CREATING NEW MARKET MECHANISMSWhat is a market?

Is there any such thing as a market in radiofrequency spectrum?

Allocation market vs secondary market?

Secondary markets?

ACMA approaches

Incentive auctions

What is a market?

> A medium that allows buyers and sellers of a specific good or service to interact in order to facilitate an exchange.

> A market may either be a physical marketplace where people come together to exchange goods and services in person, as in a bazaar or shopping centre, or a virtual market wherein buyers and sellers do not interact, as in an online market.

> NOT a Market:> ACMA is working on spectrum sharing – technology driven

sharing, compatible co-existence, private parks to enhance use, but these may only create markets incidentally

Markets

> Is there any such thing as a market in radiofrequency spectrum?

> There is a market in radiofrequency spectrum licences a subtle but important distinction.

> What’s the difference?

What’s the difference?

> Value is in the rights conferred by the licence and the characteristics of the spectrum matched with the equipment available rather than the spectrum itself. Some spectrum has some of the right characteristics but lacks others.

> - For example, spectrum which has desirable technical characteristics and widely available equipment but is available in areas where there is low demand for service. This will be less valuable to less potential users. In some areas there may be no buyers.

> In some cases all the relevant available spectrum may already be licensed to users by the ACMA and none of those are willing to offer those licences to others

> - meaning there are no sellers.> Those like the ACMA interested in creating markets for radiofrequency spectrum

need to look at both the value that lies in radiofrequency licences, and to the methods by which that value is expressed, including, but not only, by price.

Allocation market vs secondary market?

> Primary allocation can occur when someone is prepared to pay the Government a fee for spectrum access. If supply is likely to exceed demand this can consist of:

> First in time allocation - A quick way to get spectrum to those who need it.

> or> Over the counter - Done directly between an individual organisation

and the ACMA to gain a licence (may include qualification).

> Allocation competition amongst similar users can occur where demand exceeds supply. Where the ACMA thinks that this might occur it has well tried mechanisms for allocating spectrum where price is the primary or even a key determining factor. These include:

Allocation market vs secondary market – cont.

> Tender processes> Hybrid Market-Administrative Method - Organisations provided

with the opportunity to make an open or sealed offer, bid, proposal, or expression of interest in response to an invitation or requests from the ACMA for tender.

> Beauty Contest – Competing application submit proposals for service provision, may also require a set dollar amount.

> - beauty is in the eye of the beholder> Comparative bidding – Competing applicants tender a dollar

amount, may also submit proposals for service provision

Auctions

> Public sale of spectrum to the highest bidder, entry conditions and auction rules set by administration. Types of auctions include:

> English (open outcry) auction> Simultaneous multiple round auction (1800 MHz)> Combinatorial clock (the digital dividend)> Simple clock> Descending – several types

> Incentive auctions are a special case

Secondary markets?

> Trading - A market where investors purchase some or all of a licensee’s licence, an example is trading spectrum licences where the licensee of a spectrum licence may assign the whole or any part of the licence.

> - Tends to be confined to similar uses and users. Sometimes a limited field ( trading is not the same as re-farming)

> Third party authorised (sub-lease) - Private commercial agreement that allows a spectrum or apparatus licence to authorise another person or organisation to operate a radiocommunications device.

ACMA approaches

> Do what we can to remove barriers to secondary trading> - increasing certainty about renewal, reissue

> Create licence products that are flexible enough to accommodate multiple uses

> - broader licence categories, more flexible technical conditions

> Promote mechanisms which allow for licence transfer> - spectrum brokerage?

> Encourage licensees to see spectrum as an asset rather than a sunk cost.

> - Wholesale private management

Incentive auctions

> Voluntary, market-based means of repurposing spectrum by encouraging licensees to relinquish spectrum usage rights in exchange for a share of the proceeds from an auction, or new licences. FCC are using a broadcast incentive auction to repurpose broadcasting spectrum.

> Essentially a reverse auction for sellers to determine the prices at which they would be prepared to relinquish their spectrum by going off air or by moving to a different channel

Incentive AuctionsFollowed by a forward auction of buyers in an iterative process

Up to the market how much is cleared by this process (within limits)Broadcast stations that do not participate or remain on air will be repacked.

Does it remove the middle man?

>QUESTIONS ??