“Implementing Spectrum Trading” the recent consultation Presentation to SMAG Open Forum December 2002 Geoff Chapman Radiocommunications Agency

Purpose Review background to spectrum trading Review areas raised in “Implementing Spectrum Trading” to refresh your minds with important points for discussion

Background to spectrum trading: Tools for managing spectrum Award and pricing of licences (including by auction, comparative selection, first come first served, incentive pricing, licence exemption) Interface requirements linked to appropriate standards Information on spectrum use and strategy AND potentially a new tool: spectrum trading

Purpose of the consultation Set out what spectrum trading could be and could do, in context of trading generally and experience of spectrum trading overseas Set out wide range of options for UK spectrum trading Sought views from all sectors of spectrum use One purpose to cause thought and preparation on a change of mindset required by some radio spectrum users: obtaining spectrum in market(s) is different from having a regulator as the single source

Vision for spectrum trading –To develop and implement spectrum trading to allow spectrum to be worked to maximum benefit for the UK economy, including consumers, with as many decisions as possible made by the market, subject to the minimum level of regulation need to ensure: a) promotion of competition b) sufficient spectrum set aside outside market mechanisms for public safety and defence c) sufficient spectrum set aside for achievement of Government public policy objectives (eg for public service television and sound broadcasting) d) compliance with international obligations e) prevention of harmful interference

Spectrum trading What is it? Why talk about it now? What are the benefits of spectrum trading? What are the safeguards and problems?

What is spectrum trading? 1 Facility to allow some licences to be transferred directly from one user to another within a regulatory framework with safeguards Flexibility to allow buyer and seller to best match their needs More than “transfer” as a consequence of trading of whole companies

What is spectrum trading? 2 Can be sale or lease: for short duration or long Can be simple change of legal identity of owner (mode 1), or can add scope for reconfiguration (mode 2) or can add scope for change of use (mode 3)

Why talk about spectrum trading now? 1 Speed of change: technical and services to customers Increasing interest in putting decisions about spectrum use nearer to users Demand for spectrum exceeds supply in some areas and the regulator needs a mechanism able to respond quickly to changing demand Government Response to Independent Review and the Communications Bill

Why talk about spectrum trading now? 2 EU Electronic Communication Directives come into force July 2003 and through the Framework Directive and Authorisation Directive will permit spectrum trading in EU countries, with important safeguards

What are the benefits of spectrum trading? Allows spectrum to move quickly from lower value to higher value users and services. Discourages non-use. All facilitated through decisions taken by market participants. Should lower transaction costs of accessing spectrum, increase competition and facilitate innovative products and services At each trade buyer and seller gain, otherwise no trade would take place. To trade is voluntary.

What are the safeguards and problems? Not all spectrum is suitable for trading eg essential public safety All trade in all markets takes place within a regulatory regime to achieve benefits and avoid problems eg anti-competitive outcomes Important requirements in Framework Directive

Framework Directive (from Article 9) Member States shall ensure … intention to transfer rights … is notified Member States shall ensure … transfer takes place in accordance with procedures laid down … and is made public NRA’s shall ensure that competition is not distorted … Where radio frequency use has been harmonised … transfer shall not result in change of use...

Areas raised in consultation Where to start Defining tradable entities Market mechanisms Information Competition

Next steps Responses discussed in following presentation Detailed analysis of responses and consultation within Government and with Ofcom partners Listening to views expressed today Communications Bill - makes provision for Ofcom regulations on trading Implementation of Government Response to Independent Review