1. Slide 1 31 Jul 09 ADMINISTERED INCENTIVE PRICING UK Update Andy Knill Head Surveillance and Spectrum Management

2. Slide 2 31 Jul 09 Background 2005 – Chancellor of the Exchequer Independent Audit of Public Sector Spectrum – Cave Report. Recommendation that use of market mechanisms to deliver increased spectrum efficiency should be considered where appropriate. Working Groups set up to progress Governments Action Plan to progress recommendations where feasible. 2008 Ofcom publish consultation proposing the introduction of AIP for Aeronautical and Maritime Spectrum.

3. Slide 3 31 Jul 09 Current Status Since consultation closed in Oct 08, Ofcom have been reviewing responses. Recognition that there are still significant issues to be resolved in respect of 2.7-3.1GHz. Ofcom published a consultation on aeronautical and maritime spectrum management excluding VHF Comms 13 Aug. Ofcom have focused on VHF for initial application of AIP. Helios has conducted studies into VHF pricing based on Business Radio Model which form basis of revised Ofcom proposals. Ofcom intend publishing next consultation on aeronautical spectrum pricing Dec 09 12 week consultation period.

4. Slide 4 31 Jul 09 VHF AIP Proposals Information based on what has been presented at Ofcom/DfT/CAA meetings so subject to confirmation in final consultation document. AIP for VHF to be introduced in 2010 but charges phased over 3-5 years. Tiered structure within price range of £75-£9900 per frequency (currently £25-£250) based on classes of service. Use of Business Radio model may introduce factors such as population density and congestion into price model. Picing may include differentials to reflect 8.33kHz implementation.

5. Slide 5 31 Jul 09 Illustrative Costs En-Route ANSP currently £1.2M. Airports: Large International currently £3000 will rise to >£27000. Regional Airport currently £32000. Small airport/Busjet currently £40000. GA airfield currently £150 will rise to >£2000. Across the range of airfields this could lead to a price increase per movement of between 15p – £2.40 (approx).

6. Slide 6 31 Jul 09 AIP Consultation Consultation will continue to assert that the proposed pricing structure will provide an important incentive to manage this valuable asset to the advantage of all citizens and consumers. Pricing based per licence/assignment not per MHz. From the illustrative pricing examples quoted, there are perceived anomalies between airports due to the individual nature of their operation, airspace arrangements and facilities.

7. Slide 7 31 Jul 09 Initial Issues Inability of stakeholders to change behaviours due to safety requirements, operational needs and international obligations. Potential for unintended consequences on safety e.g GA community and voluntary use of VHF. Economic impact on the industry in an extremely difficult and challenging climate. Inappropriate use of Business Radio Model. Per licence/assignment charge means the more efficient we are, the more the income to Treasury increases. Although price impact per movement/passenger is low, this is only initial phase for what is a small % of aeronautical spectrum – cumulative impact is likely to be much more significant.

8. Slide 8 31 Jul 09 Way Forward Once VHF consultation published we will advise all interested stakeholders. Ofcom will be holding workshops to discuss issues. Encourage all parties to respond in their own right