spectrum: a scarce resource chris woolford director, spectrum and international policy 2 december...
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Spectrum: a scarce resource
Chris WoolfordDirector, Spectrum and International Policy
2 December 2008
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Spectrum’s value to the UK economy
Spectrum is a finite and valuable natural resource. It is the essential input for all forms of wireless communication.
Business activity that is largely dependent on spectrum
contributes around £40bn (over 3%) annually to UK GDP
Estimated net benefits to the UK economy (£bn)*
0
10
20
30
40
50
2000 2002 2005/6
+59% in real terms
*estimate of consumer + producer surplusSource: Europe Economics, 2006
3
Wide range of different uses of the radio spectrum
Radio
Businessradio
TV (terrestrial & satellite)
Emergency services
Aeronautical and maritime
Defence & security
Cellular (2G, 3G)
Satellites
Astronomy
4
Take up of new wireless services
Approximate penetration rate of selected spectrum dependent technologies
0%
20%
40%
60%
80%
100%
1992 1994 1996 1998 2000 2002 2004 2006
Pen
etr
ati
on
(ap
pro
x)
Mobile Phones (per person) Analogue TV DTV
WLan Hotspots (per thou.) DAB radios (per person) Digital Satellite
5
6
There are three ways to manage spectrum
Command & control All decisions made by
the regulator
Market mechanisms Decisions made in the
market
Licence-exemption Regulator sets rules,
but users not licensed
Approach that has historically been adopted
for over 90% of the spectrum
Approach advocated by Cave Reviews in UK. Trading, liberalisation,
technology & use neutrality
Approach currently adopted for 9% of
spectrum. Some argue for radical increase
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Three ways - continued
Command & control Market mechanisms Licence-exemption
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The effects of regulation are huge
Numerous studies have shown that existing spectrum policy has very large effects:
– An assessment of FCC spectrum management suggests costs to the US economy of $77 billion per annum (lack of spectrum for mobile, price effects) (Ellig, 2005)
– Other studies show delay in innovation in US in 1980s reduced consumer welfare by $34 billion (Hausman, 2002)
– Consumer benefits of UK 3G auction estimated at £40 billion NPV (Hazlett, Munoz, 2004)
Excessive regulation and intervention, often poorly justified. Lack of flexibility, leading to extra scarcity, adverse effects on competition, innovation, and rigid industry structures
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Ofcom’s 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
Spectrum Framework Review, June 2005
10
Major priorities for Ofcom
releasing more spectrum, to allow new services to develop
- Digital Dividend, 2.6 GHz
- public sector spectrum eg 3.4-3.6 GHz, 2.7-3.1 GHz
liberalisation and trading of spectrum now in use
- 2G bands
licence exemption
- Cognitive technologies
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WiMAX in the UK
Two operators using spectrum at 3.4 – 3.6 GHz
2.6 GHz award scheduled for winter 2008/9
• Currently subject to litigation
• Technology neutral award will allow flexibility between FDD and TDD
WiFi in the UK
Thousands of hotspots in the UK in range of locations (airports, cafes, hotels…)
Number of companies that provide service
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Conclusions
• Spectrum is a scarce resource– Huge importance to the economy– Increasing demand from ever greater range of services which are dependent on
spectrum– Demand focused on certain spectrum bands which are very scarce
• Regulators should not attempt to pick winning technologies– Increasingly impossible in dynamic electronic communication markets– Costs of getting such decisions wrong are huge
• Technology and service neutral policies combined with market mechanisms will promote innovation and competition– Gives spectrum users maximum flexibility to deliver the services most wanted by
consumers– Spectrum trading will get spectrum into the hands of the user that will make best use
of it – Promotes technology development, the provision of new services and maximises
benefits for citizens and consumers