Presentation is loading. Please wait.

Presentation is loading. Please wait.

Yemen, 11-13 December 2005 Price-setting process – methods of spectrum assignment Economic aspects of spectrum management for Arab States Director of NIIR.

Similar presentations


Presentation on theme: "Yemen, 11-13 December 2005 Price-setting process – methods of spectrum assignment Economic aspects of spectrum management for Arab States Director of NIIR."— Presentation transcript:

1 Yemen, December 2005 Price-setting process – methods of spectrum assignment Economic aspects of spectrum management for Arab States Director of NIIR Research Centre, Professor of MTUCI, Dr V. Tikhvinskiy

2 2 Definitions Spectrum Management Role of Economical Methods in Spectrum Management Market & non-market methods use for frequency assignments National cost allocation systems Conclusions Economic aspects of spectrum management for Arab States Structure of the presentation

3 3 Features of Radio Spectrum 1.Spectrum is a finite and scarce resource. 2. Spectrum is an intangible resource freely available to society. 3. Spectrum is owned by the state (it is a public resource (asset)) and leased under various terms to users Economic aspects of spectrum management for Arab States

4 4 Spectrum market: Supply & Demand 1. The demand for spectrum in certain bands has grown markedly and more often demand is greater than available supply. 2.The demand for spectrum increases as the price of spectrum falls. 3.Unlike in most markets, spectrum prices are determined via an administered process. Economic aspects of spectrum management for Arab States

5 5 Spectrum market situation Features of Spectrum resource Increase in spectrum access demand Rebalance demand and supply of Spectrum resource Economic methods for spectrum management Economic aspects of spectrum management for Arab States

6 6 Balance on the Spectrum market 1.One of the aims of administered spectrum pricing is to ensure that supply and demand for spectrum are balanced. 2. Balance on the Spectrum market can be achieved by price- setting methods implementation for Spectrum Management Economic aspects of spectrum management for Arab States

7 7 Spectrum management It means all activities carried out with the aim of giving access to spectrum for the largest possible group of interested parties, It means all activities carried out with the aim of giving access to spectrum for the largest possible group of interested parties, in due time, while ensuring the overall efficiency of spectrum use and avoiding harmful interference. (ECC Report 016). (ECC Report 016). Economic aspects of spectrum management for Arab States

8 8 Definition of Assignment Frequency distribution to FrenchEnglishSpanish Services Attribution (attribuer) Allocation (to allocate) Atribución (atribuir) Areas or countries Allotissement (allotir) Allotment (to allot) Adjudicación (adjudicar) Stations Assignation (assigner) Assignment (to assign) Asignación (asignar) Economic aspects of spectrum management for Arab States Assignment (of a radio frequency or radio frequency channel) is the Authorization given by an Administration for a radio station to use a frequency or frequency channel under specified conditions

9 Definition of Spectrum Pricing Spectrum pricing A generic term denoting the use of pricing as a spectrum management tool. It covers both administrative incentive pricing and auctions of either apparatus licences or spectrum rights. Under spectrum pricing, charges are not set by reference to the fully allocated costs of spectrum management attributable to particular user categories but are intended to balance supply of and demand for spectrum or to achieve other spectrum management policy objectives, such as facilitating the introduction of new services or promoting competition. Source: ERC REP 53 Economic aspects of spectrum management for Arab States

10 10 Aim of Economic Methods of Spectrum Management What are the objectives of countries authorities: keep the cost of access to spectrum as low as possible or maximize the economic benefit derived from spectrum use? Economic aspects of spectrum management for Arab States

11 11 Role of Economic Methods in Spectrum Management 1. The total supply of spectrum is fixed, but new technologies are affected by the limitations to which they can be utilized. 2. The demand for spectrum is derived from the demand for the implementation new technologies and services. Economic Methods are mean for an achievements of balance on Spectrum market The relationship between the demand for spectrum and its own price also reflects users' willingness to pay for spectrum. 4. The objective of spectrum pricing to encourage the introduction new technologies and an efficient spectrum management. Economic aspects of spectrum management for Arab States

12 12 Place of economics of spectrum Efficient use of spectrum Assignment of spectrum rights within a particular frequency band Allocation of spectrum to categories of use Economic aspects of spectrum management for Arab States

13 13 Level of Spectrum Pricing Impact International ( RR Table of Frequency Allocations) – No International ( RR Table of Frequency Allocations) – No Regional (Europe -ECA, Asia, Africa, etc.) – No Regional (Europe -ECA, Asia, Africa, etc.) – No National - Yes National - Yes Economic aspects of spectrum management for Arab States

14 14 Access to Spectrum 1. Access to frequencies is managed by Government, either directly or through Agencies. 2. Access to a few frequency ranges is subject to light regulation (such as license exempt frequencies). 3. Access to most frequency ranges, however, is closely regulated and in some cases frequencies are assigned to specific users on an exclusive basis. Economic aspects of spectrum management for Arab States

15 15 Spectrum assignment methods 3 methods use for frequency assignments after spectrum allocated to a particular use. Non-market based approaches: 1.Comparative process( Beauty Contest/Tender); 2.Loterry Market based approaches: 3. Auction Economic aspects of spectrum management for Arab States

16 16 Comparative process Comparative process( Beauty Contest/Tender) is method for spectrum assigning, when the qualifications of each of the competing spectrum applicants are formally compared based on established and national criteria. The authority determines who is the best qualified applicant to use the spectrum and awards the license. Economic aspects of spectrum management for Arab States

17 17 Beauty Contest A comparative selection mechanism that gives weight to criteria other than financial bids in order to decide which offer(s) is (are) best. Financial transfers nevertheless can play a role in this decision making process, but only and solely as (ex ante determined) fixed criteria that have to be met. Economic aspects of spectrum management for Arab States

18 18 Tender A selection mechanism that gives weight to both financial and non-financial criteria in order to decide which offer(s) is (are) the best. A tender looks like a mixture of a beauty contest and an auction. Economic aspects of spectrum management for Arab States

19 19 Lottery licenses or spectrum rights to applicants selected at random. Method for spectrum assigning licenses or spectrum rights to applicants selected at random. Economic aspects of spectrum management for Arab States

20 20 Auction 1.Licenses are awarded by bidding among competing spectrum applicants. 2. Auction award to those who value them most highly while simultaneously Economic aspects of spectrum management for Arab States Auctions represent a new form of licence mechanism where the applicants determine the spectrum value to be charged.

21 21 Type of Auctions Auction English auction First-price sealed bid auction Second-price sealed bid auction Dutch auction Simultaneous multiple round auction Economic aspects of spectrum management for Arab States Source: ITU Report SM 2012

22 22 GSM & UMTS Spectrum Licensing Economic aspects of spectrum management for Arab States Instruments used for assignment of GSM & UMTS spectrum Source: ECC Report 65

23 23 Assignment of FWA / WLL Spectrum Economic aspects of spectrum management for Arab States Results assignment of FWA/WLL spectrum by different methods

24 24 Broadcasting TV & Analog radio Economic aspects of spectrum management for Arab States Instruments used for assignment of broadcasting spectrum Source: ECC Report 65

25 25 Licence fees Licence fees represent another way to frequency assignments. Licence fees range in complexity from a simple table by service, to charge per frequency per station for each service, to complex formulas involving a number of variables. Economic aspects of spectrum management for Arab States

26 26 Principles of Licence fees Fees should be take into consideration the value of the spectrum; Fee mechanisms should be easy to understand and implement; Decisions and changes related to fee collection should be undertaken with users and industry; Fee should not be a barrier to entry of innovation and use of new radio technologies, or to competition; Fee should support the attainment of the spectrum managers national goals and objectives. Economic aspects of spectrum management for Arab States Source: ITU Report SM 2012

27 27 Methods of Licence fees determination Fees based on spectrum management costs (Direct & Indirect); Fees based on users gross income; Incentive fees; Opportunity cost fees. Economic aspects of spectrum management for Arab States Source: ITU Report SM 2012

28 28 Form of Administrative pricing Administrative spectrum pricing Shadow pricing Incentive pricing Regulatory Pricing Economic aspects of spectrum management for Arab States Source: ITU Report SM 2012

29 29 Shadow pricing A form of administrative pricing in which the price is set according to a predetermined formula intended to simulate the effect of market forces by taking spectrum consumption, value and scarcity into account. Parameters commonly used include bandwidth, frequency location, geographical location and coverage area. Economic aspects of spectrum management for Arab States

30 30 Administered Incentive pricing (AIP) AIP –method used to set a fee, are prices charged to license holder (holder of recognized spectrum access (RSA)); are intended to reflect the opportunity cost of spectrum use (provide effective incentives for efficient use of spectrum). Economic aspects of spectrum management for Arab States

31 31 Opportunity cost of spectrum The opportunity cost of spectrum represents the benefits that would be derived from the next best alternative use. In other words, the opportunity cost represents the benefits foregone from assigning spectrum to the best use instead of the next best use. Economic aspects of spectrum management for Arab States

32 32 Regulatory pricing Cost-based pricing method. It is charges to license holder (holders of RSA); is set unrelated to market consideration; is intended to recover the regulator's administrative costs incurred in spectrum management, control and enforcement. Economic aspects of spectrum management for Arab States

33 33 Differentiation of Spectrum Pricing The following technical and economic criteria are used to define and differentiate spectrum fees: Type of radio service and purpose of spectrum use Type of radio service and purpose of spectrum use Type of operator (public/private) Type of operator (public/private) Frequency band or sub-band Shared use or exclusive use Amount of spectrum (bandwidth) used Coverage area Network parameter Starting parameter (parameter value increases over time) Technical parameter such as EIRP, power Operating mode Percentage of the turnover/profit of an undertaking Level of frequency re-use. Economic aspects of spectrum management for Arab States

34 34 20 Responses to questionnaire Provide understanding of national systems but variety of scenarios Charges/fees often mixed up – Definitions Relationship costs & charges/fees not always clear Identification of models Result of EC Investigation Economic aspects of spectrum management for Arab States Source: ECC Report 53

35 35 Models foundation of SMO Five main models foundation of Spectrum management organization identified Elements of foundation model : SMO: Spectrum management organisation (planning, coordination, licensing, enforcement…) Ministry: overall spectrum policy Licence holders Money flows Economic aspects of spectrum management for Arab States

36 36 Cost-accounting/ cost- allocation system A cost-accounting or cost-allocation system is a model that clarifies the costs of the SMO for a certain type of activity or certain group of licence holders. A cost-accounting or cost-allocation system is a model that clarifies the costs of the SMO for a certain type of activity or certain group of licence holders. Ideally the charge that is passed to the license holders can be clarified or explained by the cost- accounting/allocation system. Economic aspects of spectrum management for Arab States

37 37 Fees and charges of SMO The bill that is sent to the market (or to the Licence holders) may have three forms and reflect: -the costs of the SMO (charge) -the value of the spectrum or other policy considerations (independent of the costs, i.e. a fee) -both the costs of the SMO and the value of spectrum (i.e. a charge combined with a fee component). Economic aspects of spectrum management for Arab States

38 38 1- Fee-based model e.g. UK Economic aspects of spectrum management for Arab States Source: ECC Report 53

39 39 2- State-financed model e.g. Denmark, France, Czech Rep. Malta, Poland Economic aspects of spectrum management for Arab States Source: ECC Report 53

40 40 3- Charge-based model with cost-allocation e.g. Netherlands, Sweden Economic aspects of spectrum management for Arab States Source: ECC Report 53

41 41 4- Charge-based model without cost-allocation e.g. Bulgaria, Hungary, Finland, Turkey Economic aspects of spectrum management for Arab States

42 42 5 a - Hybrid fee & charge-based model e.g. Switzerland, Estonia

43 43 5 b - Hybrid fee & charge-based model e.g. Croatia, Portugal Ireland, Latvia

44 44 Aims of Spectrum fees Policy objectives pursued: Equal treatment Proportionality Competition Optimum spectrum use Society needs Transparency Legal certainty Economic aspects of spectrum management for Arab States

45 45 Use of cost-allocation systems Formally used only in few NRAs to determine charges Specific elements Indirect costs Direct costs Cost-recovery principles Pros and cons of using cost allocation systems Economic aspects of spectrum management for Arab States

46 46 Direct & Indirect costs Indirect costs Not easy to link to work carried out and therefore to charge Specific overheads allocated to activities that generate them (e.g. training, salary etc.); general overheads allocated depending on number of staff (e.g. rent) International work charged to customer group or individual licensee; flat rate may be used. Direct costs Allocated to individual licensees or groups of licensees Registration of time spent on various tasks Economic aspects of spectrum management for Arab States

47 47 Enhancement of SMO Other developments: Auctions vs. spectrum fees Charges/Fees and outsourcing Flexible regulatory framework Licence exemption Technological developments Economic aspects of spectrum management for Arab States

48 48 EU package & administrative charges Expected changes: More financing via fees & charges Revision of charges to link them to frequency management costs Increase in charges More discipline with budget Refining of existing cost-allocation Other NRAs already compliant Economic aspects of spectrum management for Arab States

49 49 EU package & spectrum fees A number of NRAs already apply spectrum fees 2 NRAs plan to introduce spectrum fees 1 does not foresee implementing spectrum fees Economic aspects of spectrum management for Arab States

50 50 Conclusions There are many price-setting methods for frequency assignment. Dual nature prise-setting methods is defined by goal of Administrations. Five main models of cost-allocation system are using by European Administrations. European cost-allocation system shift towards more transparent funding models. Economic aspects of spectrum management for Arab States

51 THANKS FOR YOUR ATTENTION tel tel Economic aspects of spectrum management for Arab States


Download ppt "Yemen, 11-13 December 2005 Price-setting process – methods of spectrum assignment Economic aspects of spectrum management for Arab States Director of NIIR."

Similar presentations


Ads by Google