Presentation on theme: "Market Based Methods of Spectrum Allocation in SATRC Countries"— Presentation transcript:
1 Market Based Methods of Spectrum Allocation in SATRC Countries Chairman of Working GroupMarket Based Methods of Spectrum Allocation in SATRC Countries2nd Meeting of SATRC Working Group on Spectrum in SAP-IV, March 2014, Tehran, Iran
2 Table of Contents Introduction of WI’ report Requirement for adopting Market based MechanismMoving towards Market based approachnon-market-based strategies for spectrum allocation and assignmentMarket-based strategies for spectrum allocation and assignmentviews of Ofcom
3 Contents of the WI’ report INTRODUCTIONCHAPTER-IASSIGNMENT OF SPECTRUMCHAPTER-IIMARKET BASED SPECTRUM MECHANISM: OTHER DIMENSIONSCHAPTER-IIISATRC COUNTRIES PERSPECTIVECHAPTER-IV
4 INTRODUCTION General Requirement for adopting Market based Mechanism Moving towards Market based approach
5 Requirement for adopting Market based Mechanism ( 1) When the demand for the spectrum in any band is less than its availability, definitely, assignment of spectrum needs to be done over the counter on an administratively determined price.But, when the demand for a spectrum in band outstrips its availability considerably, the market based approach is best suited for ensuring the optimal use of the spectrum.
6 Requirement for adopting Market based Mechanism (2) The emergence of new services, particularly mobile wireless broadband,Demand for internationally harmonised spectrum
7 Requirement for adopting Market based Mechanism There is trend towards converging markets for integrated services through different communication technologies.Networks and services convergence and the rapid innovation have created a need for more flexible access to spectrum, than is possible under traditional methods.All these developments point to the need for greater flexibility in the management of spectrum resources, while maintaining harmonisation.
8 Requirement for adopting Market based Mechanism The trend towards greater flexibility and more competition in spectrum use is facilitated through a market-based approach to individual rights of use.The market based methods puts resources in the hands of those who value them the most.
9 Moving towards Market based approach There has been a gradual shift from administrative approach towards the market based approach of spectrum management.There are some countries which allowed the auctioning of licences but did not permit trading and change of use.
10 Moving towards Market based approach On the other hand, there are some markets for spectrum and spectrum licences under which both the ownership and use of spectrum can change in the course of a licensee's operation.Methods of Assignment of frequency, removal of restrictions on the usage of spectrum rights, allowing the change in the ownership through spectrum trading are important tools that have been instrumental for this shift of approach
11 non-market-based strategies for spectrum allocation and assignment the allocation stage and the assignment stagefirst-come, first-served basisbeauty contests
12 Non-market-based strategies for spectrum allocation and assignment Traditionally, non-market-based assignment approaches (administrative methods) were adopted by a number of countries for the assignment of spectrum.Minimizing harmful interference is the focal point in the traditional model which places an emphasis on the technical management of radio spectrum.
13 administrative method In the administrative method, there are two stages involved in authorizing spectrum use viz.administrative methodallocation stagespectrum useassignment stage
14 At the allocation stage, broad decisions on spectrum use are made on ITU world radio communication conferences.National spectrum regulators prepare their own allocation decisions, which are published in form of a National Frequency Allocation Table.ALLOCATION STAGE
15 ASSIGNMENT STAGEOnce an allocation has been determined, licences are issued to authorize the use of spectrum to particular users at the assignment stage with the issuance of a license(s) which is assigned.
16 ADMINISTRATIVE METHOD FOR THE ASSIGNMENT THE SPECTRUM Historically, assignments were made by methods such as first-come, first-served basis orby way of comparative evaluation (also known as ‘beauty contests’) and/or consultation rather than by market based methods.
17 FIRST-COME, FIRST SERVED In the first-come, first served (FCFS) method, eligibility criteria is set.Subsequently, blocks of spectrum are assigned to eligible seekers on first-come first served basis.Where spectrum is not scarce and there is enough to meet the demand from all those who want it, FCFS may be suitable method for the assignment of spectrum.
18 BEAUTY CONTESTS“Beauty contests” is another commonly used administrative method for the assignment the spectrum.It requires those, who are interested in a particular tranche of spectrum, making proposals for how they intend to use it.Beauty contests were used to award majority of initial GSM licenses in Europe and around half of the 3rd Generation (3G) mobile licenses.
19 BEAUTY CONTESTSThe regulator evaluates the proposals according to certain criteria, which may include proposed coverage commitments, speed of rollout, end-user prices, quality and range of services offered, etc.The spectrum management authority determines who the best qualified applicant to use the spectrum is and awards the licence.Beauty contests were used to award majority of initial GSM licenses in Europe and around half of the 3rd Generation (3G) mobile licenses.
20 BEAUTY CONTESTSThe main problem with beauty contests is that, it is difficult to keep the selection procedure objective because they involve evaluation across a range of criteria which essentially have a subjective element.They are often subject to successful legal challenge and may delay the development of a truly competitive market, to the detriment of consumers’ interest.Beauty contests are also necessarily slow, since all the criteria must be evaluated in a way which will stand up to legal consideration.Beauty contests were used to award majority of initial GSM licenses in Europe and around half of the 3rd Generation (3G) mobile licenses.
21 Market-based strategies for spectrum allocation and assignment Tradable spectrumAuctionsLicense-exempt spectrumAdministrative incentive pricingOfcom views
22 Market-based strategies for spectrum allocation and assignment AuctionsTradable spectrum rightsLicense-exempt spectrumAdministrative incentive pricingRef.
23 Advantages and disadvantages of auctions Market-based strategies for spectrum allocation and assignmentAuctionsTypes of auctionsAdvantages and disadvantages of auctionsRef. :
24 Types of auctions the English auction Market-based strategies for spectrum allocation and assignmentTypes of auctionsthe English auctionthe first-price sealed bid auctionthe second-price sealed bid auctionthe Dutch auctionthe simultaneous multiple round auctionAuctions may take various forms, including:· the English auction,where the auctioneer increases the price until a single bidder is left;· the first-price sealed bid auction,where bidders submit sealed bids and the highest wins;· the second-price sealed bid auction,where bidders submit sealed bids and the highest bidder wins but pays the second highest amount bid
25 Market-based strategies for spectrum allocation and assignment Advantagesefficient mechanism of assigning commercial spectrum licenses for which there is a high demand.to decrease the administrative costs and time associated with the spectrum assignment processlicenses are competitively assigned to users who value these licenses the mostlucrative source of income for government
26 Disadvantages Unpredictable Market-based strategies for spectrum allocation and assignmentDisadvantagesUnpredictabledelay in the rollout of infrastructure and servicesrequires a tailored approach, adapted to the particular circumstances of a country
27 Tradable spectrum rights Market-based strategies for spectrum allocation and assignmentTradable spectrum rightschange of ownershipchange of ownership and reconfigurationchange of ownership, reconfiguration and change of usechange of ownership and change of use
28 Spectrum trading variants also include: Market-based strategies for spectrum allocation and assignmentSpectrum trading variants also include:Spectrum leasingspectrum sharing
29 License-exempt spectrum Market-based strategies for spectrum allocation and assignmentLicense-exempt spectrumSpectrum commonsOpen access spectrum
30 Market-based strategies for spectrum allocation and assignment Open access spectrumLicense-exempt spectrum use is usually permitted in two formslow power transmissionsspectrum use in bands allocated for license-exempt use (ISM)
31 Administrative incentive pricing Market-based strategies for spectrum allocation and assignmentAdministrative incentive pricingAdministrative Incentive Pricing (AIP) is a fee charged to users of the spectrum to encourage them to make economically efficient use of the spectrum.Licenses are issued through an administrative process, usually on a first come first served basis, and carry with them an obligation to make a regular payments to the regulator or government agency.The idea is that AIP will give the owner of the license an incentive to return unused spectrum rather than pay the fee.It may also help a licensee to use the spectrum more efficiently.
32 Administrative incentive pricing Market-based strategies for spectrum allocation and assignmentAdministrative incentive pricingThe fee is usually based on the opportunity costs of the use of spectrum. Opportunity costs can be based on three different principles:The value of the spectrum for a user with another service.The additional costs if the service had to make use of other means.The additional costs if the licensee had to make use of less spectrum.
33 Ofcom viewsCombining market mechanisms and regulatory action to deliver optimal spectrum useSpectrum management strategy -Ofcom’s approach to and priorities for spectrum management over the next ten years- 2 October 2013
34 In order to deliver optimal spectrum use, ofcom relies on market mechanisms where possible and effective, but also take regulatory action where necessary.Once the conditions required for the use of market mechanisms are in place, they are generally considered the most effective method of allocating scarce resources to ensure they are used efficiently.Spectrum management strategy -Ofcom’s approach to and priorities for spectrum management over the next ten years- 2 October 2013
35 84% of spectrum is tradable 4G auction at 800 MHz and 2.6 GHzauctions as a means to assign new spectrum access rights for large blocks of spectrumspectrum pricing to create incentives for users to make efficient use of spectrum84% of spectrum is tradablespectrum trading and leasing as the means for spectrum access rights that are already assigned to change hands21% of spectrumgreater license flexibility (‘liberalization’) as a principle to enable change of use2005 Spectrum Framework2005 Spectrum Framework Review
37 there can be an important and complementary role for regulators to play in addressing situations where market mechanisms alone are unlikely to deliver the greatest value to society from spectrum use.Spectrum management strategy -Ofcom’s approach to and priorities for spectrum management over the next ten years- 2 October 2013
38 situations where market mechanisms alone are unlikely to deliver the greatest value to society from spectrum use often arise when major changes in spectrum use are contemplated. This is because, typically, major changes of use involve one or more of the factors in the next slideSpectrum management strategy -Ofcom’s approach to and priorities for spectrum management over the next ten years- 2 October 2013
39 Changes to international agreements Clearance and mitigation of co-existence challengesImplications for competition in relevant marketsSpectrum management strategy -Ofcom’s approach to and priorities for spectrum management over the next ten years- 2 October 2013
40 ConclusionThere are a large number of policy options for a country to select from when migrating to a more technology-focused, market-based approach to spectrum management.Approaches such as auctions, administrative incentive pricing, spectrum trading, and dedicating more frequencies for license-exempt use represent different levels of spectrum liberalization countries can choose from.The experience of the pioneering regulators such as Ofcom appears to suggest that the gradual introduction of a mix of technology focused and market based approaches across different spectrum bands would be the best overall approach
41 Thank you for your attention Any questionsDr. Mina DashtiChairman of WG on Spectrum