge (U.K.), Analysys.

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Footnote 56

SPTF Report, especially pages 55–58.

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Footnote 57

Under U.S. law, an easement is a limited right to use the real property belonging to another – for example, a legal right to cross someone else's property. Here, an easement would confer limited rights to use spectrum licensed to another.

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Footnote 58

There are, however, instances where the FCC permits unlicensed devices to operate in licensed spectrum without first obtaining the permission of the licensee. Ultrawideband (UWB) is a conspicuous example.

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Footnote 59

FCC press release, FCC Adopts Spectrum Leasing Rules and Streamlined Processing for Licence Transfer and Assignment Applications, and Proposes Further Steps to Increase Access to Spectrum through Secondary Markets, July 8, 2004.

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Footnote 60

Analysys, Dotecon, and Hogan and Hartson, Study on the conditions and options in introducing secondary trading of radio spectrum in the European Community. Final report for the European Community, Cambridge (U.K.), Analysys, p. 50.

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Footnote 61

Presentation by Darryl Myllot of at the DySpan Conference, Dublin, April 2007

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Footnote 62

Analysys, Dotecon and Hogan and Hartson, Study on conditions and options in introducing secondary trading of radio spectrum in the European Community, May 2004.

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Footnote 63

T Hazlett, G Ibarguen and W Leighton, Property Rights to Radio Spectrum in Guatemala and El Salvador: An Experiment in Liberalisation, available on SSRN.

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Footnote 64

For surveys, see The spectrum dividend: spectrum management issues, DSTI/ICCP/TISP (2006) 2/FINAL, OECD, November 2006 and M. Cave and K. Nakamura (eds) Digital Broadcasting, Edward Elgar, 2006.

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Footnote 65

Radio Spectrum Policy Group Opinion on the EU Spectrum Policy Implications of the Digital Dividend Document RSPG07–161final, RSPG Opinion # 7 14 February 2007.

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Footnote 66

The reason so little spectrum is cleared is that OFCOM have decided to require public service digital transmission. This includes coverage of 1200 sites in place of the pre-switchover numbers of about 100.

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Footnote 67

The Digital Dividend Report, December 2006.

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Footnote 68

Speech in CEBit Hannover, March 16, 2007.

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Footnote 69

The next two paragraphs are taken from E. Kwerel and S. Levy, 'The DTV transition in the U.S.', pp. 25–6, of M. Cave and K. Nakamura, Digital Broadcasting, Edward Elgar, 2006.

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Footnote 70

NTIA, Final Rule on Digital TV Converter Box Coupon Program, February 2007.

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Footnote 71

Editorial on white spaces in the Washington Post -'The white open spaces', page A14, 16th of August 2007.

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Footnote 72

www.ntia.doc.gov/osmhome/spectrumreform/index.html

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Footnote 73

www.spectrumaudit.org.uk

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Footnote 74

This section is drawn from Cave, Doyle and Webb, Essentials of Modern Spectrum Management, Cambridge University Press, Ch. 15, 2007.

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Footnote 75

The implementation of the recommendations of the U.K. spectrum audit is slightly delayed but ongoing. See November 2006 progress report at www.spectrumaudit.org.uk.

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Footnote 76

The method yields an annual opportunity cost. This can be converted into a capital value by taking the sum of annual flows, each discounted by a cost of capital which reflects both general interest rate conditions in the economy, and the fairly high risks associated with spectrum assets, as a result of technological change which may change the pattern of spectrum use.

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Footnote 77

FCC Public Notice DA 06–1882, September 20, 2006.

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