mec1249 Martin Cave Warwick Business School, UK Universidad Francisco Marroquin Guatemala Telecommunications Workshop June ‘Spectrum Reform An Overview’

2 mec The familiar tool-kit Command and control (possibly supplemented by administrative pricing) Tradability and liberalisation Various types of commons (with different level of regulation)

3 mec The liberaliser’s pitch -Spectrum gravitates to its most profitable and productive use -Reduces barriers to entry in spectrum –using services -Permits speedier innovation without lengthy allocation and assignment process (Problem 1: this will take time Problem 2: you can’t (shouldn’t) promise specific benefits, as you don’t know where they will be found Problem 3: studies showing estimated aggregate benefits are vulnerable to criticism, but large numbers have magical powers in debate)

4 mec Playing the technology card New technologies enable services to be provided by intelligent dynamic ‘hopping’ over a range of frequencies, thus increasing utilisation:* -This may create role for intermediaries, selling access rights, not spectrum capacity -It could reduce the market clearing price to zero, facilitating a commons * See

5 mec Confounding the sceptics/overcoming the vested interests Their criticisms focus on: -Pressure on interference (greater economic incentives to economise, switch from equipment licensing to more broadly defined property rights) -Hoarding, speculation and abuse of market power -Fragmentation -Conflicts with international harmonisation -Windfall gains (Emphasis on difficulties is often accompanied by claims that the existing allocation is close to perfection, and improvements to ITU processes will soon solve any outstanding problems)

6 mec How ambitious should the liberalisation be? -the size of the ‘reserved sector’ -the timetable -the fungibility of property rights -the tenure of the licensee -means of ‘compulsory purchase’ -treatment of ‘on the shelf’ spectrum

7 mec Liberalisation and the Commons Currently 5-6% of spectrum in many countries is a commons- with freedom of entry, usually subject to restrictions on power etc. The success of Wi-Fi has shown the potential of ‘no permission required’ spectrum but also raised the question of QoS guarantees. New ‘commons’ such as UWB are now under consideration. Commons are difficult to reverse and there is a case for caution, combined with encouragement of ‘wholesalers’ or ‘band managers’ to facilitate access. (Commons advocates are often an unwitting stalking horse for the do-nothing brigade – ‘wait a few years and the problems will vanish’)

8 mec A success story (so far- in conception): the UK Spectrum Strategy Objectives of the 2003 Communications Act include efficient use of spectrum and trading Management function assigned to independent agency - Ofcom Government’s reserve power of direction limited Ofcom has already produced a strategy, an implementation plan and trading procedures.

9 mec Components of the Strategy - Changing the balance (%) C&CMarketCommons /96 0/0 4/ /21 74/69 4/10 (former figure below 3GHz, latter figure 3-60 GHz) -Facilitating change of use: from equipment licensing to policing of boundary emissions -Releasing spectrum off the shelf

1010 mec Co-ordinating public and private sector use On-going study for UK Treasury Need to sharpen, deepen and cascade pricing incentives in the public sector (higher prices for spectrum, ensuring prices influence investment – eg. military procurement decisions) Development of sharing technologies (eg. radar and communications); satisfying public sector concerns about pre-emption Creating combined high-level public/private institutions to challenge current or new public sector assignments.

11 mec However, the pace of reform elsewhere in Europe is slow -entrenched bureaucracy -reliance on ITU -powerful public sector users -no Commission spectrum powers -lack of demonstrated success among liberalisers.