current developments in spectrum regulation in europe including wapecs, gsm directive and mobile tv...

Current developments in spectrum regulation in Europe including WAPECS, GSM directive and

Mobile TV

JUCONOMY Consulting AG

15 May 2008

2

Spectrum is a scarce resource with high economic relevance – EU Commission estimates its value to 250 billion € within the EU

There is a great expectation that a more efficient spectrum policy within Europe and the rest of the world will bring more innovation and economic growth

There has been a great dissatisfaction with the spectrum policy in the past, as it has created “artificial scarcity” and prevented market entrance for new operators

There is a great and extensive revision of the spectrum policy within Europe, including aspects such as: A market based approach including WAPECS and Spectrum retrading Harmonisation Revision of spectrum plans (frequency allocation tables)

Introduction

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Main relevant market developmentsMain relevant market developments11

Analyses of the Commission ActivitiesAnalyses of the Commission Activities33

SummarySummary44

Activities by the European CommissionActivities by the European Commission22

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Increased demand in retail markets for wireless services (esp. wireless broadband and broadcasting)

Increased demand in retail markets for wireless services (esp. wireless broadband and broadcasting)

Soaring demand in factor markets for

spectrum

Soaring demand in factor markets for

spectrum

Constant flow of new technologies and

standards

Constant flow of new technologies and

standards

Mobile operators

Broadcasting network operators

BWA operators

Fixed network operators

Etc.

The market for spectrum interacts with the end user markets as well as the development of new technologies and standards

The increasing demand in the end user markets for “mobile”, i.e. spectrum based services and the introduction of new technologies and standards implies an increasing demand for spectrum:

5

Technologies and spectrum bands below 1 GHz

Key factsKey facts

Attractive as lower bands are associated with higher coverage per transmitter Largest part of the spectrum historically allocated to broadcasting with high ERP The long reach and the high ERP requires extensive international coordination

Attractive as lower bands are associated with higher coverage per transmitter Largest part of the spectrum historically allocated to broadcasting with high ERP The long reach and the high ERP requires extensive international coordination

BroadcastingMobile

CommunicationsOthers

Analogue Radio

Analogue Television

Digital Television

Mobile TV

Analogue e.g. NMT

GSM

TETRA

(WiMAX)

Amateur radio

Short range devices

Aeronautical

Satellite

Paging

Etc.

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New wireless usages and applications are driving the demand for spectrum

Mobile instead of fixed voice services (Fixed markets revenues declining by 4.5-8.5% per year; some EU countries experience decreasing number of fixed lines)

Drivers of demand Applications and usages

Fixed-Mobile Substitution

Introduction of Mobile TV (DVB-H, DMB, MediaFLO) Introduction of HDTV Growing and insatiable demand for additional TV and radio channels

Mobile TV/Broad-casting

Wireless Broadband

3G take-up increases in EU – 3G penetration in Italy already exceeding 20% Introduction of WiMAX and other BWA technologies

Fixed-Mobile Convergence

Quad-Play (Retail packages including fixed and mobile services) Integrative handsets (Handsets integrating fixed and mobile technologies, i.e.

WLAN, UMTS and DSL/DECT technologies) Personal networks

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Mobile Communications still show increasing penetration rates Implying increased usage and need for spectrum

Success of Mobile Communications

Source: EU Commission, 13th Implementation report, Annex 2, p. 11

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Mobile Communications still show decreasing prices Implying increased usage and need for spectrum

Success of Mobile Communications

Development of prices in EU

Low usage Medium usage High usage2006 2007

- 10%

- 12%

- 13%

Source: JUCONOMY based on EU Commission, 13th Implementation report, Annex 2

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Situation of broadcasting

Analogue terrestrial TV to be switched off – generally spoken before 2012 but not later than 2016 The digitalisation is taking place on all platforms (including satellite and CATV) Heterogeneous situation regarding:

Digital TV penetration (EU27: 23,8% of all households; UK: 66,6%; Romania, Slovak Rep., Lithuania: <1%)*DTT penetration (EU27: 6,8%; Finland: 33,1%; Ireland: 0%)*

Terrestrial TV competes with CATV, satellite TV and in future also IPTV Situation differs from country to country, but satellite and cable have

increased their market shares the last decades

Aspects Findings

Intra-modal competition

Digitalisation

* (Q3/2005)

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Do we need digital terrestrial television (DTT) and a reservation of spectrum?

Contra DTT privileges Pro DTT privileges

Generally very high demand for spectrum below 1 GHz

No need for parallel transmission of TV signals over CATV, satellite and terrestrial networks Terrestrial networks are expensive Universal service safeguarded in rural

areas through satellite and in urban areas by CATV networks

With a market based approach, the spectrum would be allocated more efficiently

Enough spectrum for mobile communications available

The spectrum enables too low bandwidth for rural broadband

High public value for DTT (universal service)

Problems of funding for terrestrial networks

Network externalities: requirement that DTT can sustain in competition with other platforms Need for large number of channels

Higher cost of spectrum for DTT crowding out investments in content

Interference problems between broadcasting and mobile communications

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Do we need digital terrestrial television (DTT) – sources of public value?

Source: “THE EFFECTS OF A MARKET-BASED APPROACH TO UHF SPECTRUM MANAGEMENT AND THE IMPACT ON BROADCASTING”, a study made by Oliver & Ohlbaum Associates Ltd and DotEcon Ltd for European Broadcasters Union, February 2008, p. 23

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Market developments and requirements on regulation

afdsafsda

Need to make spectrum available for new technologies, standards and applications

Eventually design allocation rules and processes to support innovation and growth

Need for efficient allocation of a scarce resource

Developments Requirements on regulation

Higher overall demand for spectrum

New technologies and standards (short term)

Need for flexible spectrum regulation (e.g. trading, reallocation, service and technology neutrality)

Higher uncertainties regarding spectrum usage due to new standards, technologies and applications (long term)

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WAPECS / Revision of the frameworkWAPECS / Revision of the framework2.12.1

Conclusions on the Commission ActivitiesConclusions on the Commission Activities33

SummarySummary44


Mobile TVMobile TV2.22.2

Other activitiesOther activities2.32.3

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The predefinition of technology to be used by the spectrum leads to suboptimal allocation of spectrum regarding different technologies

Long licencing times result in unused spectrum due to failed technologies and business models

Current problems

Unused spectrum

Usage of spectrum for the wrong technologies

Due to suboptimal allocation and long allocation periods Spectrum scarcity (e.g UMTS)

Artificial scarcity

WAPECS more efficient and optimal allocation of

spectrum due to technology and

service neutrality (less

spectrum conditions)

Problems identified regarding the spectrum regulation of the past

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The RSPG (Radio Spectrum Policy Group) is a working group established by the European Commission.

RSPG was delegated the task from the EU Commission to examine a possible reformation of the spectrum regulation.

Thereby an opinion should be published according to the objective to ensure that spectrum is available to a wide range of services to meet the requirements of the Lisbon agenda.

The results of the work conducted by RSPG are, among other: A definition of WAPECS: Technology and service neutrality and the reduction of

technical requirements set by the regulators (i.e. minimum requirements to avoid interference).

An identification of possible spectrum bands for the introduction of WAPECS on a European level.

WAPECS and the work of RSPG

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WAPECS and the work of RSPG

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Introduction of WAPECS (Wireless access platforms for electronic communications services) as a form of more flexible spectrum regulation including technology and service neutrality.

Introduction of EU wide regulation for spectrum trading and refarming. Introduction of a European Authority („EECMA“) dealing with:

Identification of EU wide license free spectrum, including administration of a registry of all spectrum allocations in the member states

Creation of minimum rights regarding frequency trading (to become obligatory in all member states)

Provide advice to the Commission and in special cases undertake the allocation of spectrum and spectrum conditions (acc. to Authorisation Directive Article 6b)

EU Commission Communication from 02/2007 recommends to “immediately” implement the principles regarding a more flexible approach to spectrum management set out in the Review of the Framework 2002 instead of waiting for the complete revision to come into force about 2010

The European Commission suggests the following changes to the framework regarding frequency regulation

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A committee of the European Parliament has issued a discussion paper on the proposed changes, including: There is a strong need for harmonisation as spectrum does not regard national

borders The flexibilisation has to be balanced against the need for harmonisation Evolution instead of revolution Service neutrality should be the exception and not the rule Against the

principle of WAPECS!!! Spectrum trading should be decided on national level More spectrum should be harmonised for license-excempt spectrum on a non-

interference basis There should be pan-european selection procedures administered by the

European Commission There must be a balanced approach regarding the digital dividend, allowing

gains for both broadcasters and mobile operators

Reaction of the EU Parliament regarding the Commission suggestions

19




SummarySummary44




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Mobile TV – convergence of broadcasting and mobile communications

Broadcasting Technologies Mobile communication

One-to-many communication No individualisation Efficient usage of spectrum Standards:

DVB-H DMB DAB-IP MediaFlo ISDB-T

One-to-One communication High level of individualisation High demand for spectrum Technology currently used for

Mobile TV is UMTS Also MBMS for broadcasting

TV in multicast networks

Mobile TV brings broadcasting to the handsets used for mobile communications This convergence implies large difficulties for market players and regulators alike

The situation is complicated through the number of available technologies and business models

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Mobile TV Strategy of the European Commission

Problem

Requirements for success of

Mobile TV

Solutions provided by the

Commission

Commission: slow uptake and development of Mobile TV compared to other regions in the world

Risk regarding missed opportunities to fulfil the aims of the Lisbon Agenda

The Commission has concluded that the following criteria should be fulfilled in order to make Mobile TV a success; Solve technical problems: standards/interoperability Provide a regulatory environment conducive to innovation and investment Ensuring quality spectrum for Mobile TV services

Instead of a directive, the commission has decided (among others) to only publish a Mobile TV strategy, calling member states to provide spectrum dedicated to the DVB-H standard

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Mobile TV – spectrum allocation

The Commission has published the following to illustrate their proposal for the allocation of spectrum to mobile TV

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Recent developments in Mobile TV

Since the European Commission started to push DVB-H, this technology tend to prevail across Europe (e.g. as the standard in Finland, Italy, Austria, Germany…)

As the Commission recently included DVB-H in their official list of standards, this development is likely to continue

The optimal and sustainable business models are still to be determined: In Germany, the regulator preferred to give the rights to an independent

operator In Italy, the key operations are divided between mobile and broadcasting

operators Finland: Initiative of the mobile operators

Further uncertainties regard standards/technologies and the uptake in consumer markets difficulties in spectrum management (need of spectrum and spectrum conditions difficult to determine)

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SummarySummary44




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The removal of the GSM directive from 1987 (Directive 87/372/EEC)

Introduction in 1987

Defining GSM as the technology in the bands 890-915 and 935-960 MHz

Outcome: Harmonised usage of spectrum in Europe enabling:

Economies of scale International roaming

Mass market deployment of mobile communications

Proposal to open up 900 MHz spectrum to all technologies/service (WAPECS)

EU Commission: “This proposal is a concrete step towards a more flexible market driven approach…”

Outcome: Increased supply of spectrum lower cost of spectrum

Possible usages: UMTS900 by existing or new

operators Introduction of broadcasting

services doubtful due to interference

BWA

Proposal to open up 900 MHz spectrum to all technologies/service (WAPECS)

EU Commission: “This proposal is a concrete step towards a more flexible market driven approach…”

Outcome: Increased supply of spectrum lower cost of spectrum

Possible usages: UMTS900 by existing or new

operators Introduction of broadcasting

services doubtful due to interference

BWA

Removal in 2007

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The deployment of UMTS 900 leads to significant cost savings and CAPEX reductions compared with the roll out of a UMTS 2100 system: OVUM: UMTS 900 provides between 44% (in urban areas) and 119% (in rural

areas) increased coverage per Node-B compared with UMTS 2100 due to the propagation characteristics of the lower frequency band

Field Trial Manx Telecom (UK): In-building coverage +30% compared to UMTS 2100

Field trials done in Finland, France, Portugal, UK and Australia

Several factors are important for the successful introduction of UMTS 900, i.e. a co-ordinated policy to refarm 900 MHz spectrum and a NRA spectrum policy on pricing and roaming

Development of UMTS 900

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The European Commission has taken one decision and made one proposal for a decision to enable Pan-European “Mobile Satellite Systems”

Concerned is the spectrum 1980-2010 MHz and 2170-2200 MHz according to ITU WARC-92

As spectrum is currently unused in most EU member states, the Commission has passed a directive that member states should designate this spectrum to MSS*

Reasons to push MSS: MSS can improve coverage in rural areas Services are per se international The take-up has so far been too low, e.g. due to regulatory burden (assignment

in a large number of member states required)

MSS decision

* see Commission decision of 14 February 2007 on the harmonised use of radio spectrum in the 2 GHz frequency bands for the implementation of systems providing mobile satellite systems (c(2007)409)

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Following the decision on allocation of spectrum for MSS, the European Commission has additionally suggested to select the MSS operators at EU level.

The proposal has still to be accepted by the European Parlament changes or rejection possible

Proposed is that: The MSS operators should be designated by the Commission Assignment should be done by beauty contest (in 2 phases) Following the designation by the Commission, the member states should

authorise the selected MSS operators

Proposal for decision on MSS

* see Commission proposal from 22 August 2007 “Proposal for a decision of the European Parlament and the Council on the selection and authorisation of systems providing mobile satellite systems”

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Mobile communication services on aircraft refers to GSM (and eventually other mobile networks) where a base station with satellite link is installed on board

Mobile Communication Services on Aircraft (MCA)

Decision on harmonised conditionsDecision on harmonised conditions

Member states shall make spectrum available

1710-1785 MHz and 1805-1880 MHz spectrum

System considers a network control unit (preventing interference with terrestrial networks) and an aircraft BTS

Compliance with GSM standards by ETSI for GSM or equivalent standards

Interference with other mobile communication bands should be prevented (450, 900, 1800, 2100 MHz)

Minimum height for transmission: 3000 meters

Authorisation recommendationAuthorisation recommendation

Acc. to recommendation, the authorisation of MCA should be made by country of origin of the aircraft

The authorisation will automatically apply for all member states

Commission Decision of 7 April 2008 on harmonised conditions of spectrum use for the operation of mobile communication services on aircraft MCA services) in the Community (C(2008) 1256) AND COMMISSION RECOMMENDATION of 7 April 2008 on authorisation of mobile communication services on aircraft (MCA services) in the European Community (C(2008) 1257)

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Analysing the Commission ActivitiesAnalysing the Commission Activities33

SummarySummary44


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The Commission is working intensely to centralise and create a Pan-European spectrum regulation Outcome is still open

In general, the Commission favours more flexibilisation and a more market based approach (acc. to WAPECS) This has partially happened, but there is still resistance from the Parliament, some member states and regulators

The initiatives on Mobile-TV and MSS is a breach against the implementation of a market based approach, which is motivated by the need of harmonisation for a success of these services

Remarks on the development

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The initiatives of the Commission regarding Mobile TV can be analysed as a sort of practising of industrial policies Arguments in favour of industrial policies: Markets do not function optimally and

different state interventions are called for Arguments against: interventions will not make things better but may even

worsen the situation

Market failures call for state intervention and government failures speak against it.

A situative analysis has to be done to evaluate the exceptions suggested by the Commission for Mobile TV

Pros and Cons regarding the exception for Mobile TV as example for harmonisation

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Pros and Cons regarding the exception for Mobile TV

Pro Mobile TV exceptions Against exceptions

The slow development of Mobile TV calls for action

Without detailed regulation there might be multiple standards causing lack of interoperability and economies of scale

The GSM directive of 1987 has been successful

Eventual costs of migration to a certain standard

Administrative burden and complience costs

Lock-in effects to a certain technology and service preventing further development (e.g. comparable to UMTS 900)

Dedicating spectrum to a certain service causes crowding out effects (for other services/ technologies)

Past problems, i.e. false alloca-tions (forecasting problems) and locked-in spectrum

The Mobile TV initiative is a high risk strategy which might be a success, but the downturn side is considerable

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Outcomes on the factor markets and the end user markets

MHz

Price/MHz

Demand (t0)

Supply (t0)

Demand (Refarming/WAPECS)

Supply (for non Mobile TV-services/technologies)

P1

P1

P0

Refarming and WAPECS lowers demand as the spectrum can be used more efficiently (e.g. no new spectrum for new services required)

The Mobile TV strategy if implemented will reserve spectrum for DVB-H, reducing spectrum available for other services (crowding out)

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Outcomes on the factor markets and the end user markets

Market based regulation/WAPECS: Lower costs of introducing new services and technologies Possibility to reduce retail prices in the long run due to lower spectrum costs Higher penetration/usageMobile TV strategy: Chance to get cheap spectrum to implement Mobile TV – higher ARPU and improved service provisioning

Mobile Communications

Broadcasting

Market based regulation/WAPECS: Risk for broadcasters to loose their privileged situation and thereby risk of less service provision over terrestrial networks Hence, criticised by the EBU and broadcasting companiesMobile TV: Chance to get cheap spectrum to implement Mobile TV – higher ARPUs and improved service provisioning

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Analysing the Commission ActivitiesAnalysing the Commission Activities33

SummarySummary44


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The development goes towards a more market based and flexible spectrum regulation. Lower demand in the factor markets for spectrum lower prices for spectrum

and more spectrum available to new services lower prices and/or more innovation and technological development in the downstream markets

On the contrary, there is a call for harmonisation and Pan-European services including initatives on Mobile TV and MSS, which violates the principles of service/technology neutrality (WAPECS): If Mobile TV and the DVB-H standard is successful, the strategy of the

Commission will have positive effects, but it is a very high risk strategy which can just as likely end up with a negative outcome.

The decision on MSS might crowd out other services, with negative outcomes if MSS services are not successful

Important to strike balances between harmonisation, standardisation, a market based approach and the risks for artificial scarcity through command and control policies

Summary and final conclusions

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Contact

JUCONOMY Consulting AG

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