Radio spectrum management review: a consultation paper


Contents
Page


Foreword by Professor Martin Cave
2
Responding to the review
4
Introduction
5
The value of spectrum
6
Economic gains from efficient use of spectrum
7
Economic principles of spectrum management
11
Legislative basis for spectrum management
12
Regulatory framework for spectrum management 
14
International dimension
14
National dimension
16
Spectrum use: marketed and non-marketed outputs
19
Issues in non-marketed uses of spectrum
21
Defence
21
Broadcasting
23
Aeronautical and maritime services
28
Emergency services
30
Spectrum valuation: pricing and auctions
30
Spectrum trading
33
The boundaries of spectrum regulation
38
Annex A
Summary of issues for discussion
40
Annex B
Review remit: H M Treasury press release of 22 March 2001
43
Annex C
Application of incentive pricing to spectrum users
46


Foreword

In March 2001, I was appointed by the Chancellor of the Exchequer and the Secretary 
of State for Trade and Industry to conduct an independent review of spectrum 
management in the United Kingdom, with the purpose of promoting UK 
competitiveness.  The attached discussion document sets out some of the issues 
which my team and I have identified as being crucial to the future conduct of 
spectrum management, and invites responses on these and other matters.  The 
premises on which I am operating are that:

?	the spectrum is an asset of large and growing importance, crucial to the success 
of many industries, such as the communications industry, which have a major 
bearing on our future prosperity and in which the U.K. can excel;
?	understandably, a régime for allocating spectrum has grown up which relies 
largely on administrative measures and is not always necessarily calculated to 
ensure that best use is made of the spectrum;
?	at the same time, it is vital to ensure that adequate spectrum is available in the 
public sector to ensure the delivery of essential services such as defence and the 
emergency services. 

Paradoxically, the fact that the starting conditions are non-optimal creates unusual 
opportunities for implementing policies through which almost all participants and 
stakeholders - existing private firms, new private firms, existing public organisations 
and consumers - can benefit.  We should therefore be able to put forward proposals 
which are palatable to as many as possible of the interested parties.

In my opinion, the objective of enhancing efficiency can best be achieved by 
developing a régime for spectrum management which gives all spectrum users an 
incentive to take into account the opportunity cost of the spectrum they are using.  In 
the case of private sector users, such as mobile telephony companies, this can 
readily be achieved by developing a free market in spectrum or licences associated 
with spectrum, both by auctioning them when they first become available and by 
introducing secondary trading.  The impact of this system will be enhanced by 
loosening the restrictions placed on the uses to which particular blocks of spectrum 
can be put.  This should help to ensure that spectrum is deployed in the most 
effective way by encouraging firms to develop new technologies.  Ideally, full 
substitution across alternative spectrum uses should result in a situation in which as 
much as possible of it is utilised, while prices are kept low.

In the public sector, ways must be found to give spectrum users an incentive to 
consider a range of possible technologies which may economise on valuable 
spectrum.  This may involve, for example, trade-offs between spectrum use and the 
bringing forward of equipment renewal, or between spectrum use and 'wired' 
alternatives such as fibre-optic cable.

Many people have commented on the power of constraints upon the implementation 
of any new policy, resulting from the need for the UK to comply with international 
obligations.  I fully acknowledge the existence of these constraints, but am currently 
inclined to recommend policies which seek progressively to minimise them through 
unilateral and international action, and to focus upon the opportunities which better 
spectrum management can create.  The likely relaxation of the EU's prohibition on 
spectrum trading is a major and essential step in this direction.  But the constraints 
do draw attention to the inevitable long-term nature of introducing major changes in 
spectrum management.

For this reason, it is likely that my proposals will seek to identify long-term means of 
reaching the objective. Some of the steps towards this end, though, may well require 
implementation over a shorter period, as a necessary precursor to enabling moves 
towards spectrum efficiency over the longer term.

I look forward to receiving responses to the accompanying document by August 17th, 
and to speaking in person with the major parties with an interest in spectrum use.


Martin Cave

June 2001


Responding to the review

The review welcomes responses to this consultation paper from all quarters. The 
consultation paper is particularly addressed at:
?	trade associations and major individual companies with an interest in spectrum 
use,
?	Government departments and regulatory bodies involved in spectrum 
management activities, in the UK and overseas,
?	public interest groups representing consumers' use of radio services, and
?	academics and economic policy consultants and other individuals with an interest 
in regulatory and communications issues.

A summary of the issues for discussion raised by the review is at Annex A.

Responses should be addressed to the secretary to the review, Daniel Storey, at the 
following address:

post:		c/o Radiocommunications Agency
Wyndham House
189 Marsh Wall
London E14 9SX

e-mail:		spectrum.review@ra.gsi.gov.uk
telephone:	020 7211 0662

This document, and others relating to the review, can be found at the review's 
website:

www.spectrumreview.radio.gov.uk

and at the websites of the Radiocommunications Agency (www.radio.gov.uk) and Her 
Majesty's Treasury (www.hm-treasury.gov.uk).

Responses are requested by Friday 17 August 2001. In the interests of openness, 
the review intends to publish (via its website) the responses received, along with the 
identity of authors, unless confidentiality is requested.



Introduction

1.	The radio spectrum is an essential raw material for many of the UK's most 
promising industries of the future. It is also a key input into many vital public 
services, affecting the quality and safety of life of all UK citizens. It contributes 
to a diverse array of cultural, social and scientific activities. But the amount of 
spectrum available is finite and ensuring that it is used efficiently is essential if 
the demands of growing industries and high quality public services are to be 
accommodated.

2.	The next decade will see significant continued growth and innovation in 
wireless communications. The UK has, on the whole, been successful in 
making spectrum available for new services. The Government has taken 
steps in recent years to improve the UK's spectrum management regime to 
provide that spectrum users face greater incentives to use it efficiently. It has 
introduced administrative pricing and auctions as spectrum management 
tools. But it is essential that the framework for spectrum management keep up 
with the pace of change if the UK is to remain at the forefront of the 
information revolution.

3.	The Government therefore commissioned this independent review of 
spectrum management, to report to the Chancellor and to the Secretary of 
State for Trade and Industry. (A copy of the H M Treasury press notice of 30 
March 2001 which sets out the review's remit is at Annex B). The review will 
advise Government on the principles which should govern spectrum 
management and what more needs to be done to ensure that all users, 
commercial and non-commercial users, are focused on using spectrum in the 
most efficient way possible. In doing so, it will consider the use of spectrum 
management mechanisms such as spectrum valuation, pricing and trading. 

4.	The review will report to Ministers by the end of this year with 
recommendations.

5.	The purpose of this consultation paper is: 
?	to set out the approach of the review to tackling its remit;
?	to provide a preliminary exposition of the potential benefits from, and 
constraints on, applying economic principles more comprehensively to 
spectrum management in the UK;
?	to identify some of the key questions which the review will aim to address; 
and
?	to solicit views from all interested parties on the current practice of 
spectrum management and the scope to make further improvements to 
this in the interests of the UK economy as a whole.

6.	The review's objectives are focused very firmly on seeking principles which 
can be turned into regulatory practice, which will help deliver a more 
economically efficient use of radio spectrum across the UK economy as a 
whole. This is a broad remit, encompassing both public and private sectors. It 
is broad also in the application of the concept of economic efficiency, which 
can encompass both sectors, as well as both marketed and non-marketed 
goods. The review will seek solutions in which use of spectrum for public 
policy objectives and the delivery of certain services to UK citizens (e.g. 
defence, 'safety of life' emergency and transport services, public service 
broadcasting) can be weighed against the opportunity cost of achieving these 
policy outputs. Ultimately, the breadth and quality of these services to the UK 
populace, and the manner in which they are delivered, is a matter of public 
choice via the political process. But this choice may be better made if 
informed by the cost of spectrum usage associated with different means of 
achieving the same policy outcomes.

7.	The review's focus on maximising economic efficiency in spectrum use 
across all sectors of the UK economy does not equate to a focus on 
maximising proceeds to the Exchequer from ongoing spectrum usage fees or 
one-off auction proceeds. In certain circumstances, there may well be a 
coincidence between spectrum efficiency concerns and revenue generation, 
for example in the design of an auction for commercial use of certain 
spectrum bands. In other cases, achieving economic efficiency in spectrum 
usage and delivering public policy outcomes may preclude or over-ride any 
revenue generation objectives. In other words, the review's starting point is 
that charges on spectrum use should be applied where necessary to guide 
spectrum to its most efficient uses. Charging is not an end in itself.

The value of spectrum

8.	The value of spectrum has, at its heart, a very human basis: the enjoyment 
and utility which individuals and society place on communication. Radio 
spectrum enables communication across many different media, for many 
different purposes, individual and collective, commercial and non-commercial. 
The phenomenal growth in the use of the internet, mobile telephones, and 
multi-channel television broadcasting is a manifestation of the attraction of 
communication in all its electronic forms to very broad sections of society. 
People like to talk and listen, to watch and learn, to be informed and 
entertained: radio spectrum enables this.

9.	At the same time, individuals and society enjoy a wide range of publicly 
provided benefits from spectrum use. We all value the security and protection 
of the emergency services, where radio is an integral input into their activities. 
Likewise, UK society places a value on the defence of the country and its 
interests via the UK's military capabilities, which in turn rely on a range of 
spectrum uses. Advances in scientific understanding, for example through 
radio astronomy and radio telemetry earth observations, provide international 
benefits.

10.	Shifts in technology constantly open up new possibilities for spectrum use, 
paving the way for consumers, businesses and governments to discover 
newly valuable uses of radio services. Technological advances have both 
increased the productivity of existing usable frequencies and opened up new 
frequency bands, thereby increasing supply. At the same time consumer and 
public sector demands for radio services have leapt forward, spurred on by 
network effects in an increasingly information intensive economy. Enabling 
changes in spectrum use which reflect changes in these relative values 
should increase the benefit which society as a whole derives from this 
resource.

11.	So maximising the economic efficiency with which spectrum is used (the 
focus of the review's deliberations) should manifest itself in very tangible and 
human ways, such as: 
?	Higher quality lower cost personal communications
?	Richer delivery of information and entertainment to the home and to 
business
?	Better quality public services delivered with greater value for money

12.	This increased value, enjoyment and utility from spectrum use thus presents a 
real opportunity for the UK economy. But to realise this gain for all will require 
a rigorous approach to spectrum management, which enables society to 
respond, through public policy, regulation and the market, to the new 
opportunities from and changing demands for radio services. 

Economic gains from efficient use of spectrum

13.	Radio spectrum is a finite resource with scarcity value in many frequencies 
and geographical areas. This creates the potential for economically wasteful 
congestion and interference. Balancing spectrum supply and demand to avoid 
this inefficient outcome has been the rationale for regulating access to 
spectrum at both a national level, under the Wireless Telegraphy Acts, and 
internationally, under the auspices of the International Telecommunication 
Union and the European Conference of Post and Telecommunications 
Administrations. This regulatory approach has successfully provided an 
evolving framework for a diverse range of users (commercial and public 
sector, civil and military) to access the spectrum they currently need. It has 
also enabled users to input into the regulatory process forecasts of their 
prospective demands, in order to influence future determination of spectrum 
use.

14.	What has changed, though, in recent years has been the speed of 
technological advance and the growth in services reliant upon radio spectrum 
as a vital input . In other words, spectrum management is becoming more 
difficult and more important. Speed of change makes it much harder for a 
purely regulatory approach to ensure that spectrum is used as efficiently as 
possible on a continuing basis. Growth in spectrum-reliant services makes 
efficient use increasingly important to the health of the UK economy as a 
whole. Misallocation and inefficient use of spectrum can have major adverse 
impacts on consumers, businesses and users of public services. Conversely, 
spectrum management which incentivises efficient use and re-use over time 
can be an important enabler of the diffusion of new technology, which in turn 
contributes to economic growth.

15.	Recent economic events and studies illustrate the scale of the challenge 
faced by spectrum management policy. Last year's auctions and comparative 
selections ('beauty contests') by most European governments of licences to 
operate so called 3rd Generation mobile phones raised some €130 billion , or 
around €350 per head of population. Operators may face at least comparable 
costs for the deployment of new networks and for the marketing of new 3G 
services. The total amount raised through licence fees (whether through 
auction or 'beauty contest') represents a lower bound on the telecoms 
companies' estimate (at the time of the sales) of the net surplus they might 
create through their 3G services. In the UK, the total amount paid for licences 
(£22.5 billion) equates to some £1.8 billion per year over the 20 year life of the 
licences (assuming a 6 per cent real interest rate), or some £21 million per 
MHz. 

16.	Few other spectrum users in the UK have been subject to such direct market 
valuations of their spectrum use. Recent economic studies undertaken for the 
Radiocommunications Agency, though, have shed light on the estimated 
benefits to producers and consumers of radio industry services .

Economic impact of radio: selected sectors3

Value (producer plus 
consumer benefits) (£m)
Licence 
fees (£m)
Benefits/fees
Total radio industry
   20,300 
512
40
Mobile telephony 
services
     8,200 
44 
186 
Broadcasting
     7,400 
            435 
17 
Satellite links
     1,800 
                   
3 
600 
Fixed links
     1,600 
18
89 
Private mobile radio
     1,100 
8
138 
Maritime
            1 
2
0.5 
Aviation
          16 
                 1 
16  
Amateur/citizens radio
            5 
 1 
5 
Others
        200 
               - 
- 





Notes on licence fees:



Broadcasting: spectrum access fees proxied as the sum of Wireless Telegraphy Act 
licence fees (£4.9m) plus Broadcasting Act payments for independent TV (£419m) and 
independent radio (£11m); source: ITC and Radio Authority annual reports, 2000
All other categories: annual accrued W T Act licence fees received by RA for 2000-01
Satellite links: fees do not apply to mobile satellite stations


17.	These data present some striking results:
?	The total economic value of the radio industry surveyed is some £20 billion 
at 2000 prices (excluding civil aviation, defence and other public sector 
use of radio, and consumer benefits of some licence-exempt services)
?	Broadcasting and public mobile radio together account for around three-
quarters of the estimated benefits 
?	Consumer benefits account for 83 per cent of the total value from the radio 
services surveyed. Producer benefits were 15 per cent, while licence fees 
(a benefit to the public sector) were some 2.5 per cent
?	The ratio of total benefits to consumers and producers versus licence fees 
for spectrum usage is estimated around 40:1. There is an extraordinarily 
wide range in this ratio, though, across different spectrum users: for 
example, from 600:1 for satellite services, 186:1 for public mobile radio, 
17:1 for broadcasting, down to less than 1 for maritime services.

18.	One can compare these estimates of the value of radio services to the UK 
economy with the current use of spectrum. Usage currently ranges widely 
across spectrum from 9 KHz (Very Low Frequency) up to 300 GHz 
(Extremely High Frequency), but 'prime spectrum'  is generally considered at 
present to lie within the range 300-3,000 MHz (Ultra High Frequency band). 
Use of this spectrum range, and the explicit or implicit licence fee charge for 
spectrum usage in these prime bands, is currently split as follows:























Prime spectrum allocation in UK (300-3,000 MHz)


percentage
licence fee/MHz (£k/pa)
aeronautical
25
                        1 
defence and emergency services
28
                       20 
broadcasting radio
1
112 
broadcasting TV
16
                  2,000 
fixed links
5
                     35 
maritime
5
                       15 
private business radio
4
                     100 
2G mobile 
8
                     300 
3G mobile
7
               21,000 
other mobile
1
257




100

Source: Radiocommunications Agency
Notes:
Spectrum percentages are approximations which depend in part upon assumptions 
made about attribution of shared spectrum
Broadcasting: spectrum access fees proxied as the sum of W T Act licence fees 
(£4.9m) plus Broadcasting Act payments for independent TV (£419m) and independent 
radio (£11m); source: ITC and Radio Authority annual reports, 2000
All other categories: annual accrued W T Act licence fees received by RA for 2000-01
Satellite links: fees do not apply to mobile satellite stations 
3G fees derived from annualising the net present value of the £22.5 billion auction 
receipts, assuming a 6 per cent real interest rate
Defence spectrum: no fee levied on NATO-managed bands and radar usage, other 
bands charged at similar rates to public mobile 

19.	These economic data suggest strongly that there are potentially serious 
mismatches between:
?	the value which UK society places on services using radio spectrum as an 
input
?	the amount of spectrum allocated to such services, and
?	the fees charged to users of such spectrum to provide direct incentives for 
the economical use of spectrum.
At the very least, these data raise questions about the transparency of 
demands for spectrum use across the economy and the scale of charges for 
such use.

20.	Some of these mismatches are starting to be tackled by the gradual 
implementation of spectrum pricing via auctions and administratively set 
prices. But the review has concerns about the ability of the current regulatory 
regime to deliver significantly better alignment, on a comprehensive and timely 
basis, between the benefits of spectrum use and the allocation and 
assignment of specific spectrum access. Indeed, this concern underlies the 
remit of the review, set by H M Treasury and the DTI. Furthermore, these 
figures are just a snap-shot, and do not capture the further potential gains 
from adjusting spectrum use over time to reflect changes in technology and 
society's demands for radio services.

21.	The review will examine further the economic data generated by the 
Radiocommunications Agency and others on the values which producers and 
consumers of radio services attach to spectrum use. These data will form the 
empirical context for the review's recommendations and could provide 
compelling evidence of the need for change in spectrum management policy 
and practice.

Issues for discussion
i.	How best can Government assess the economic gains from 
enabling more efficient use to be made of spectrum?
ii.	How could information from market transactions and economic 
impact studies best help inform the design of spectrum 
management policies?

Economic principles of spectrum management

22.	The Radiocommunications Agency operates to an ambitious corporate plan 
with stretching aim and objectives:

"Aim
To be the best spectrum manager in the world, managing the radio spectrum 
effectively in support of the Government's aim of building a successful and 
competitive knowledge economy that is the best in the world for electronic 
trading while providing high quality service in line with the 'Modernising 
Government' programme.

Objectives 2000/01 to 2004/05
For the Plan period these include:
To support Departmental objectives by:
?	managing spectrum in accordance with a clear strategic plan, which: 
?	promotes enterprise, innovation and competitiveness;
?	makes full and appropriate use of all available spectrum management 
tools to promote the best social and economic use of the radio 
spectrum; and
?	carries forward innovative and progressive approaches to spectrum 
management."

23.	These aims and objectives are firmly focused on the economic benefits of 
effective spectrum management to the UK as a whole. They also require the 
Agency to make trade-offs on behalf of Government and society as a whole 
between competing social and economic uses of spectrum. But the process 
of making such trade-offs, and the factors and weightings to be given to 
competing private and public sector spectrum users, are not clearly 
articulated.

24.	The review's over-arching principle is that all spectrum users should face 
some form of price reflecting the opportunity cost of their spectrum use, thus 
providing incentives over the long term towards efficient use. The review will 
consider how this principle might be translated into regulatory objectives and 
practice. It will examine the case for strengthening the Agency's economic 
efficiency objectives. It will also explore the scope for articulating more clearly 
in organisational objectives the wider social objectives of managing spectrum 
access for the provision of non-marketed services.

Issues for discussion
iii.	How far can the over-arching principle, that spectrum users should 
bear the opportunity cost of their usage, be applied in practice?
iv.	How can the trade-offs between competing economic and social 
uses of spectrum be more clearly articulated in the principles 
governing spectrum management?

Legislative basis for spectrum management

Statutory functions and duties of a unified regulator

25.	The proposed creation of a new unified regulatory body for the 
communications and media industries - an Office of Communications 
(Ofcom)  - will include the current spectrum management functions of the 
Radiocommunications Agency. The Communications Bill to be introduced to 
implement these plans presents an opportunity to refine the statutory 
functions, duties, aims and objectives of Ofcom with regard to spectrum 
management. There is scope to embed in the statute a framework to help 
ensure that the new regulator faces clear incentives to deliver effective 
spectrum management to the long term benefit of the UK economy. 

26.	Spectrum management will be only one of a number of high-level functions to 
be carried out by Ofcom. In one sense, this spectrum function is central and 
pivotal to all of the services and networks which Ofcom will regulate, as it 
provides one of the key inputs to both telecommunications and broadcasting. 
At the same time, spectrum management also has important constituencies 
outside the converging worlds of communications and broadcasting, notably 
defence, transport and emergency services. Ofcom should face enduring 
incentives to take due account of spectrum efficiency for the good of the 
economy and society as a whole, which could act as a counterweight to 
Ofcom's internal telecoms and broadcasting constituencies.

27.	To achieve this, it may be helpful to make ensuring efficient spectrum use one 
of the primary duties of Ofcom, to rank alongside its duties towards delivering 
consumer choice and value in telecoms and its public service broadcasting 
goals. Spectrum efficiency should be measured by the impact on the UK 
economy as a whole, given wider political choices about the balance between 
marketed and non-marketed goods, and the scale of the latter.

Statutory basis of spectrum licensing

28.	Spectrum regulation in the UK has relied for nearly a century on the licensing 
of wireless apparatus, with the use of extensive criminal sanctions to enforce 
this regime. This regime has been very durable, requiring only three significant 
Parliamentary Acts during the 20th century, the last of which  maintained the 
structure of licensing and enforcement while adding new economic tools for 
spectrum management (see below).

29.	The forthcoming Communications Bill provides an opportunity to reassess 
whether the current regime could be further improved by adding new modes of 
regulating spectrum. One approach, which has been pioneered by the 
Australian Communications Authority (ACA), is to augment apparatus 
licensing with regulation of spectrum usage directly in certain frequency 
bands. Spectrum in such bands is divided by geography and frequency into 
standard trading units which can be aggregated along either of these 
dimensions. Instead of specifying conditions of apparatus use, spectrum 
licensing determines the relevant frequencies, the geographic area of 
authorised use, the maximum emission levels outside the bandwidth of the 
licence, and the maximum emission levels outside the area of the licence.

30.	This emphasis on regulation of spectrum access rather than apparatus is 
closer to the economic principles which underlie spectrum management, 
namely avoiding inefficient congestion in electromagnetic signals. One of the 
potential benefits of this approach could be to provide a means to move 
progressively towards a more technology-neutral approach to spectrum 
management, which was indifferent to the type and location of the transmitting 
apparatus and the type of radio service carried on the spectrum. This could 
enable UK regulators to deliver more efficient use of radio spectrum within UK 
territory. For example, it could enable regulation of signals transmitted from 
outside the UK (such as from satellites) or of radio signals which are 
incidental by-product emissions from non-wireless apparatus (such as 
radiation from ADSL lines). This may enable Ofcom to deliver more efficient 
overall spectrum management by improving its regulatory reach over 
spectrum use in the UK from all sources.

31.	The review's remit invites it to advise, if necessary, on the legislation to 
implement Ofcom. The review will consider the proposed draft 
Communications Bill, when published, and will aim to submit any interim 
report on the aspects of this which affect spectrum management in time to 
inform preparation of the Bill.

Issues for discussion
v.	To what extent would a separate spectrum management duty for 
Ofcom be helpful, and how could this best be articulated in a new 
statutory framework for communications regulation?
vi.	What additional statutory alternatives to apparatus licensing could 
assist Ofcom in meeting its spectrum management objectives?
vii.	How far can new modes of licensing, based upon access to 
defined spectrum rather than defined wireless apparatus, assist in 
enabling more efficient use to be made of spectrum?

Regulatory framework for spectrum management

32.	Radio transmission signals, from a given system, have a tendency to interfere 
with the proper reception of those of other systems, unless the respective 
power levels of each system are properly planned. Also, these signals do not 
respect national borders. As a result, transmissions from one country can 
interfere unacceptably with systems utilising the same or similar frequencies 
in other countries. For these reasons, the field of radio communications has 
traditionally been a highly regulated industry at both an international and 
national level.

International dimension

33.	The trans-national nature of many radio signals, allied to the global nature of 
many radio-using services, makes international co-operation in radio 
frequency planning essential to avoid harmful interference. There are 
significant global benefits from such co-ordination. As an advanced economy 
making intensive use of radio spectrum, on the geographical edge of a 
crowded continent with competing commercial and non-commercial spectrum 
users, the UK stands to benefit more than many countries from this co-
ordination. But there are also costs involved, in terms of constraints on the 
rate at which spectrum can be made available on an internationally-
harmonised basis for new services which place a higher value on spectrum 
use than incumbents.

34.	There are three main rationales for international co-ordination: 
?	Planning of radio services involving the global and regional movement of 
transmitters (e.g. maritime, aviation and increasingly mobile phones)
?	Avoidance of interference by planning of frequencies which propagate 
significantly across regions (e.g. satellite services, lower frequency 
broadcasting bands) and across neighbouring countries (most services 
except for low power and short range)
?	Allocation of bands across regions to particular radio services or 
technologies enables manufacturers to achieve economies of scale in the 
production of transmission and reception equipment across larger 
commercial markets, enabling more rapid and economical roll-out of new 
services.

35.	International harmonisation activity takes place on several inter-connected 
levels: 
?	Allocation of services to frequency bands
?	Selection and co-ordination of specific frequencies for individual users 
(assignments)
?	Harmonisation of operational procedures (e.g. access protocols, call-signs 
and qualification of maritime, aviation and amateur operators)
?	Technical equipment standards
?	Technical conditions within which various allocations can share 
frequencies 
?	Regulatory procedures including licensing.
These activities are carried out by several global and European organisations:

The International Telecommunications Union (ITU) is an 
intergovernmental agency of the UN, based in Geneva. The 
Radiocommunications Sector (ITU-R) is responsible for establishing the 
International Radio Regulations, which include the International Frequency 
Allocation Table and the Rules and Procedures for use of the frequencies. It is 
also responsible for agreeing formal recommendations on the technical 
conditions for frequency sharing between applicable services, equipment  
standards, and radiowave propagation. The Radio Regulations are updated 
every 2-3 years at World Radio Conferences (WRC) which require a 
continuous and extensive cycle of preparations by the various national 
administrations. Technical work is carried out within a number of ITU Study 
Groups.

The European Conference of Post and Telecommunications 
Administrations (CEPT) is composed of 43 member administrations. Its 
main priority is to work towards harmonising the planning and use of the 
spectrum and licensing arrangements. It is also responsible for co-ordinating 
common European positions for each of the World Radio Conferences. The 
European Union (EU) is playing an increasingly influential role in determining 
policies, covering all areas telecommunications including the use of radio, in 
member states. EU Directives such as those on Radio and 
Telecommunications Terminal Equipment and Licensing have major 
implications for UK. A key priority for EU is the eradication of barriers to trade 
and promotion of competition in telecommunications within its member states. 
The European Telecommunications Standards Institute (ETSI) is 
composed of manufacturers, operators and administrations.   It is the principal 
telecommunications standardisation body in Europe.

36.	The review recognises the significant constraints which the UK's international 
obligations as a member of the ITU and CEPT place on unilateral spectrum 
management decisions in the UK. The co-ordination of internationally mobile 
radio transmitters and trans-national radio signals is clearly vital, and provides 
benefits in terms of spectrum efficiency and interference management. The 
European Union is also showing a greater interest in spectrum management 
as part of the wider policy of developing the single European market in 
electronic communications.

37.	There appears, however, to be a trade-off between the degree of international 
harmonisation on allocations to defined radio services and the flexibility for 
individual states to plan their own allocations (or even leave these to market 
forces to determine). Some jurisdictions (such as Australia, New Zealand, the 
USA and Guatemala) have moved, in certain frequency ranges, towards a 
more technology- and service-neutral approach to spectrum management, 
which is nevertheless consistent with their obligations as ITU signatories. 
There is also a trade-off between internationally-mandated allocations, which 
give certainty to equipment manufacturers, and the less prescriptive approach 
of enabling industry-led standard setting bodies to deliver the benefits of 
technology harmonisation.

38.	The review will consider these international trade-offs and constraints in 
achieving economic efficiency of spectrum use in the UK. It will also consider 
the extent to which the UK's international stance on spectrum harmonisation 
might reflect more directly the changing valuations placed on spectrum by 
different users.

Issues for discussion
viii.	How can the UK's stance towards international spectrum 
management policy best reflect the opportunity costs of different 
spectrum uses?
ix.	What scope is there for greater autonomy in domestic spectrum 
policy within the constraints imposed by the UK's international 
commitments?
x.	How should the UK Government judge the trade-off between a 
more liberal approach to spectrum management and one in which 
technology standards and spectrum access are mandated as part 
of a strategic industrial and trade policy?
xi.	If there were greater latitude in international allocations and/or the 
UK's implementation of such decisions, to what extent would 
market mechanisms result in harmonisation of equipment and 
transmission standards? 

National dimension

39.	The institutional arrangements for spectrum management in the UK have an 
important bearing on the delivery of the overall objective of spectrum 
efficiency. The Radiocommunications Agency plays the leading role in 
managing the allocation of spectrum and conducting the bulk of individual 
spectrum assignments. It also leads in representing the UK in international 
spectrum management fora. 

40.	The RA, like its regulatory counterparts overseas, tends to stipulate national 
allocations which are based on the ITU-R Radio Regulations. These national 
allocations tend to be sub-sets of the Radio Regulations. In other words, in a 
given frequency band the national regulator will permit the licensing of some, 
but not necessarily all, of the possible uses identified in the Radio Regulations. 
This decision is based on national telecommunications strategy, historic use 
and wider national considerations, such as defence and aircraft safety.

41.	Having made a decision to licence a certain service in a given band the 
selection of licensees and the award (assignment) of  frequencies can take a 
number of forms: 
?	User-planned assignments: (for example, public cellular mobile or point to 
multi-point systems) RA first endeavours to identify a number of tranches 
of suitable spectrum with a view to awarding (assigning) them on a 
national or regional basis to individual operators. Where there is clear 
evidence that the number of potential (candidate) licensees exceed the 
number of licences available, auctions may be used to select the 
successful licensees.  Alternatively, where there is not a clear case for 
auctions, a process of comparative selection ('beauty contests') is also 
available. In either case the successful candidates are responsible for the 
necessary planning of the use of the assigned spectrum.
?	RA-planned assignments: (for example, fixed point to point links) RA 
manages a number of frequency bands from which it makes specific 
frequency assignments on an individual link by link basis, upon receipt of 
licence application from a large pool of UK operators.
Some services (such as private business radio) use both assignment 
approaches, with smaller systems assigned licences on a case by case basis 
by RA regional offices, and larger systems assigned a block of frequency 
channels within which the operator will plan the network.

42.	Satellite communications systems, which have shown rapid developments in 
technology and business applications , are subject to a hybrid approach to 
licensing. Up-link transmissions from fixed earth satellite stations are subject 
to licensing under the W T Act. 'Receive only' terminals and certain mobile 
satellite system terminals are exempt from individual licensing under the W T 
Act. Finally, down-links from satellites into the UK are outside the scope of the 
W T Act, since the transmitter is not within UK territory. Nevertheless, such 
'space to earth' transmissions may place some constraints (agreed in 
principle in the ITU-R) on other licensed terrestrial services which share the 
same frequency bands.

43.	In addition to the RA, a number of other departments, agencies and public 
bodies have narrower spectrum policy interests and/or spectrum 
management/frequency planning functions in their own sectors. These include 
the Home Office, Ministry of Defence, Department of Culture Media and Sport, 
Scottish Executive, Civil Aviation Authority, Maritime and Coastguard Agency, 
Independent Television Commission, Radio Authority, and the BBC. A central 
Cabinet Office committee, jointly chaired by the RA and the MoD, provides an 
official forum for formulating and co-ordinating policy on frequency planning 
and allocation.

44.	The delegation of frequency planning within the public sector is mirrored to 
some extent by delegation to a number of private sector groups. For example, 
the Joint Frequency Management Group assigns operating licenses to the 
programme making and special events sector, and the Joint Radio Committee 
of the fuel and power industries perform a similar function for these utilities. 
Also, certain fixed links bands have historically been self-managed by BT and 
Cable & Wireless on a block basis. This is a continuation of arrangements 
made during the monopoly and duopoly periods (prior to 1984). With the 
companies' agreement, RA is in the process of taking over management of 
these bands with a view to facilitating access to other operators of fixed links.

45.	Delegation of certain spectrum management functions to experts within 
specialised agencies/departments can clearly provide benefits to particular 
constituencies of users, in terms of understanding of and responsiveness to 
their needs. Indeed, some jurisdictions, such as New Zealand, have applied 
this approach more widely, by auctioning off management rights to particular 
frequency bands to commercial intermediaries, for them to assign licences 
within this band to business users of spectrum. Such reforms are designed to 
encourage a more pro-active approach, with band managers encouraged to 
seek out profitable and innovative opportunities for the use of spectrum.

46.	There are, however, factors which militate against a very devolved approach. It 
may reduce the scope for making more than marginal changes to the 
allocations across different uses. It may help entrench the interests of 
incumbent users (be they public or private sector) by increasing their 
informational advantage versus spectrum regulators and other potential 
spectrum users. The division of responsibility can also spread available 
expertise thinly.

47.	One potential offset against these disadvantages is the provision of 
information to all spectrum users and regulators about current and 
prospective spectrum use. The RA has taken significant steps in this direction 
in recent years with the regular publication of a comprehensive report on 
spectrum strategy . Other national regulators (such as the Australian 
Communications Authority) have taken provision of information a step further, 
with the publication (via internet web site) of data on individual apparatus and 
spectrum access licences .

48.	The RA is also working towards facilitating the reception of licence application 
forms via electronic media. Customers can download the blank application 
forms from the RA web site. A further development of this electronic 
interchange of licence documentation may be the development of an on-line 
database, maintained and protected by RA and containing the essential 
spectrum-utilisation details of existing systems. There are clearly some 
potential obstacles (e.g. customer confidentiality, national security) which 
would need to be addressed. However, the potential benefits, in terms of 
creating a more open, flexible and dynamic environment, could be significant.

Issues for discussion 
xii.	Within the current and proposed statutory framework, what 
improvements (if any) could be made to the institutional 
arrangements for spectrum management in the UK?
xiii.	To what extent would greater transparency of specific data on 
current and prospective spectrum uses support efficient spectrum 
use? What are the key issues and trade-offs pertinent to the 
provision, by RA, of an on-line database containing spectrum-
utilisation details? How far is transparency compatible with 
commercial confidentiality and public safety and security 
considerations?
xiv.	To what extent could intermediaries play a valuable role in buying 
rights to manage a particular frequency band and then selling 
access to parts of this spectrum to users on a commercial basis?

Spectrum use: marketed and non-marketed outputs

49.	Spectrum users can be categorised by the degree to which the services for 
which spectrum is an input are marketed or non-marketed. At one extreme are 
private business radio users (such as taxi firms) and telecommunications 
operators, whose product is entirely commercial with no (or very limited) 
'public goods'  aspects at all. The supply of these services is very largely 
determined by the market, responding to consumer demands . The market 
into which these services are sold may or may not be subject to sector-
specific regulation (for example, telecoms services) to deal with competition 
and consumer protection concerns. But there is no governmental interest in 
these spectrum users producing non-marketed services (including 'public 
goods' as classically defined) in addition to or as part of their commercial 
services.

50.	Such spectrum users have tended to be the first to pay spectrum fees that 
bear some relation to the value of spectrum utilised, and have been the first to 
be subjected to spectrum auctions. The review's starting point is that there is 
no prima facie reason why such economic spectrum management tools 
(along with others, such as spectrum trading) should not be implemented 
across the full range of purely commercial radio services. Issues to be 
explored by the review will include:
?	The relative benefits of auctions versus administrative pricing
?	The methodology used to derive administrative prices and to implement 
them in spectrum licence fees
?	The extent to which market reaction to auctions and pricing is 
systematically fed back into allocation and other spectrum licensing 
decisions. 

51.	 At the other extreme are radio services which are non-marketed. The scale 
and definition of this activity is determined not through the meeting of supply 
and demand in a commercial market, but through Government determining 
the inputs and outputs through some political calculus. At the core of this 
category are pure 'public goods', such as defence of the UK. It also includes 
other publicly delivered non-marketed services, such as emergency 
ambulance services, which are not strictly public goods. There is no 
significant commercial market for the outputs of these services, which are by 
and large produced in the public sector. Most inputs to these services are, 
however, purchased in private sector commercial markets. Furthermore, 
services ancillary to the production of the main non-marketed service are 
increasingly contracted out to the private sector and bought back in as a 
commercial input. 

52.	The Government has already introduced administrative spectrum pricing to a 
number of public sector users, notably the Ministry of Defence and the 
emergency services. The review's starting point is that where spectrum is an 
essential input to the production of essential public goods, then the 
Government has a legitimate obligation in reserving sufficient spectrum for 
such public uses. But it should also impose incentives on public sector users 
to economise on their spectrum use. Issues to be explored by the review 
include:
?	evidence on the impact of spectrum pricing to date on public sector users' 
short term spectrum usage
?	impact of pricing on longer term equipment procurement decisions
?	mechanisms to reward/compensate public sector users for releasing 
spectrum within their allocation for re-use by others

53.	Between the two extremes of marketed and non-marketed outputs based on 
radio spectrum inputs are radio services which combine elements of each. 
The prime examples of these combined services are:
?	Broadcasting: commercial broadcasters obtain spectrum as part of their 
regulatory franchises, in return for a franchise fee (which may be set 
through competition or administratively) and meeting public service 
broadcasting obligations. The BBC is allocated spectrum in order to meet 
its public service broadcasting obligations under the Corporation's Charter 
and Agreement. Both commercial and public sector broadcasters deliver 
programme streams which compete in part with each other, and in part 
with fully commercial entertainment services delivered by other wired and 
satellite technologies
?	Transport navigation and safety services: aeronautical and maritime 
companies produce transport services which are traded in a fully 
commercial market. They also contribute to public safety at large, not just 
for their own passengers, through their use of radio services.

54.	Some spectrum users in this category (such as some aeronautical ground or 
maritime coastal stations) face direct charges related to the amount of 
spectrum they use and, in part, to the value of that spectrum. Others (for 
example, Channel 3 TV companies and independent national radio stations) 
pay franchise fees set through a competitive process which reflect in part the 
scarcity value of the spectrum which attaches to the franchise.

55.	The review's starting point is to encourage spectrum efficiency, through the 
application of economic incentives, as the over-arching long-term principle for 
spectrum management which is most likely to deliver the greatest economic 
benefits. This long-term principle applies even where the scope for 
economising on spectrum may appear very limited in the short to medium 
term by the constraints of international harmonisation or public service/public 
safety requirements to achieve universal coverage. The review will consider: 
?	the scope for separating regulation of non-marketed and 'public goods' 
outputs from  access to and charging for spectrum inputs
?	the link between ongoing spectrum access charges and major long-term 
network investment plans
The application of this general approach to specific sectors is described in 
more detail in the following sections, with regard in particular to defence, 
broadcasting, transport and emergency services. The aim is to ensure that 
public policy goals were achieved while at the same time introducing a greater 
incentive for efficient spectrum management over the longer term.

Issues for discussion
xv.	To what extent is the review's distinction between radio spectrum 
used for marketed and non-marketed goods a helpful one?
xvi.	How far can public policy objectives for the delivery of non-
marketed goods be separated from the regulation of access to the 
spectrum necessary to deliver such services?

Issues in non-marketed uses of spectrum

Defence

56.	There has been significant progress in recent years in the application of 
economic incentives to military spectrum use. This has already generated 
dividends for the UK economy as a whole, in the form of released spectrum 
bands and a greater willingness on the part of the MOD to accommodate 
spectrum sharing in return for lower annual spectrum fees. Economic 
incentives have tended to reinforce an increasingly open approach by the 
MOD to disclose information about their spectrum usage (within the 
constraints of national security requirements).

57.	Defence uses are allocated significant amounts of spectrum to enable the 
MOD to deliver the UK's defence capability. The following table summarises 
allocation and use by band :




Spectrum band
Percentage of 
band allocated to 
defence uses
Summary of spectrum use
87.5 to 960 MHz
23 
main NATO communications 
band at 225-400 MHz, long-range 
radar, tactical radio-relay, other 
mainly national bands
960 to 3000 MHz
16 
radio-relays and radars
3 to 10 GHz
48 
radars, fixed telecommunications 
networks and fixed-satellite links
10 to 30 GHz
21 
fixed and fixed-satellite links, and 
some radar
30 to 60 GHz
28 
Fixed, fixed-satellite and some 
radar

58.	Spectrum fees have now been rolled out across those spectrum uses by 
MOD where the equivalent civilian commercial service has also been subject 
to incentive pricing (for example, mobile radio networks, fixed links, but not yet 
for aeronautical radars). MOD currently pay some £23 million per year for their 
spectrum usage, with the fees derived from earlier RA-commissioned 
Smith/NERA studies into spectrum valuation for commercial users. These 
fees represent around 2 per cent of the relevant annual budget for 
communications and information equipment, so at present they largely play a 
signalling role in highlighting an economic opportunity cost to MOD spectrum 
users, rather than being a decisive factor in procurement decisions.

59.	Defence demands for access to spectrum when needed for training or 
operations are rising. Technological advances hold out the prospects for 
battlefield commanders to access a much wider and richer range of data 
delivered via the spectrum. For example, better sensor technology enables 
better battlefield management, provided spectrum is available to access data 
from remote sensors while simultaneously commanding forces. Even without 
competing demands from civil users, this trend places more pressure on 
military spectrum users to co-ordinate their own uses effectively in operational 
situations. The need for UK forces to be globally mobile and inter-operable 
with other coalition forces (e.g. in United Nations-mandated missions) also 
has an impact on the flexibility of equipment and frequency use.

60.	Against this trend, there are other factors which may enable more efficient 
economic use of spectrum allocated to MOD. Much military spectrum use is 
sporadic in nature, dictated by training cycles and infrequent operational 
requirements. This creates inefficiencies in spectrum use over time. 
Advances in technology which enable time-sharing of spectrum to a greater 
degree can help offset this. For example, commercial digital data services 
which can accept some degree of interruption could co-exist with certain 
military spectrum users. With sharing protocols embedded in frequency 
management software, this time-sharing can become more dynamic, opening 
up the prospect of making more valuable slices of spectrum over time 
available to non-military users.

61.	Implementing such sharing arrangements can involve initial investment to 
scope the technical possibilities of time-sharing and the business case for 
commercial partners, and assessment of the impact on military capabilities. 
This could well require more internal resources to manage this process. 
Thereafter, there may need to be re-investment in new military equipment to 
enable some radio services to be migrated to different bands. The review will 
investigate whether abatement at the margins of spectrum fees at their 
current level provides a sufficiently strong positive incentive on the MOD to 
explore commercial spectrum sharing opportunities. It may be necessary to 
strengthen these incentives, for example though enabling MOD to strike 
public-private partnerships for commercial exploitation of shared spectrum, 
with revenues from such agreements flowing back into the defence budget.

62.	There may also be scope for time sharing over a much longer time horizon, 
where MOD is reserving a particular frequency for possible use in future 
years, depending on the outcome of a particular equipment development 
programme or capability review. At present, there may be a tendency for MOD 
to reserve spectrum in the absence of a reliable means of exerting pre-
emption rights at a later date. The review will explore the scope for public-
private deals under which MOD could release spectrum to commercial use 
with an option to buy back at a later date.

Issues for discussion
xvii.	Is this a valid description of the factors affecting defence use of 
radio spectrum?
xviii.	What opportunities exist for commercial and other civil users to 
share spectrum with the defence establishment in the UK?
xix.	What further incentives could be introduced to encourage more 
intensive and efficient use of spectrum allocated to defence?

Broadcasting

63.	A complex set of arrangements and relationships exists in the licensing and 
pricing of broadcast services and their use of the radio spectrum. These 
involve the Government (including the RA), the independent broadcasting 
regulators, the BBC, commercial broadcasters, and their transmission 
providers. The review aims to explore the extent to which spectrum 
management policy might be disentangled from broadcasting policy, at the 
same time enabling Government to continue to achieve its policy goals in the 
broadcasting arena.

64.	The suggested goal is for all broadcasters, whatever their public service 
broadcasting (PSB) obligations or their revenue source, to face incentives 
towards the efficient use of spectrum to meet their PSB and/or commercial 
objectives. This has for some time been the aim of Government policy, and is 
articulated in the W T Act 1998, but has yet to be implemented in practice. 
Moving from analogue to digital terrestrial broadcasting, and thus making a 
major step-change improvement in spectrum efficiency, is the major 
economic 'windfall' which could help motivate, and in turn be facilitated by, 
changes in spectrum management policy.

65.	The management of broadcasting spectrum is multi-layered. The Government 
determines the amount of spectrum to make available for broadcasting and 
how it is shared between the BBC (for the delivery of the Corporation's 
services under the terms of the Charter and Agreement) and the independent 
regulators (for the delivery of commercial services according to the 
requirements of the Broadcasting Acts). Depending, in particular, on the extent 
to which the Government requires the spectrum to be used to deliver, for 
example, PSB obligations, the Government makes other stipulations which 
impact on the way in which the BBC and the regulators may plan the 
spectrum .

66.	The BBC is then charged with planning the spectrum usage for its UK-based 
transmissions: these plans are then passed to its transmission providers  for 
implementation. The transmission providers are then granted W T Act 
licences by the RA, with terms and conditions on spectrum use built into the 
licences.

67.	The ITC and the Radio Authority (RAu) plan the relevant spectrum and 
regulate independent broadcasting services under the Broadcasting Acts 1990 
and 1996. The quantum of spectrum to enable them to perform their function 
is made available to them by the Secretary of State (acting through the RA) 
also through the provisions in the Broadcasting Acts. The ITC and RAu are 
responsible for planning (or arranging the planning) of the spectrum for their 
licensed services. Licences are awarded via a variety of arrangements 
depending on the service concerned. For example, for Channel 3 TV services, 
licences were awarded via a comparative selection ('beauty contest') 
combined with an auction; for independent local radio and for the digital sound 
and TV multiplexes, licences are granted solely through comparative 
selection. As with the transmission of BBC services, the use of spectrum has 
to be licensed by the RA under the terms of the W T Act. These licences are 
held by either transmission providers or, in a number of cases, by the 
broadcasters themselves.

68.	Spectrum planning is closely interleaved with, and in some cases dictated by, 
broadcasting policy considerations. The Government plays a pivotal role in the 
economics of the broadcasting sector by:
?	granting a specific quantum of spectrum to the broadcasting sector and its 
distribution between BBC and commercial broadcasters
?	setting spectrum prices under the W T Act 1998
?	setting out conditions (including PSB requirements) for the way in which 
spectrum might be used by the BBC and the independent regulators
?	laying out rules for franchise payments and licence duration and renewal in 
broadcasting legislation.
Given the invested infrastructure of terrestrial TV transmission masts and 
households' own purchases of analogue radios, TVs and video recorders, 
access to this Government-reserved spectrum is currently a sine qua non for 
public service broadcasters with an obligation to deliver universal coverage. It 
is also vital for commercial broadcasters whose business depends upon 
advertising revenue from 'free-to-air' terrestrial transmissions.

69.	But as other delivery platforms develop, this perfect identification between 
delivery of universal coverage and other PSB obligations in return for privileged 
access to the current quantum of spectrum is beginning to erode. This calls 
into question the implicit spectrum pact between Government and the 
broadcast sector.

70.	Digital terrestrial TV (DTT) offers the prospect of delivering the current 'free to 
air' services and others using a fraction of the spectrum currently allocated to 
TV broadcasting (some 368 MHz in the UHF band). Six TV services of 
standard picture quality can be carried in digital form in the spectrum currently 
used for one analogue service (and even more at a quality equivalent to, say, 
VHS video recorders). Extending the coverage of DTT requires further 
investment in the transmission infrastructure and, to match terrestrial 
coverage of analogue services, the switch-off of analogue signals. Also, 
crucially, the take up of DTT requires investment by individual households in 
digital receiving TVs and/or decoding boxes, which feed into analogue TVs and 
VCRs. Digital satellite TV (DST) has a broadcast 'footprint' encompassing 
some 94-97 per cent of residential locations (i.e. including multi-household 
buildings). Actual DST usage again depends on take-up by households of 
subscription channels and/or investment in new reception hardware. Finally, 
cable TV passes by the front door of around 50 per cent of UK homes, offering 
these households another means of obtaining TV other than via analogue 
broadcasts.

71.	In the longer term, there is significant scope for broadcasters to make 
dramatic reductions in their spectrum use. The Government has already 
signalled that the conditions for switchover from analogue to DTT digital, 
including 99.4 per cent coverage of households by public service broadcasts 
and the availability of affordable equipment, may be met in the period 2006 to 
2010. The review will consider the extent to which spectrum management 
policy towards the broadcasting sector can contribute to the implementation of 
this strategy. In this context, the review concurs with the findings of an earlier 
study for the RA  that "... for television and radio there is merit in pricing the 
use of spectrum to encourage migration from analogue to digital use".

72.	There are at present few financial incentives on incumbent or new entrant 
terrestrial broadcasters to economise on current spectrum usage. Nor are 
there clear incentives for broadcasters to consider the longer-term trade-offs 
between terrestrial analogue and digital transmission, digital satellite and 
digital cable transmission as means of delivering their services to households 
in the UK. Licences under the W T Act are fixed at the levels pertaining prior to 
the W T Act 1998, i.e. set simply to cover RA's administrative costs.

73.	Where broadcasters have been subject to an auction to assign spectrum and 
broadcast licences (eg Channels 3 and 5), the resulting franchise fees can be 
considered in part as payment for spectrum usage. But the franchise fee does 
not vary with the amount of spectrum subsequently used for broadcasting, so 
there is little incentive to economise on spectrum. The franchise fee also 
implicitly bundles a number of factors, which if decomposed would comprise: 
?	payments for the right to an exclusive franchise from the ITC within the 
respective TV regions
?	payment for the granting of 'must carry' status on other delivery platforms, 
and
?	subsidy for the broadcaster to meet certain PSB obligations.
Total tender payments from Channel 3 companies amounted to some £350 
million in 2000 and are forecast to fall to around £335 million in 2001. These 
sums equate to around £2 million per MHz per annum as a price for spectrum 
usage (with the associated privileges and obligations).

74.	The Government has recognised  that:

"Broadcasters, like other major users of spectrum, must use spectrum 
efficiently, and there should be effective mechanisms to ensure this, which 
might include regulation or spectrum pricing. The Government has therefore 
decided that spectrum should be valued. However, the extent to which 
payment is required for use of this spectrum will need to take account of the 
particular circumstances of broadcasting. These include the substantial 
payments already made under the Broadcasting Acts by commercial 
broadcasters; the level of public service obligations undertaken by the 
broadcasters; and the forthcoming switchover to digital broadcasting."

75.	The review welcomes this first step which could lead towards the introduction 
of financial incentives to economise on spectrum use. The review will examine 
options for introducing such incentives across the full range of spectrum-using 
broadcasters, and doing so in a manner consistent with the Government's 
broadcasting policy. 

76.	For the BBC, there are a number of possible mechanisms for inducing greater 
spectrum efficiency in the short and medium term. Building on the 
commitment to value spectrum use, the Government could set up a spectrum 
account for the BBC, which measured objectively the value of the spectrum 
used so that the full economic cost of public broadcasting became more 
transparent.

77.	As a further step, the BBC might be encouraged financially to share the use of 
its allocated spectrum with other users (for example, business data providers 
which could use under-utilised spectrum on a digital broadcasting multiplex 
during off peak hours). The commercial revenues from such deals could 
provide an incentive for the BBC to economise on spectrum use and open up 
opportunities for new spectrum-based services, to the benefit of the wider 
economy.

78.	This positive incentive to spectrum sharing could be augmented with full 
charging by the RA/Ofcom for the BBC's spectrum use. To ensure that the 
introduction of such spectrum efficiency incentives did not impinge on the 
BBC's ability to meet its public service remit, there would need to be a 
corresponding transfer from the Government to the BBC equal to the initial 
spectrum charge. Changes in the price per MHz charged might subsequently 
be offset by changes in the Government transfer. But changes in the quantum 
of spectrum used could be internalised within the BBC: reduction in spectrum 
use (through relinquishing or sharing frequencies) would benefit BBC 
revenues.

79.	Clearly such a spectrum charging arrangement would need to be carefully 
designed to maintain the BBC's financial independence from Government. 
There are, however, already examples of interaction between delivery of 
Government's wider policy goals and the BBC's finances: for example, the 
£300m annual transfer from the pension budget to the BBC to compensate for 
the introduction of free TV licences for over 75 year olds.

80.	Many of these mechanisms could also be applied to Channel 4 as the other 
public sector broadcaster. Universal coverage obligations may constrain 
Channel 4's ability to make significant reductions in its spectrum usage in the 
short to medium term. But price signals could have a positive role to play in 
encouraging Channel 4 to switch from analogue to digital broadcasting.

81.	For ITV Channel 3 and 5 broadcasters and the national analogue sound 
broadcasting services, the franchise fee (as noted above) already implicitly 
incorporates a charge for the use of analogue spectrum. During the passage 
of the W T Act 1998, Ministers gave a commitment that commercial 
broadcasters who faced an auction for their franchises under the 
Broadcasting Act would not face a 'double jeopardy' in terms of a further 
auction for the use of spectrum. The Government also indicated that account 
would be taken in setting spectrum fees for broadcasters of amounts paid 
under the Broadcasting Act. Against this background, the review will examine 
the scope for 'unbundling' the franchise fee to recognise explicitly the value of 
spectrum usage by each of the franchisees. There may also be scope to relax 
licence terms to enable broadcasters to share spectrum usage with others, 
with possible gains in terms of reduced franchise fees and/or commercial 
revenue from such deals.

82.	To encourage the development and adoption of DTT, the Government 
awarded franchises for digital commercial broadcasting with a zero tariff on 
the revenues from such services for the first 12 years of the franchise. 
Accordingly, the review will not investigate charging for DTT spectrum use up 
to the point of analogue digital switchover. This may be counter-productive to 
the wider goal of making the step-change to digital TV which has the potential 
to make a dramatic improvement in spectrum efficiency. The review will 
examine, though, mechanisms for applying incentives towards spectrum 
efficiency after digital switchover, and the role of financial incentives for 
analogue spectrum use up to switchover. It will also explore options for re-
allocating spectrum released from analogue broadcasting to economically 
valuable uses.

83.	Commercial radio licences are awarded against public service broadcasting 
criteria. Independent national radio licences are assigned on the basis of 
competitive financial bids which implicitly incorporate a value to the 
broadcaster of the assigned spectrum. Local radio licences are, however, 
assigned only on the comparative quality of the respective bids. Trading in the 
shares of companies subsequent to their winning a local radio broadcast 
licence suggests strongly that there may be a significant market value 
attached to the use of this broadcast spectrum, and an only an indirect means 
by which this spectrum value is reflected in assignment of licences. The 
review will examine the scope to introduce spectrum pricing and licence 
auctions to all parts of the radio broadcasting spectrum.

84.	In both TV and radio, the Government has objectives to maintain the plurality 
and diversity of broadcasting. To meet the needs of different communities of 
interest the RAu (in addition to licensing local radio) and the ITC license 
restricted radio and TV services. Proposals have also been made in the 
Communications White Paper concerning a tier of 'Access Radio'. Other 
community TV channels are carried on a variety of delivery platforms, as part 
of a commercial package of channels. If measures are introduced to 
encourage greater spectrum efficiency, and certainly following digital 
switchover, the spectrum access constraints on enabling local and 
community broadcasting should be eased, both technically and economically. 
But such broadcasts are likely to continue to need special treatment in terms 
of access to commercial delivery platforms or access to their own spectrum. 
The review will explore ways in which spectrum efficiency goals can be made 
compatible with plurality and diversity objectives of broadcasting policy.

Issues for discussion
xx.	Is this a valid description of the factors affecting use of radio 
spectrum by the broadcasting sector?
xxi.	How can the Government's commitment to value the spectrum 
used by broadcasters be implemented in a way which encourages 
spectrum efficiency?
xxii.	What further incentives might be introduced, consistent with wider 
broadcasting policy and with previous Government commitments 
about television and radio franchise fees, to encourage greater 
spectrum efficiency by commercial broadcasters? Are there 
differences in the approach to incentives before and after the 
proposed switchover from analogue to digital terrestrial TV 
broadcasting?
xxiii.	What incentives might be introduced, consistent with wider 
broadcasting policy and the Government's approach to the funding 
of the BBC and its public service remit, to encourage greater 
spectrum efficiency by the BBC?

Aeronautical and maritime services

85.	Aeronautical uses of spectrum include:
?	Air traffic control: communications from plane to ground and vice versa
?	Radiolocation and radionavigation radar: ground based and aircraft based
?	Navigational beacons: distance and direction finding equipment
?	Instrument landing systems
?	Terrestrial flight telephone system
These account for some 26 per cent of allocated bands between 960 and 
3000 MHz, and 10 per cent of bands between 3 and 10 GHz, with radar 
accounting for the bulk of spectrum usage.

86.	Maritime uses include:
?	Ship to ship and ship to shore communications
?	Radionavigation systems
?	Radiolocation radars
?	Navigational beacons
These account for some 5 per cent of allocated spectrum in 960 to 3000 MHz, 
and 6 per cent in 3 to 10 GHz.

87.	Use of spectrum in these sectors supports both fully marketed services 
(transportation of freight and passengers by air and sea) as well as a wider 
public benefit of safety of life for passengers, other transport users, and the 
population at large. This must be taken into account when considering moves 
towards a more market-based approach to spectrum management. 
Furthermore, the global nature of aircraft and ship movements mandates 
virtually complete international harmonisation of communications standards, 
including the technical specification of on-board equipment. Spectrum 
allocation for aeronautical services is mandated by the International Civil 
Aviation Organisation, and managed in the UK by the Civil Aviation Authority.

88.	The review recognises the limited room for manoeuvre of UK authorities in 
incentivising greater spectrum efficiency in services which rely on particular 
on-board systems, which are themselves reliant on specific radio frequencies. 
There may, however, be greater scope to encourage efficiency in UK-based 
radars and other ground-based transmitters which do not require full 
international harmonisation of inter-operable equipment on board aircraft. The 
RA is in the process of conducting a study, with the CAA and the Maritime and 
Coastguard Agency, on the characteristics, operation and protection 
requirements of civil aeronautical and maritime radars.

89.	The review will explore the scope for the selective application of economic incentives to the spectrum use of civil radars. In the short term there may be no immediate alternative spectrum-efficient means to provide the same 
degree of coverage and reliability to meet safety standards. In the longer term, 
though, there is likely to be some degree of trade-off between spectrum use 
and investment in new equipment which can operate with less bandwidth or 
which is more tolerant of spectrum sharing. The review will consider possible 
incentive mechanisms to make such trade-offs account for the opportunity 
cost of spectrum use, for example by benchmarking spectrum charges for 
particular radars against the most spectrum-efficient radar currently available 
which meets the relevant safety standards.

Issues for discussion
xxiv.	Is this a valid description of the factors affecting use of radio 
spectrum by aeronautical and maritime services?
xxv.	Given the international harmonisation constraints, where could new 
economic incentives most encourage more efficient use of 
spectrum in the UK?
xxvi.	How far could changes in spectrum use charges be reflected in air 
traffic control fees which are passed on to users of UK airspace 
and landing services?

Emergency services

90.	The spectrum use by the emergency services is overseen by the Home 
Office , which also make spectrum assignments to specialist covert units in 
other agencies (eg H M Customs & Excise, Inland Revenue) which require 
facility for joint operations with the police. Spectrum usage covers a wide 
range of applications including personal and mobile radio; secure voice, data 
and video links; location devices; and telemetry links. Spectrum is planned to a 
high standard to reduce probability of co-channel interference. Many 
assignments are national to allow for inter-operability and movement of 
officers around the UK.

91.	Although police forces and fire brigades are independent and have 
responsibility for their own procurement, the demands for inter-operability have 
led to commonality in the type of systems deployed. This process is being 
taken forward with the introduction over the next few years of a major new 
national trunked radio system, the Public Safety Radio Communications 
Service (PSRC-S). This service, procured by the Home Office under a private 
finance initiative contract, will allow significant rationalisation of spectrum 
allocated to the Home Office.

92.	Spectrum pricing is being phased in to this sector, with charges calculated on 
a comparable basis to the equivalent commercial use of the spectrum. The 
review will explore the extent to which these price signals could influence 
spectrum use by the emergency services over the medium term, as 
communication equipment comes up for renewal. Price signals may point up 
opportunities for efficient use by some emergency services of private 
business radio. Conversely, there may be scope (subject to competition policy 
considerations) for non-emergency service users to buy into radio services 
developed under the PSRC-S project, thus making more intensive use of the 
spectrum allocated to the emergency services.

Issues for discussion
xxvii.	Is this a valid description of the factors affecting use of radio 
spectrum by the emergency services?
xxviii.	How far can spectrum pricing influence emergency services to 
make efficient use of spectrum over time?
xxix.	What scope might there be for sharing of spectrum access with 
other users to enable more efficient spectrum use?

Spectrum valuation: pricing and auctions 

93.	The Radiocommunications Agency has been in the vanguard among national 
spectrum authorities in introducing economic incentives on users with the aim 
of improving the dynamic efficiency of spectrum use. As the RA has said 
itself : "The challenge for spectrum managers in the 21st century is how to 
satisfy demand for spectrum that is simultaneously growing quantitatively and 
changing qualitatively. Unless that challenge can be met, there is a real danger 
that spectrum congestion and shortages will hold back growth and slow down 
innovation". Spectrum pricing and auctions are vital spectrum management 
tools to enable the RA to meet its increasingly difficult challenge.

94.	The RA adopted a consultative and open approach over a period of years in 
order to secure consensus for the shift from cost-based spectrum licence 
fees to incentive pricing, under which fees are set by reference to the degree 
of congestion pertaining in the relevant spectrum space. This work, including 
commissioning a major analysis of the application of spectrum pricing and 
proposed methodology for setting incentive prices , has been a vital 
precursor to subsequent changes in legislation.

95.	The Wireless Telegraphy Act 1998 introduced two new forms of spectrum 
pricing:
?	Administrative pricing, in which fees are set by regulation on the basis of 
spectrum management criteria (referred to alternatively here as incentive 
pricing, since the objective is to set fees to produce incentives on users to 
make efficient and economical use of spectrum); and 
?	Auctions, in which fees are set directly by the market.
These new forms of pricing superseded the previous cost-recovery basis of 
pricing.

96.	Under administrative (incentive) pricing, the Secretary of State (acting through 
the offices of the RA) is required in setting spectrum licence fees to have 
regard to various spectrum management factors. These are:
?	The balance between spectrum availability and current and expected 
future demand; and 
?	The desirability of promoting:
?	Efficient spectrum use and management
?	Economic benefits
?	Development of innovative services
?	Competition.

97.	Since enactment of the WT Act 1998, the RA has progressively introduced 
spectrum pricing across a wide range of spectrum-using sectors. 
Implementation has been staged, with pricing applied first to those sectors 
judged to be most congested and then progressively rolled out across others. 
Within each sector, transition from old licence fees to the new incentive prices 
has generally been phased over a four year period in order to allow users to 
adjust to the new regime. In order to enable the effects of pricing to be 
monitored and to minimise the rise in fees, the Government decided that only 
half the amount of the increases suggested by the Smith/NERA study should 
be implemented in this first phase . The table in Annex C summarises the 
extent of current and planned spectrum pricing across the full range of 
spectrum-using sectors. 

98.	The review agrees strongly with the underlying premise of spectrum pricing, 
that users facing a charge which reflects as fully as possible the marginal 
value will tend to make more efficient use of their spectrum. The aggregate 
result of these individual decisions by users, to economise on their own 
spectrum use, should be an overall improvement in economic welfare. The 
review will consider whether and if so how the RA's application of spectrum 
pricing could more effectively contribute to economically efficient spectrum 
management. In particular, the review will investigate:
?	Evidence on the impact of spectrum pricing as it has been introduced in 
the UK to date
?	The extent to which the administratively set prices could be updated on a 
regular basis to reflect new information, from surveys and auction results, 
about current valuations of spectrum use
?	The balance between the application of incentive pricing and the more 
direct incentive of auctioning spectrum on a competitive basis.

99.	The auctioning of spectrum licences is now a well-established practice among 
many national spectrum authorities. In the UK, there have been two spectrum 
auctions to date, for 3G licences and broadband fixed wireless access 
spectrum at 28 GHz, both of which took place last year. UK broadcasting 
authorities have also, for some years, auctioned franchises for analogue 
commercial television and national radio stations; spectrum is one of the 
major and valuable assets bundled within the rights and obligations associated 
with each franchise.

100.	Auctions have the potential to generate allocatively efficient outcomes at 
relatively low transactions costs. They also provide spectrum and other 
regulators (e.g. telecoms, broadcasting) the ability to factor other policy 
considerations into the design of the auction process in a transparent manner. 
For example, roll-out requirements for service networks can be incorporated in 
licence terms, and competition policy factors can modify the structure of the 
auction in order to achieve a desired market structure.

101.	The specifics of auction design are the subject of a lively discourse between 
spectrum regulators, academics and economic consultants across the 
developed world. This review does not propose to add to that debate. Much of 
this research and its application, though, takes as a given the quantum of 
spectrum to be auctioned. The review will consider the prior questions of how 
regulators should decide:
?	The range of frequencies for which licences are to be auctioned
?	The packaging of those frequencies by the regulator or as an outcome of 
the auction process
?	The boundary between auctions and administrative pricing
?	The interactions between auctions and subsequent secondary trading and 
leasing of spectrum access

Issues for discussion
xxx.	How far have economic incentives from spectrum prices helped to 
encourage efficient spectrum use?
xxxi.	Where should the balance lie between administratively-set 
incentive prices and competitive auction of spectrum licences? To 
what extent could the two approaches be combined to encourage 
spectrum efficiency?
xxxii.	What factors should determine the choice of frequencies subject to 
auction of licences?

Spectrum trading

102.	Spectrum trading is an obvious extension of auctions. It has the potential to 
add a new dimension to the incentives on current and potential spectrum 
users to optimise their use of spectrum on ongoing basis. It has been long 
advocated by economists as a means of introducing greater flexibility and 
efficiency in spectrum use.

103.	The Government is committed to introducing spectrum trading and is in the 
process of devising a practical means of doing so. It has already indicated 
(during the passage of the W T Act 1998) that it saw considerable attractions 
in the introduction of trading of spectrum licences "at an appropriate time and 
within a suitable statutory framework". In 1998, the Radiocommunications 
Agency issued a preliminary consultation paper on developing spectrum 
trading and reducing the administrative burden on the transfer of licences . 
The responses to this were supportive of the concept of spectrum trading. 
The Spectrum Management Advisory Group, established to give Ministers 
independent strategic advice on spectrum management matters, described 
trading as "an essential and inevitable progression".

104.	There was broad agreement among consultees that a spectrum market could: 
?	Improve the economic efficiency of spectrum management
?	Help ensure that spectrum was assigned to those who could produce the 
greatest benefit from it
?	Provide valuable additional flexibility for spectrum assignments to be 
adjusted through the market in response to demand changes

105.	There was also consensus on the need for a clear and effective regulatory 
framework within which trading could take place. Consultees stressed a range 
of objectives of such regulation: 
?	Control interference 
?	Minimising scope for anti-competitive practices
?	Prevent hoarding
?	Allow for strategic management of spectrum
?	Protect access by small and medium sized enterprises
?	Ensure compliance with international requirements on spectrum use.
There were differences of opinion about how restrictive such a regulatory 
framework would need to be.

106.	The review recognises the need for an effective means of managing 
interference. It also agrees that prevention of abuse of a market power is an 
important economic goal, and that controls over spectrum inputs may have a 
role to play in effecting this competition policy. But it has reservations about 
the extent to which spectrum trading should be circumscribed by a desire to 
protect certain classes of commercial spectrum user, or to impose a 
centrally-determined strategic view of future spectrum use. 

107.	The Government has committed (in the Communications White Paper of 
December 2000) to develop further its market-based approach by introducing 
trading as a new way of gaining access to spectrum. This policy is subject to 
changes to EC law, via the draft directive on a common regulatory framework 
for electronic communications networks and services , which is currently 
being considered by the European Parliament and the Council of Ministers. 
Once EC law has been amended (which is anticipated during the first half of 
2002), the Radiocommunications Agency plans to introduce spectrum trading 
on a selective basis within a clear and effective framework of market 
supervisions and regulation. The RA is due to issue a further consultation 
paper later this summer, setting out in more detail its proposals for spectrum 
trading. The review will aim to address the issues raised by this consultation in 
its final report to Ministers.

108.	Perhaps more than spectrum pricing for initial allocation of licences, spectrum 
trading challenges many tenets of the traditional regulatory approach to 
spectrum allocation and assignment. In moving down this road, regulators in 
other jurisdictions have adopted a more or less radical approach to reform of 
spectrum management practice. But all have found it necessary to move 
towards greater definition of the rights and responsibilities of spectrum 
licensees and users, which in turn helps define their economic interests. This 
approach is based upon the fundamentals of an effective market:
?	Property rights, including the right to use the property for a specified 
period, to divide the property and transfer its use to others within this 
period, as well as the right to exclude others from encroaching on the 
property
?	Enforcement and liability rules, to protect property holders/users and to 
oblige them to protect the legitimate use of others
?	Information on the ownership and transfer of property, to enable current 
and potential users to identify opportunities for mutually beneficial transfers

109.	Spectrum trading utilises the dispersed information and varying judgements 
held by a wide variety of current and potential users about the economic value 
of spectrum. This discovery mechanism could supplant to some extent the 
central planning role of the RA. There may therefore be a shift in emphasis in 
the RA's approach to spectrum management, away from specific detailed 
assignments and towards more generic allocation policies, definition of 
tradable spectrum units with associated rights and responsibilities, and 
policing the operation of the secondary markets in spectrum usage.

110.	Change of spectrum usage rights from one entity to another will be motivated 
by the higher value which the buyer places on using the spectrum than the 
seller, either through delivering the current spectrum-consuming services 
more efficiently, or using the spectrum to deliver other higher value services. 
Trading on the latter basis will only be feasible if the spectrum usage rights to 
be transferred allow some degree of latitude in the type of service to be 
delivered using that spectrum.

111.	Restrictions on spectrum usage which may hinder spectrum trading include: 
?	Eligibility requirements: specifying the type of licensee by business sector
?	Service requirements: specifying the provision of certain services and 
proscribing the provision of others
?	Technical restrictions (aside from measures designed to minimise harmful 
interference): specifying the type of technology to be used
?	Implementation requirements: specifying the pace at which licence holders 
must 'build out' their network and provision of services across the 
geography covered by the licence.

112.	Many of these requirements flow from international agreements about 
harmonised spectrum allocation. Others may stem from domestic policy 
considerations about guaranteed access to spectrum for public sector users 
and commercial organisations producing some elements of public goods. 
Finally, some requirements (such as 'use it or lose it' terms) may substitute a 
regulatory penalty for a market-based opportunity cost. The application of 
spectrum trading will therefore require a fundamental review of the range of 
restrictions currently placed on spectrum usage by licence holders. Trading 
within allocations may be feasible and introduce some efficiency gains with 
only some relaxation of technical and implementation requirements. Trading 
across allocation boundaries is likely to require a more substantial relaxation 
of eligibility and service requirements as well.

113.	Other restrictions include market competition parameters imposed on 
spectrum allocation via auctions. These may specify the maximum number of 
licences which any one bidder may hold in total, or by region, or may reserve 
particular licences to bids from new entrants to a particular radio service 
market. These restrictions provide some degree of certainty to the market at 
the time of the initial spectrum assignment via auction about the degree of 
concentration in access to the spectrum input which the regulatory authorities 
will tolerate. This decision is based on an ex ante judgement about the extent 
of competition likely to pertain in the radio service market given a certain 
division of spectrum at auction.

114.	Markets evolve, though, and subsequent changes in technology, consumer 
tastes, competing services using different radio frequencies or non-radio 
delivery mechanisms may undermine the initial competition analysis which 
determined the auction design. In that case, secondary trading may help 
deliver an efficient reallocation of spectrum, even if the subsequent pattern of 
spectrum usage did not meet the terms of the original auction. Spectrum 
trading could help improve allocative efficiency over time, provided that 
competition authorities remained vigilant to the accumulation and potential 
abuse of market power, supported in part through the accumulation of 
spectrum access rights.

115.	Trading of spectrum, as of any other asset, will require clear specification of enforceable rights and obligations attaching to use of spectrum in particular frequencies, geographical space and time. At present, these terms are established bilaterally between the RA and the spectrum licence-holder at the award of the licence, on the basis of the whole of the spectrum subject to the licence. To enable spectrum trading to operate efficiently, it may be 
advantageous to enable licence holders to divide up their spectrum usage by 
time, geography, and/or frequency, to create spectrum 'packages' which may 
be of value to other potential users. As each division by geography and 
frequency creates a new set of boundary conditions, the licence holder and 
the transferee would have to agree a binding contract defining interference 
protocols. This process, while enabling spectrum users to choose the level of 
interference they are willing to accept, could add significantly to the 
transactions' costs of spectrum trading. The central regulatory authority could 
therefore define, for the frequencies subject to spectrum trading, minimum 
indivisible units of spectrum with associated interference limits.

116.	A key parameter of any licence is the length of the period of spectrum usage. Traditionally, licences in the UK have been issued on a quasi perpetual basis, non-time limited but with W T Act fees collected on an annual basis, and with an unfettered legal right for the RA to revoke the licence after the current fee period expires, consequently making further use of the spectrum illegal. In practice, removing licences from incumbent spectrum users is a more 
protracted process, often involving detailed work to migrate users to new 
frequencies. More recently, the RA has fettered its discretion with respect to 
auctioned licences, which have been sold with a well-defined time limit of 15-
20 years. Furthermore, some W T Act licences are inter-dependent on the 
award of telecommunications or broadcasting licences which may also 
guarantee rights of tenure.

117.	There is a balance between providing licences of sufficient length to enable users to plan services and recoup their investments over time, and the 
flexibility for the RA in reallocating spectrum from short term licences. If a 
spectrum market develops, then there may be a case for moving towards longer term or even perpetual licences, as the market could provide a means by which incumbents could be 'bought out' to facilitate re-allocation of the spectrum. There are also questions about the starting conditions for spectrum trading, whether it should apply to spectrum subject to auctions for initial licence assignment or more generally. In either case, licence holders could be subject to 'windfall' gains or losses in the 'secondary market' for spectrum.

118.	As well as enabling licence holders to 'parcel up' their spectrum usage by its physical parameters, it would also be advantageous to allow some 
'unbundling' of the legal rights and obligations associated with spectrum use. 
For example, licence holders may wish to 'lease' spectrum usage to others 
while retaining the obligation under the terms of their licence to prevent 
interference. Alternatively, they may wish to transfer the full bundle of rights 
and responsibilities to lessees for a period of time, with the aim of 
subsequently taking back control of the spectrum at the end of the lease.

119.	Whichever approach is adopted, it would be important for the parties to the transfer, the regulator and other spectrum users to have clear information 
about where responsibility for meeting interference obligations lies. This is a 
further argument in favour of introducing greater transparency in spectrum 
usage as part of a move towards spectrum trading.

120.	The need to ensure some degree of transparency about spectrum usage 
rights and responsibilities suggests that at the very least there should be a 
central system for the registration of spectrum licences and transfers. It is 
debatable whether any further intervention by the RA in the spectrum market is 
necessary. In principle, the rights and obligations attaching to spectrum use 
will have been clearly specified at the outset. So the division and/or transfer of such usage rights should not necessarily impede RA's overall spectrum 
management function. If spectrum were not being used in accordance with 
the terms of the licence, then the RA would have legitimate grounds for action 
against the licence holder and/or the lessee (depending whether usage 
obligations had been transferred as well usage rights). Where the issue 
involved a dispute over legitimate rights (as opposed to 'pirate radio' type 
infringements), then there may be a role for some form of independent 
arbitration.

121.	There are other arguments for a greater degree of intervention in the spectrum market, for example:
?	To mandate minimum standards to manage interference on transfer of 
spectrum use, for example through requiring an audit of the transferee's 
proposed spectrum use (either by the RA or a qualified independent third 
party). Such an audit might be a condition for a spectrum transfer to 
become registered
?	To ensure that whichever party retained the obligation to meet service type and coverage requirements was able and willing to meet these. As 
discussed above, moves towards spectrum trading may reduce the extent 
to which such requirements (over and above the need to minimise 
interference) are mandated in certain spectrum bands.

Issues for discussion
xxxiii.	Which areas of spectrum use are most amenable to, and which 
areas offer the greatest potential efficiency gains from, the 
introduction of spectrum trading?
xxxiv.	To what extent would a move to licensing of spectrum access, as 
opposed to wireless apparatus licensing as now, facilitate spectrum trading?
xxxv.	What changes to the terms and conditions of licences for the 
operation of wireless equipment and/or for access to spectrum 
would facilitate spectrum trading?
xxxvi.	If new modes of licensing spectrum access (rather than equipment 
operation) were introduced, how could rights to spectrum usage, 
such as interference standards and length of licences, best be 
defined to facilitate spectrum trading?
xxxvii.	What market infrastructure, such as spectrum registers and 
dispute resolution procedures, could facilitate spectrum trading?
xxxviii.	What lessons can be learnt from the experiences of other countries 
(such as Australia, New Zealand and the United States) in 
introducing different modes of spectrum trading?

The boundaries of spectrum regulation

122.	A wide range of spectrum use is exempt from individual licensing, typically because the power and propagation characteristics of these services is so localised that they do not materially interfere with other spectrum users. With advances in radio technology, there is growing commercial interest in 
developing products which utilise such licence-exempt spectrum, for example, 
home/office local area wireless networks (such as the 'Bluetooth' standard). 
Some of the services developed for such licence-exempt spectrum can be 
partial substitutes for and/or complements to licensed spectrum applications, 
such as mobile phones. The absence of spectrum usage charges may 
encourage commercial operators to focus their research efforts on using this 
spectrum. Conversely, the lack of protection from interference offered to users 
of such spectrum may militate against operators providing a commercial 
service, since they may face difficulties in guaranteeing the quality of 
transmissions.

123.	Use of licence-exempt spectrum is on a non-interference non-protected basis. Users of such deregulated spectrum must not cause interference to other 
authorised spectrum users, nor can they claim protection from interference 
from such services. With short range propagation and few devices in any 
given geography, the risk of interference caused by such low power licence-
exempt spectrum use has historically been relatively low. At the same time, 
the absence of regulations covering receivers' standards has meant that in 
some cases equipment can be very vulnerable to interference from other 
services. Technology now offers the prospect of increasing the intensity of 
spectrum use in these unregulated bands through the use of systems which 
are automatically self-protecting and 'polite'. These avoid interference coming 
into the band and avoid transmitting over other signals within the band. 

124.	Use of licence-exempt spectrum therefore poses a number of regulatory 
challenges: 
?	Whether, where and how to regulate growing congestion in licence-
exempt spectrum use
?	If so, how to do so in way which targets regulation where it is needed, to 
help different spectrum users resolve efficiently their competing demands 
to use a particular radio frequency, thus avoiding unnecessary over-
regulation
?	The choice of regulatory tools, for example channel access protocols 
which mandate a minimum level of self-protection and 'politeness'
?	Whether to widen the uses to which licence-exempt spectrum can applied 
(for example, licence exemption does not currently apply in the UK to the 
provision of a low power public mobile radio system provided 
commercially for use by others) 
?	How to reduce the impact of the regulatory boundary between licence-
exempt spectrum use (which attracts no spectrum charge) and regulated 
spectrum where opportunity cost pricing prevails.

125.	There is currently significant market interest in the development of wireless 
local area networks which could utilise several licence-exempt frequency 
bands (such as the Digital Enhanced Cordless Telephone band at 1880 to 
1900 MHz, the 2400 to 2483.5 MHz band, and the 5 GHz bands). In light of this 
demand, the RA is proposing to consult later this year on the removal of the 
prohibition on the use of deregulated spectrum for the provision of public 
telecommunications services. In light of the information generated by this RA 
consultation, the review will consider the division between licensed and 
licence-exempt spectrum use, and assess regulatory approaches which 
might be adopted to deal with growing congestion problems in unlicensed 
spectrum.

Issues for discussion
xxxix.	What factors should guide regulators in setting the boundaries of 
licence-exempt spectrum use?
xl.	What remit should regulators hold over licence-exempt spectrum 
use, other ensuring that it does not interfere unduly with licensed 
spectrum use?
xli.	How far can developments in radio technology provide an 
alternative to regulation in licence-exempt spectrum bands, 
particularly where the potential for interference with other users is 
very low given the propagation and power characteristics of the 
signals concerned?


Annex A

Summary of issues for discussion

Economic gains from efficient use of spectrum
i.	How best can Government assess the economic gains from enabling more 
efficient use to be made of spectrum?
ii.	How could information from market transactions and economic impact studies 
best help inform the design of spectrum management policies?

Economic principles of spectrum management
iii.	How far can the over-arching principle, that spectrum users should bear the 
opportunity cost of their usage, be applied in practice?
iv.	How can the trade-offs between competing economic and social uses of 
spectrum be more clearly articulated in the principles governing spectrum 
management?

Legislative basis for spectrum management
v.	To what extent would a separate spectrum management duty for Ofcom be 
helpful, and how could this best be articulated in a new statutory framework for 
communications regulation? 
vi.	What additional statutory alternatives to apparatus licensing could assist 
Ofcom in meeting its spectrum management objectives?
vii.	How far can new modes of licensing, based upon access to defined spectrum 
rather than defined wireless apparatus, assist in enabling more efficient use to 
be made of spectrum?

Regulatory framework for spectrum management

International dimension 
viii.	How can the UK's stance towards international spectrum management policy 
best reflect the opportunity costs of different spectrum uses?
ix.	What scope is there for greater autonomy in domestic spectrum policy within 
the constraints imposed by the UK's international commitments?
x.	How should the UK Government judge the trade-off between a more liberal 
approach to spectrum management and one in which technology standards 
and spectrum access are mandated as part of a strategic industrial and trade 
policy?
xi.	If there were greater latitude in international allocations and/or the UK's 
implementation of such decisions, to what extent would market mechanisms 
result in harmonisation of equipment and transmission standards?

National dimension
xii.	Within the current and proposed statutory framework, what improvements (if 
any) could be made to the institutional arrangements for spectrum 
management in the UK?
xiii.	To what extent would greater transparency of specific data on current and 
prospective spectrum uses support efficient spectrum use? What are the key 
issues and trade-offs pertinent to the provision, by RA, of an on-line database 
containing spectrum-utilisation details? How far is transparency compatible 
with commercial confidentiality and public safety and security considerations?
xiv.	To what extent could intermediaries play a valuable role in buying rights to 
manage a particular frequency band and then selling access to parts of this 
spectrum to users on a commercial basis?

Spectrum use: marketed and non-marketed outputs
xv.	To what extent is the review's distinction between radio spectrum used for 
marketed and non-marketed goods a helpful one?
xvi.	How far can public policy objectives for the delivery of non-marketed goods be 
separated from the regulation of access to the spectrum necessary to deliver 
such services?

Issues in non-marketed uses of spectrum

Defence
xvii.	Is this a valid description of the factors affecting defence use of radio 
spectrum?
xviii.	What opportunities exist for commercial and other civil users to share 
spectrum with the defence establishment in the UK?
xix.	What further incentives could be introduced to encourage more intensive and 
efficient use of spectrum allocated to defence?

Broadcasting
xx.	Is this a valid description of the factors affecting use of radio spectrum by the 
broadcasting sector?
xxi.	How can the Government's commitment to value the spectrum used by 
broadcasters be implemented in a way which encourages spectrum 
efficiency?
xxii.	What further incentives might be introduced, consistent with wider 
broadcasting policy and with previous Government about television and radio 
franchise fees, to encourage greater spectrum efficiency by commercial 
broadcasters? Are there differences in the approach to incentives before and 
after the proposed switchover from analogue to digital terrestrial TV 
broadcasting?
xxiii.	What incentives might be introduced, consistent with wider broadcasting 
policy and the Government's approach to the funding of the BBC and its public 
service remit, to encourage greater spectrum efficiency by the BBC?

Aeronautical and maritime services
xxiv.	Is this a valid description of the factors affecting use of radio spectrum by 
aeronautical and maritime services?
xxv.	Given the international harmonisation constraints, where could new economic 
incentives most encourage more efficient use of spectrum in the UK? 
xxvi.	How far could changes in spectrum use charges be reflected in air traffic 
control fees which are passed on to users of UK airspace and landing 
services?

Emergency services
xxvii.	Is this a valid description of the factors affecting use of radio spectrum by the 
emergency services?
xxviii.	How far can spectrum pricing influence emergency services to make efficient 
use of spectrum over time?
xxix.	What scope might there be for sharing of spectrum access with other users 
to enable more efficient spectrum use?

Spectrum pricing and auctions
xxx.	How far have economic incentives from spectrum prices helped to encourage 
efficient spectrum use?
xxxi.	Where should the balance lie between administratively-set incentive prices 
and competitive auction of spectrum licences? To what extent could the two 
approaches be combined to encourage spectrum efficiency?
xxxii.	What factors should determine the choice of frequencies subject to auction of 
licences?

Spectrum trading
xxxiii.	Which areas of spectrum use are most amenable to and which areas offer 
the greatest potential efficiency gains from the introduction of spectrum 
trading?
xxxiv.	To what extent would a move to licensing of spectrum access, as opposed to 
wireless apparatus licensing as now, facilitate spectrum trading?
xxxv.	What changes to the terms and conditions of licences for the operation of 
wireless equipment and/or for access to spectrum would facilitate spectrum 
trading?
xxxvi.	If new modes of licensing spectrum access (rather than equipment operation) 
were introduced, how could rights to spectrum usage, such as interference 
standards and length of licences, best be defined to facilitate spectrum 
trading?
xxxvii.	What market infrastructure, such as spectrum registers and dispute 
resolution procedures, could facilitate spectrum trading?
xxxviii.	What lessons can be learnt from the experiences of other countries (such as 
Australia, New Zealand and the United States) in introducing different modes 
of spectrum trading?

The boundaries of spectrum regulation
xxxix.	What factors should guide regulators in setting the boundaries of licence-
exempt spectrum use?
xl.	What remit should regulators hold over licence-exempt spectrum use, other 
ensuring that it does not interfere unduly with licensed spectrum use?
xli.	How far can developments in radio technology provide an alternative to 
regulation in licence-exempt spectrum bands, particularly where the potential 
for interference with other users is very low given the propagation and power 
characteristics of the signals concerned?
 


Annex B

Review remit: H M Treasury press release of 22 March 2001

35/01 
22 March 2001
 
REMIT OF RADIO SPECTRUM MANAGEMENT REVIEW ANNOUNCED- CAVE

The radio spectrum is a key resource for many new and developing high-tech 
industries. The management and development of the spectrum will play an important 
role in creating a knowledge driven economy.

The Chancellor announced in Budget 2001 that Professor Martin Cave, Vice Principal 
at Brunel University, will lead the independent review of spectrum management.

The review will publish an issues paper in May 2001, setting out initial areas of 
interest.

Professor Cave said:
"The radio spectrum is a key resource for many new and developing high-tech 
industries that are important to the future growth and productivity of the UK. Ensuring 
spectrum is managed in the best interests of the economy will mean we fully benefit 
from these new technologies. Consultation by the review will be wide and extensive, 
and involve many interested parties in industry, academia and government."

The review will ensure that the spectrum management framework is at the forefront of 
change. It will advise on the principles that should govern spectrum management and 
what more needs to be done to ensure that all users, including non-commercial 
users, are focussed on using their spectrum as efficiently as possible. The review will 
consider the use of spectrum management tools such as spectrum valuation, trading 
and pricing.
The review will report to the Chancellor and the Secretary of State for Trade and 
Industry by the end of the year. It will address issues early where its advice will be 
relevant to the institutional framework for spectrum management proposed in the 
Communications White Paper.

NOTES FOR EDITORS

1. Professor Martin Cave, professor of economics and Vice-Principal at Brunel 
University, has published on a wide range of subjects, including telecommunications 
regulation and spectrum management as well as competition policy and higher 
education. He has also advised OFTEL and a number of regulatory bodies. He is a 
member of the Competition Commission. 

2. The Communications White Paper was published in December 2000 by the 
Department for Trade and Industry, and the Department for Culture, Media and Sport. 
It sets out the institutional framework for communications regulation, including the 
establishment of a single regulator for the sector. This single regulator will incorporate 
the spectrum management functions of the Radiocommunications Agency.

3. The Review invites initial responses from all interested parties to the following 
addresses: spectrum.review@ra.gsi.gov.uk and/or to the Secretary to the Review, 
Daniel Storey, at

Radio Spectrum Management Review 
c/o Radiocommunications Agency 
Wyndham House 
189 Marsh Wall 
London 
E14 9SX

In light of initial responses and analysis, the Review will publish an issues paper in 
May. This press notice, and subsequent Review documents, will be available at the 
following web address: www.spectrumreview.radio.gov.uk or via the 
Radiocommunications Agency website: www.radio.gov.uk
 
ANNEX TO PRESS NOTICE

Independent review of radio spectrum management: terms of reference

1.	In the November 2000 Pre-Budget Report, the Government announced an 
independent review of radio spectrum management.

2.	The review will advise on the principles that should govern spectrum 
management, and what more needs to be done to ensure that all users, including 
non-commercial users, are focused on using their spectrum in the most efficient 
way possible. In doing so, it will consider the use of spectrum management tools 
such as spectrum valuation, pricing and trading.

3.	The review will report to the Chancellor and to the Secretary of State for Trade 
and Industry.

Context and timing

4.	In December 2000 the Government published the Communications White Paper. 
This sets out the future for regulation in the communications sector, including the 
transfer of spectrum management functions into the new unified regulator, 
OFCOM.

5.	The purpose of the review is not to revisit these institutional arrangements. 
However, it may be the case that the review wishes to make recommendations 
for the implementation of the legislation. In order to ensure that this is possible, the 
review will provide advice on these areas for late summer 2001.

6.	The review will provide a final report by the end of the year, and if possible for the 
2001 Pre-Budget Report.

Process

7.	In order to ensure that the review is fully informed and authoritative, it will carry out 
full consultation with interested parties, including from the private sector (such as 
broadcasters, telecommunications companies, manufacturers, etc), and from 
relevant Government departments (including, but not necessarily limited to, the 
Ministry of Defence, the Department of Culture, Media and Sport and the 
Department for the Environment, Transport and the Regions).

8.	The recommendations that the review produces need to be practical as well as 
desirable. It will consider not only analytical issues but also the incentives facing 
different users and realistic mechanisms for improving spectrum management.



Annex C

Application of incentive pricing to spectrum users

Sector
Smith/NE
RA 
recomm
endation 
on 
incentive 
pricing
Basis 
for 
prices
Date of 
introducti
on of 
incentive 
pricing (or 
other 
measures 
taken eg. 
Simplificat
ion)
P
h
a
s
e
d 
In
tr
o
d
u
ct
io
n 
p
er
io
d 
p
o
si
ti
o
n 
pr
o
p
o
s
e
d 
fo
r 
J
ul
y 
2
0
0
1 



F
ul
l  i
m
pl
e
m
e
nt
at
io
n 
d
at
e
Fixe
d 
Sum 
(Ad
mini
strat
ive)
Fee 
Rate 
(£/M
Hz/K
m2 ) 
An
nu
al 
ac
cru
ed 
fee
s 
rec
eiv
ed 
for 
20
00 
- 
20
01
Aeronautical
Administrati
ve pricing 
limited to 
TFTS, 
channel 36. 
Needed to 
recognise 
international 
dimension 
for the 
pricing of 
Ground 
Station.
Set 
relative to 
alternativ
e use.
Simplification 
of Ground 
Station 
licence 
classes (July 
2000). Radar 
deferred for 
further study. 
No demand 
for TFTS.
N/A
N/A
Range 
£20 to 
£250
N/A
£0.3 M
Aircraft
All aircraft 
share the 
same 
spectrum 
worldwide.
Cost 
recovery 
only, flat 
fees.
Simplification 
of licence 
classes (July 
2000). 
N/A
N/A
Range 
£15 to 
£350 by 
aircraft 
size 
and 
usage.
N/A
£0.6M
Amateur/Citize
ns' Band
Administrati
ve pricing 
not 
appropriate. 
Cost 
recovery 
only, flat 
fees.
Simplification 
of licence 
class (July 
2000).
N/A
N/A
£15 for 
most 
users.
N/A
£1.2M
Broadcasting
(Audio and TV 
only)
Administrati
ve pricing 
seen as 
worthwhile, 
subject to 
resolution of 
policy 
issues.
Cost 
recovery 
only, flat 
fees at 
pre-1998 
levels.
N/A
N/A
N/A
N/A
N/A
£4.9M
Fixed Links
Administrati
ve pricing 
seen as 
worthwhile. 
Set relative 
to cost of 
alternate 
services.
Standard 
(fixed) 
Tariff 
Unit. 
Scaled to 
reflect 
efficiency 
and 
congesti
on.
From 1998 
(for point to 
point) other 
products from 
1999.
Year 
3 of 
4
July 
2002
N/A
Up to 
£1.05 ? 
£925 
Fixed 
Link 
referen
ce fee?
£18.3
M
? Licence fee = Fixed Links Reference Fee x Frequency Band Factor x Adjusted Bandwidth Factor. This 
is equivalent to using the STU of £1.05



Sector
Smith/NE
RA 
recomm
endation 
on 
incentive 
pricing
Basis for 
prices
Date of 
introduct
ion of 
incentive 
pricing 
(or 
simplific
ation of 
sector)
Phas
ed 
Intro
ducti
on 
perio
d 
posit
ion 
prop
osed 
for 
July 
2001
Fu
ll 
i
m
pl
e
m
e
nt
at
io
n 
d
at
e
Fixed 
Sum
(Admi
nistrat
ive)
Fe
e 
R
at
e 
(£
/M
H
z/
K
m
2) 
An
nua
l 
acc
rue
d 
fee
s 
rec
eiv
ed 
for 
200
0 - 
200
1
Maritime

Administrati
ve pricing 
seen as 
only 
worthwhile 
for Maritime 
Business 
Radio. 
Need to 
recognise 
international 
dimension 
for pricing 
maritime 
use.
Benchmark
ed from 
other 
mobile 
prices.
Rationalisat
ion July 
2000.
N/A
N/A
Range 
£75 to 
£1000 
per 
channel 
of base 
station.
N/A
£0.3M
Ships
Administrati
ve pricing 
seen as 
only 
worthwhile. 
All ships 
share the 
same 
spectrum 
worldwide.
Cost 
recovery 
only, flat 
fees.
Rationalisat
ion from 
July 2001. 
N/A
N/A
£15 to 
£20 from 
July 
2001.
N/A
£1.3M
Private 
Business 
Radio
Administrati
ve pricing 
seen as 
worthwhile.
Standard 
(mobile) 
Tariff Unit or 
scaled 
proportion 
according to 
congestion 
or pricing 
incentives.
From July 
1998.
Several 
classes 
each 
year 
July 
2000
.
N/A
Up 
to 
£1.6
5
£8.1M
Programme 
Making and 
Special 
Events
Administrati
ve pricing 
seen as 
worthwhile. 
Recommen
d that 
account be 
taken of the 
mobile & 
fixed STU.
Incentive 
pricing 
introduced 
from July 
2001.
From July 
2001.
Year 1 
of 4
July 
2004
.
Range 
£2 to 
£2,400 
dependin
g on 
channel 
and/or 
region.
N/A
£1.1M



Sector
Smith/NER
A 
recomme
ndation on 
incentive 
pricing
Basis for 
prices
Date 
of 
intro
ducti
on of 
ince
ntive 
prici
ng 
(or 
simp
lifica
tion 
of 
sect
or)
Phased 
Introduct
ion 
period 
position 
propose
d for July 
2001
Full 
im
ple
me
nta
tio
n 
dat
e
Fi
x
e
d 
S
u
m
(A
d
m
in
is
tr
at
iv
e)
Fee 
Rate 
(£/M
Hz/K
m2)
An
nu
al 
ac
cru
ed 
fee
s 
rec
eiv
ed 
for 
20
00 
- 
20
01
Public 
Telecoms 
Networks
Administrativ
e pricing 
seen as 
worthwhile. 
Set relative to 
cost of 
alternate 
services.
Standard 
(Mobile) 
Tariff Unit.
From 
July 
1998.
Year4 of 4 
for public 
telephony
July 
2001
N/A
Up to 
£1.65
£40.0
M




2 of 4 for 
RFA
July 
2003
N/A
Up to 
£1.65 
£0.8M




3 of 4 other 
PMO
July 
2002
N/A
Up to 
£1.65 
£2.9M




3 of 4 for 
CBS
July 
2002
N/A
Up to 
£1.65 
£0.7M
Satellite 
uplinks 
(inc. PES, 
TES & 
VSATS)
Administrativ
e pricing 
seen as 
worthwhile, 
incentive 
pricing 
should be 
applied to all 
licensing 
products.
Benchmark
ed from 
Standard 
(fixed) Tariff 
Unit.
July 
2001.
Year 1 of 2
July 
2001 
(TES)
Oct 
2001 
(PES)
N/A
Up to 
£1.05 
(by 
bench
markin
g)
£2.9M
Scanning 
Telemetry
Administrativ
e pricing 
seen as 
worthwhile. 
Benchmarke
d to PBR.
Cost 
recovery, 
plus 
introduction 
national 
channel 
which is 
incentive 
priced.
July 
2001
Nationa
l 
incentiv
e priced 
channel
.
Year 1 of 2
July 
2002.
£
4
0 
p
er 
st
at
io
n 
or 
£
7,
9
2
0 
n
at
io
n
al 
c
h
a
n
n
el
.
Up to 
£1.65
£0.4M




Sector
Smith/NER
A 
recommen
dation on 
incentive 
pricing
Basis for 
prices
Date 
of 
introd
uction 
of 
incenti
ve 
pricin
g (or 
simplif
ication 
of 
sector
)
Phas
ed 
Intro
ducti
on 
perio
d 
posit
ion 
prop
osed 
for 
July 
2001
Fu
ll 
i
m
pl
e
m
e
nt
at
io
n 
d
at
e
Fi
x
e
d 
S
u
m
(A
d
m
ini
st
ra
tiv
e)
Fee 
Rate 
(£/M
Hz/K
m2
Ann
ual 
acc
rue
d 
fee
s 
rec
eiv
ed 
for 
200
0 - 
200
1
PUBLIC USE
Defence
Administrative 
pricing seen 
as worthwhile.
Set relative to 
fixed links, 
mobile radio 
fees 
depending on 
the band.
1999
Year 3 
of 3 
2001
N/A
As for 
appropri
ate PMO 
or Fixed 
links 
£22.7
M
Home 
Office
Not covered. 
RA have taken 
same 
approach as 
Defence

As Defence
2000
Year 2 
of 4
2004
N/A
ditto
£1.0 M
Radio 
Astronomy, 
space 
research, 
meteorolo
gy
Administrative 
pricing seen 
as worthwhile, 
although there 
are some 
policy issues.
Needs further 
consideration
N/A
N/A
N/A
N/A
N/A
£0.3 M


  	for example, the number of cellular mobile phone subscribers grew from 1 million to 10 
million between 1992 and 1998, and then leapt to 35 million by 2000 (source: Oftel); the number 
of local commercial radio stations rose from 130 in 1991 to 248 in 2000 (source: Radio 
Authority)
  	as of 20 March 2001 (source: European Commission Communication COM(2001)141, 
The Introduction of Third Generation Mobile Communications in the European Union: State of 
Play and the Way Forward)
  	The Economic Impact of Radio, A Study Produced by The Radiocommunications 
Agency, February 2001
  	so termed because of the physical properties of these radio waves which enable 
significant amounts of data to be transmitted across economically useful distances, and also 
allow mobile applications 
  	as proposed in the DTI/DCMS White Paper, A New Future for Communications, 
December 2000
  	Wireless Telegraphy Act 1998
  	such as broadband internet access
  	Strategy for the future use of the Radio Spectrum in the UK, Radiocommunications 
Agency, Fifth Edition, March 2001
  	www.aca.gov.au/database/radcomm/index.htm provides data on the majority of 
licences, excluding specific information on military and emergency service frequencies
  	public goods are classically defined as those where there is non-rivalry in consumption 
(e.g. my reception of TV broadcast does not prevent your reception of the same transmission) 
and non-excludability (e.g. one cannot prevent any one individual from enjoying the benefits of a 
national defence force)
  	the universal service obligation on certain telecoms services is an exception to this rule.
  	further detailed information is provided in Chapter 3 of Strategy for the future use of the 
Radio Spectrum in the UK, Radiocommunications Agency, March 2000 
  	for example, the Broadcasting Act 1990 is prescriptive about providing for TV Channels 
3 and 5 and the three analogue national radio services
  	independent companies such as Crown Castle International and NTL
  	Study into the use of spectrum pricing, NERA and Smith System Engineering Ltd, 
published by the Radiocommunications Agency, June 1996 
  	in section 2.7.3, Communications White Paper, December 2000
  	for England and Wales; there are parallel devolved but co-ordinated arrangements for 
other parts of the UK and the Islands
  	Spectrum Pricing: Third Stage Update and Consultation, Radiocommunications 
Agency, December 2000, 
  	Study into the Use of Spectrum Pricing, by NERA and Smith System Engineering Ltd, 
published by the Radiocommunications Agency, June 1996
  	Spectrum Management: into the 21st Century, DTI White Paper, June 1996
  	Managing spectrum through the market, Radiocommunications Agency, 1998
  	COM(2000)393
Radio spectrum management review: a consultation paper
		1