1. Spectrum Reform: The theory, practice, politics and problems Professor William Webb November 2008

2. 1 Spectrum reform is a journey…. In the beginning The Radiocommunications Agency Ofcom and the Spectrum Framework Review Spectrum engineering – SURs and disruptive technologies Lessons learnt and implications for others Next steps

3. 2 In the beginning came Coase The Coase Theorem [1960] suggests that " the efficient solution will be achieved independently of who is assigned the ownership rights, so long as someone is assigned those rights"

4. 3 The theory stage New Zealand and Australia try new ideas The US assignment journey The UK moves centre stage More history From a paper by Phillipa Marks and Kiyotaka Yuguchi

5. 4 The US seeks a new way of awarding licences

6. 5 Spectrum reform is a journey…. In the beginning The Radiocommunications Agency Ofcom and the Spectrum Framework Review Spectrum engineering – SURs and disruptive technologies Lessons learnt and implications for others Next steps

7. 6 A seminal work was the “Economic Value of Spectrum” (UK - 1995)

8. 7 This opened the way for the introduction of pricing (Smith-NERA 1996)

9. 8 Next the Government commissioned the Cave Review Unsurprisingly for an economist, Cave argued that market mechanisms should be applied to spectrum Where not possible, proxy market mechanisms such as pricing should be employed Recommended trading, liberalisation and pricing Provided increased legitimacy for the introduction of market forces

10. 9 Spectrum reform is a journey…. In the beginning The Radiocommunications Agency Ofcom and the Spectrum Framework Review Spectrum engineering – SURs and disruptive technologies Lessons learnt and implications for others Next steps

11. 10 The formation of Ofcom was a key breakthrough At arms length from Government Around 80% of the senior management had never previously worked for a regulator A natural remit to conduct “blank sheet of paper” review

12. 11 In 2004 we produced the Spectrum Framework Review (SFR) The Given: Fulfil our statutory duties The Ambition: Make the UK the leading country for wireless investment & innovation Ensure optimal use of the spectrum Take account of the needs of all spectrum users Maximise economic benefits of the spectrum A better signposted approach to spectrum, giving more certainty in the market A flexible approach to spectrum, providing opportunity for innovation A competitive communications market, providing opportunity for returns on investment

13. 12 The SFR said that there are three possible ways to manage spectrum Command & Control Zone Ofcom manages it Market Forces Zone Companies manage it Licence-exempt Zone Nobody manages it Approach that was adopted for about 94% of the spectrum Approach advocated by Cave and implemented by trading and liberalisation Approach currently adopted for 6% of spectrum, some argue for radical increase We need to decide the right balance between the Zones Zones are currently demarcated by frequency. However, there are also dimensions of power and time

14. 13 The Command and Control Zone Still needed in some areas –Spectrum controlled internationally, eg HF, satellite –Spectrum where international roaming is essential, eg maritime, aeronautical –Uses we wish to preserve, eg radio astronomy The status quo –The regulator decides on how much spectrum is needed for each application and who gets it. –No variations are allowed –The approach followed for the last 100 years But no longer the preferred option –The regulator cannot know as much as the market and so cannot make decisions as well as the market –The Cave Report strongly recommended moving away from this model 200494%21%2010

15. 14 The Market Forces Zone Allocation (what the best use is for the spectrum) Assignment (who the best user is of the spectrum) Existing spectrum: Trading between users “New” spectrum: Auctions Liberalisation: Technology-neutral spectrum usage rights (SURs) to allow users to make the change without consulting Ofcom 20040%72%2010

16. 15 The Licence-exempt Zone Key area for innovation but we do not need much more More detailed rules set out in the Licence Exempt Framework Review 20046%7%2010

17. 16 Spectrum reform is a journey…. In the beginning The Radiocommunications Agency Ofcom and the Spectrum Framework Review Spectrum engineering – SURs and disruptive technologies Lessons learnt and implications for others Next steps

18. 17 A new form of licensing is needed – it can either be focussed around transmitters or receivers Transmitters Restrictions on the in-band and out-of- band powers that can be emitted Simple and flexible But does not control interference Receivers Restrictions on the amount of interference that can be caused to others More complicated and less flexible But provides a high level of protection and certainty for neighbours

19. 18 SURs can be considered as a set of core components and choices made for each band CORE CHOICES A system for defining technical conditions in licences based directly on the interference caused PFD limits covering Geographical interference In band interference Out of band interference Verification Modelling OR Measurement Parameters 50% of locations OR 90% of location, etc Additional restrictions None OR Some (eg max EIRP) “The OOB PFD at any point up to a height H m above ground level should not exceed XdBW/m 2 /MHz at more than Z% of locations in any area A km 2”

20. 19 Our “spectrum commons” proposals fall into four areas Better use of spectrum Exemption at high frequenciesExemption of low-power transmitters Bands shared by a range of applications, with interference managed through power limits and polite protocols. Much of the spectrum above 40 GHz can be released for licence exempt use. All spectrum use can be made exempt for transmission power levels similar to the UWB limits. Role of light licensing Light licensing will evolve towards exception in time, but will maintain its role for the foreseeable future.

21. 20 Ultra Wideband The first step is to consider the economics This provided a rational basis on which to set the mask Then work with Europe to obtain widespread agreement

22. 21 Cognitive or white space access Economics are more difficult Hence, we will not mandate in spectrum owned by others But interleaved spectrum is different Application and implementation still unclear

23. 22 The Ofcom Spectrum Vision Spectrum should be free of technology, policy and usage constraints as far as possible It should be simple and transparent for licence holders to change the ownership and use of spectrum Rights of spectrum users should be clearly defined and users should feel comfortable that they will not be changed without good cause

24. 23 Spectrum reform is a journey…. In the beginning The Radiocommunications Agency Ofcom and the Spectrum Framework Review Spectrum engineering – SURs and disruptive technologies Lessons learnt and implications for others Next steps

25. 24 Since Ofcom’s formation in 2003… Multiple auctions held Two major auctions well in train SURs implemented UWB implemented Trading implemented across some licence classes Cave Audit completed and much downstream activity

26. 25 Key lessons Evidence-based analysis is very powerful Implementation is much more difficult than we anticipate We often have less autonomy than we thought Interrelationships are complex Specific problems can prevent or delay us delivering generic policies Current licence holders are risk averse and often prefer the status quo while the new entrants who will benefit most have a relatively weak voice

27. 26 “2G liberalisation” – our major cause for delay Inability to apply trading and technology neutrality to 2G spectrum has led to… –Can’t apply liberalisation to 3G –Delay in auctioning 2.5-2.7GHz due to legal action –Possible delays to “700MHz” depending on legal outcome –Around 2 years behind schedule (and growing…) Problem is one of competitive fairness –Desire to introduce more competition in the 2000 3G auction –Would not have occurred if 2G licences were technology neutral Will legal “gaming” be the key mechanism for fighting market-based regulation?

28. 27 Still too early to assess whether the new regime is better Consider the possibility of deploying a new service Obtain financial backing Acquire the spectrum Roll out the infrastructure Acquire subscribers 1235710 Timing (years) Trading was implemented in 2004 but only in a few areas – only now are we implementing trading and liberalisation more widely

29. 28 Other countries

30. 29 If I ran the FCC…

31. 30 Spectrum reform is a journey…. In the beginning The Radiocommunications Agency Ofcom and the Spectrum Framework Review Spectrum engineering – SURs and disruptive technologies Lessons learnt and implications for others Next steps

32. 31 Where next?