Spectrum Reform: The theory, practice, politics and problems

Professor William Webb

November 2008

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Spectrum reform is a journey….

• In the beginning

• The Radiocommunications Agency

• Ofcom and the Spectrum Framework Review

• Spectrum engineering – SURs and disruptive technologies

• Lessons learnt and implications for others

• Next steps

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In the beginning came Coase

• The Coase Theorem [1960] suggests that " the efficient solution will be achieved independently of who is assigned the ownership rights, so long as someone is assigned those rights"

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The theory stage

New Zealand and Australia try new ideas

The US assignment journey

The UK moves centre stage

More history

From a paper by Phillipa Marks and Kiyotaka Yuguchi

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The US seeks a new way of awarding licences

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Spectrum reform is a journey….

• In the beginning

• The Radiocommunications Agency

• Ofcom and the Spectrum Framework Review

• Spectrum engineering – SURs and disruptive technologies

• Lessons learnt and implications for others

• Next steps

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A seminal work was the “Economic Value of Spectrum” (UK - 1995)

2006 2002

Sector Value (£ billion)

Percentage (%)

Value (£ billion)

Percentage

(%)

Total 44.8 100 28.2 100

of which:

Public mobile 21.8 49 14.4 51

Broadcasting 14.7 33 5.9 21

Satellite links 2.8 6 2.9 10

Fixed links 3.9 9 3.8 14

Wireless broadband 0.3 1 - -

Private mobile radio 1.2 3 1.1 4

Other 0.1 0 0.1 0

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This opened the way for the introduction of pricing (Smith-NERA 1996)

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Next the Government commissioned the Cave Review

• Unsurprisingly for an economist, Cave argued that market mechanisms should be applied to spectrum

• Where not possible, proxy market mechanisms such as pricing should be employed

• Recommended trading, liberalisation and pricing

• Provided increased legitimacy for the introduction of market forces

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Spectrum reform is a journey….

• In the beginning

• The Radiocommunications Agency

• Ofcom and the Spectrum Framework Review

• Spectrum engineering – SURs and disruptive technologies

• Lessons learnt and implications for others

• Next steps

11

The formation of Ofcom was a key breakthrough

• At arms length from Government

• Around 80% of the senior management had never previously worked for a regulator

• A natural remit to conduct “blank sheet of paper” review

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In 2004 we produced the Spectrum Framework Review (SFR)

The Given:Fulfil our statutory duties

The Ambition:Make the UK the leading country for wireless investment & innovation

Ensure optimal use of the spectrum

Take account of the needs of all spectrum users

Maximise economic benefits of the spectrum

A better signposted approach to spectrum, giving more certainty in the market

A flexible approach to spectrum, providing opportunity for innovation

A competitive communications market, providing opportunity for returns on investment

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The SFR said that there are three possible ways to manage spectrum

Command & Control Zone

Ofcom manages it

Market Forces ZoneCompanies manage it

Licence-exempt Zone Nobody manages it

Approach that was adopted for about 94% of

the spectrum

Approach advocated by Cave and implemented

by trading and liberalisation

Approach currently adopted for 6% of

spectrum, some argue for radical increase

• We need to decide the right balance between the Zones

• Zones are currently demarcated by frequency. However, there are also dimensions of power and time

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The Command and Control Zone

• Still needed in some areas– Spectrum controlled internationally, eg HF, satellite– Spectrum where international roaming is essential, eg maritime, aeronautical– Uses we wish to preserve, eg radio astronomy

• The status quo

– The regulator decides on how much spectrum is needed for each application and who gets it.

– No variations are allowed– The approach followed for the last 100

years

• But no longer the preferred option

– The regulator cannot know as much as the market and so cannot make decisions as well as the market

– The Cave Report strongly recommended moving away from this model

2004 94% 21% 2010

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The Market Forces Zone

Allocation(what the best use is

for the spectrum)

Assignment(who the best user is

of the spectrum)

Existing spectrum:Trading between

users

“New” spectrum:Auctions

Liberalisation:Technology-neutral spectrum usage rights (SURs) to allow

users to make the change without consulting Ofcom

2004 0% 72% 2010

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The Licence-exempt Zone

Key area for innovation but we do not need much more

More detailed rules set out in the Licence Exempt Framework Review

2004 6% 7% 2010

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Spectrum reform is a journey….

• In the beginning

• The Radiocommunications Agency

• Ofcom and the Spectrum Framework Review

• Spectrum engineering – SURs and disruptive technologies

• Lessons learnt and implications for others

• Next steps

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A new form of licensing is needed – it can either be focussed around transmitters or receivers

Transmitters

• Restrictions on the in-band and out-of-band powers that can be emitted

• Simple and flexible

• But does not control interference

Receivers

• Restrictions on the amount of interference that can be caused to others

• More complicated and less flexible

• But provides a high level of protection and certainty for neighbours

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SURs can be considered as a set of core components and choices made for each band

CORE

CHOICES

A system for defining technical conditions in

licences based directly on the interference caused

PFD limits covering•Geographical interference•In band interference•Out of band interference

Verification• Modelling OR• Measurement

Parameters• 50% of locations OR• 90% of location, etc

Additional restrictions• None OR• Some (eg max EIRP)

“The OOB PFD at any point up to a height H m above ground level should not exceed XdBW/m2/MHz at more than Z% of locations in any area A km2”

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Our “spectrum commons” proposals fall into four areas

Better use of spectrum

Exemption at high frequencies Exemption of low-power transmitters

Bands shared by a range of applications, with interference managed

through power limits and polite protocols.

Much of the spectrum above 40 GHz can be released for licence exempt use.

All spectrum use can be made exempt for transmission power levels similar to

the UWB limits.

Role of light licensing

Light licensing will evolve towards exception in time, but will maintain its

role for the foreseeable future.

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Ultra Wideband

• The first step is to consider the economics

• This provided a rational basis on which to set the mask

• Then work with Europe to obtain widespread agreement

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Cognitive or white space access

• Economics are more difficult

• Hence, we will not mandate in spectrum owned by others

• But interleaved spectrum is different

• Application and implementation still unclear

Path (2) Signal to mobile blocked by tall building

Path (1) Signal from transmitter goes direct to house

Path (3) Signal from mobile to house antenna

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The Ofcom Spectrum Vision

• Spectrum should be free of technology, policy and usage constraints as far as possible

• It should be simple and transparent for licence holders to change the ownership and use of spectrum

• Rights of spectrum users should be clearly defined and users should feel comfortable that they will not be changed without good cause

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Spectrum reform is a journey….

• In the beginning

• The Radiocommunications Agency

• Ofcom and the Spectrum Framework Review

• Spectrum engineering – SURs and disruptive technologies

• Lessons learnt and implications for others

• Next steps

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Since Ofcom’s formation in 2003…

• Multiple auctions held

• Two major auctions well in train

• SURs implemented

• UWB implemented

• Trading implemented across some licence classes

• Cave Audit completed and much downstream activity

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Key lessons

• Evidence-based analysis is very powerful

• Implementation is much more difficult than we anticipate

• We often have less autonomy than we thought

• Interrelationships are complex

• Specific problems can prevent or delay us delivering generic policies

• Current licence holders are risk averse and often prefer the status quo while the new entrants who will benefit most have a relatively weak voice

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“2G liberalisation” – our major cause for delay

• Inability to apply trading and technology neutrality to 2G spectrum has led to…– Can’t apply liberalisation to 3G– Delay in auctioning 2.5-2.7GHz due to

legal action– Possible delays to “700MHz” depending

on legal outcome– Around 2 years behind schedule (and

growing…)

• Problem is one of competitive fairness– Desire to introduce more competition in

the 2000 3G auction– Would not have occurred if 2G licences

were technology neutral

Will legal “gaming” be the key mechanism for fighting market-based regulation?

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Still too early to assess whether the new regime is better

Consider the possibility

of deploying a new service

Obtain financial backing

Acquire the spectrum

Roll out the infrastructure

Acquire subscribers

1 2 3 5 7 10

Timing (years)

Trading was implemented in 2004 but only in a few areas – only now are we implementing trading and liberalisation more widely

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Other countries

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If I ran the FCC…

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Spectrum reform is a journey….

• In the beginning

• The Radiocommunications Agency

• Ofcom and the Spectrum Framework Review

• Spectrum engineering – SURs and disruptive technologies

• Lessons learnt and implications for others

• Next steps

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Where next?