Licence Fees RCC Working Group Meeting 17 October 2003

Pricing as Spectrum Management Tool Creates incentives for efficient use of spectrum –Minimise spectrum use –Move to less congested bands –Cancel licences no longer needed

Objectives Set out in Radiocommunication Act 1992 The system of charging for use of spectrum be: –Efficient –Equitable –Transparent

Use of Formula Provides a consistent basis for setting licence taxes –Predictable –Equitable –Transparent

Components of Formula Spectrum Dimension –Spectrum Location (Si) What frequency range is being used –Bandwidth (Bi) How much spectrum is being used Geographic Dimension –Geographic Location (Gi) Where is the transmitter located –Coverage (Ai) Size of the area covered

Formula Tax = K x (Si, Gi) x Bi x Ai Where K is a constant. –Converts relative fee levels between different licences into a dollar figure I will describe each component in turn

Constant This is the same for each licence. –It is adjusted by the CPI each year Supplemented by adjustment factors –Land mobile licence fees adjusted upwards –Fixed licence fees adjusted downwards

Geographic Location High Density –Sydney, Melbourne, Brisbane Medium Density –Adelaide, Perth, Newcastle Low Density –Elsewhere Australia Wide –Device that roams anywhere in Australia

Fee Areas

Frequency Ranges 30 MHz and below 30 to 70 MHz 70 to 960 MHz 960 to 2,690 MHz 2.69 to 5.0 GHz 5.0 to 8.5 GHz 8.5 to 31.3 GHz Above 31.3 GHz

Location Weights Determine the relative fee level between licences in different spectrum locations and geographic locations –Based on the density of spectrum use in 1995 (the number of services per km 2 )

Location Weights

Bandwidth Fees are based on the bandwidth of a service –the bandwidth of the channel occupied by the service Bandwidth ranges are used to keep the enable fees to be presented in a look-up table Fee formula uses the midpoint of the bandwidth range

Bandwidth Ranges

Coverage Intended to provide a lower tax for services that deny spectrum to other users over only a small area Discount factor of.1 if –Transmitter power is one watt or less; or –Service is provided only within premises to which the licence applies Discount does not apply to fixed services

Discussion of Issues Market Information Bandwidth Geographic Location Spectrum Location Flexibility Coverage

Market Information PC suggested that more information be given to licensees about the formula –All elements required for the calculation of fees be given to licensees ACA would like fees to be as transparent as possible –Acknowledge we don’t always explain well

Market Information ACA will review how fees are presented Welcome any comments

Bandwidth Formula ensures licensees pay in proportion to the bandwidth they use However –Bandwidth ranges simplify tables but distorts proportionality –All bandwidths above 200 MHz are charged the same fee

Bandwidth Proportionality

Bandwidth Options for Change Finer dissection of bands –Better fit with bandwidth actually used Fees are exactly proportional to the channel width used –Exact fit of fees with bandwidth used

Geographic Location Where high demand –fees give an incentive minimise spectrum use change spectrum band In rural areas want to encourage use of spectrum. –lower fee than in the city

Geographic Options Greater number of areas in fee formula –Enables fees to be tailored more precisely to the level of demand in each area –Reduce the variation in fees when moving from one area to another Specifically could split low density areas –Fees in very remote areas lower than in areas of higher congestion

What remote area may look like

Point to Point < 1.5 GHz

Microwave Point to Point

Spectrum Location Gives an incentive to move to less congested bands However –Spectrum location ranges are very broad –Contain an number of bands where demand differs greatly –PC argued bands next to each other should have similar fees

PC Recommendation

Spectrum Location

Flexibility Weights give relativities between different spectrum and geographic locations Weights have not altered since 1995 –Demand patterns have changed –New uses in 1-5 GHz range Stability can be important for licensees’ business plans –Desirable to review weights regularly to keep relativities current

Relativities

Coverage Allows for the size of the geographic area covered by a service –Encourages greater efficiency –Rewards services that allow greater re-use Implemented as a power function Of all small coverage licences –78% are land mobile –14% are narrowcasting –7% are radiodetermination

Limitations of Coverage Factor Doesn’t capture all low powered applications –1 watt is not appropriate for all types of service Doesn’t give incentive for fixed services to allow greater re-use

Coverage Options Further study to identify –Most appropriate power level for discount for small area applications For each type of service –Extension to fixed services Studies by ACA engineers indicate that antenna quality id a major factor in the amount of re-use by microwave fixed services