Research
Brief
Development of a cross-industry business case and
spectrum valuation for wireless telecommunication
T911 - September 2010
Background
The Department for Transport (DfT) Rail Technical Strategy sets
out a vision of intelligent trains operating on intelligent
infrastructure. In support of this there is an expectation that there
will be major development and greater application of existing and
future communication and positioning systems.
When this research was commissioned Ofcom was planning to
auction parcels of the spectrum around 900MHz, adjacent to the
GSM-R band and of benefit to the rail industry. Results from the
recent RSSB-managed research T795 Proof of concept trial
demonstrating 900 MHz wireless Internet protocol connectivity
determined the technical potential to build upon the current GSMR network to utilise these frequency bands to facilitate the
introduction of broadband IP-based communications between
trains and wider rail industry systems, but did not conduct any
economic evaluation.
This research project therefore set out to identify the value of this
additional spectrum to the rail industry in support of future
decisions on bidding for the frequency bands. Owing to their
commercial nature, the results of the cross-industry business
case and spectrum valuation are not publicly available; but by
conducting the research the rail industry was well positioned to
respond to the Ofcom 2009 consultation on the proposed
auctioning of the spectrum.
Additionally, the research has produced a number of observations
and lessons learnt that are detailed below and will be taken
forward by the industry as best practice guidance for future crossindustry opportunities and business case developments.
Aims
RSSB R&D Programme
Block 2 Angel Square
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On behalf of the Future Communications and Positioning
Systems Advisory Group (FC&PS AG), a sub-group of the
Vehicle/Train Control and Communications System Interface
Committee (VTC&C SIC), and the Technical Strategy Advisory
Group (TSAG), the aim of this research project was to enable
informed decisions to be taken by the DfT, Network Rail (NR) and
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Development of a cross-industry business case and spectrum valuation for wireless
telecommunication
T911 - September 2010
Great Britain's rail industry in response to the forthcoming Ofcom
auction.
In addressing this aim, the FC&PS AG identified a series of
objectives for this research. These were:
 Preparation of a cross-industry business case that would
examine the opportunity for a mobile broadband data
service for operational applications.
 Provide a valuation for the GB rail industry of a spectrum
band planned to be offered to the market by Ofcom.
 Enable an informed decision to be taken by the DfT, NR,
and Great Britain's rail industry in considering a potential
bid.
 Development and dissemination of best practice guidance
for future cross-industry opportunities.
Method
The approach to addressing the aims and objectives of this
research was to investigate the costs and benefits of providing
mobile broadband data services to support operational
applications, followed by the development of a business case to
enable the rail industry to ascribe a potential value of this
particular parcel of spectrum.
Potential applications that could use a mobile broadband
capability were identified from both concurrent RSSB-managed
research T809 Development of a communications and positioning
technology roadmap and action plan for GB railways and T817
Assessing the bandwidth demand for future communications
needs, and from a series of interviews with key industry
stakeholders including Network Rail, passenger and freight
operating companies (TOCs and FOCs), the ROSCOs, and the
rolling stock manufacturers. This demand analysis helped to
identify a range of possible incremental benefits to the industry
from a mobile broadband service. The benefits were then
quantified based on stakeholder input at a workshop, discussion
with industry economists, and a review of rail industry reference
material. The benefits were set against the forecast costs of
implementing and running the service, to create the business
case. This included tasks such as assessing coverage analysis
and alternatives sources for bandwidth/services.
A range of potential values to the rail industry of the additional
900MHz spectrum bands was then prepared by comparing the
business case valuation with the UK market valuations of similar
spectrum parcels.
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Figure 1 - An overview of the business model
Findings
Business case and spectrum valuation
The research has recognised the differing economic incentives on
major segments of the rail industry that lead to the potential for
opposing positions to be adopted on key topics.
The major challenge of the business case was in developing a
cost-benefit analysis that represented the system level of the rail
industry, and in particular quantifying benefits. Benefits were
eventually quantified under four main areas comprising revenue
increase, operating cost reduction, time (delay) reduction, and
safety increase, but the availability of supporting information was
variable.
The research has concluded that preparation of business cases
at any level within the industry, but particularly at the crossindustry level would be greatly assisted by co-ordinated
documentation on the wide range of benefit measures that can be
applied to opportunities. Some of the measures already exist in
various parts of the industry but future cross-industry cases would
be greatly helped if potential benefits that the rail industry and its
constituents deliver were centrally defined, documented, and
approaches to their measurement specified. Such co-ordination
would have to work within the boundaries of confidentiality of
some operators' data.
In the same manner as for 'benefits', the research has concluded
that there would be value in creating a body of understanding of
'applications' and system developments across the industry, and
the impact this has in terms of staffing, system, and process
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Development of a cross-industry business case and spectrum valuation for wireless
telecommunication
T911 - September 2010
requirements, equipment requirements, and realistic timescales
to deliver development projects.
In delivering this research it was also confirmed that return on
investment expectations also differ across the industry, because
of the very different positions of the various parties. While many
project opportunities will be unique, a set of common measures
relating to hurdle rates, discount rates, and other financial
parameters, which were agreed at an industry level as forming the
basis for initial evaluation of an opportunity, would assist in
standardising opportunity appraisal. Business cases prepared at
the rail industry level must therefore recognise the complexity of
the industry and demonstrate that benefit for the whole industry
comes without possible dis-benefit for a particular segment, or the
resultant benefit being skewed to one particular segment.
Lessons learnt
Commissioning of this project recognised the cross-industry
nature of the business case development, spectrum valuation,
and associated commercial sensitivities. One of its objectives
was to provide high-level observations and key lessons of good
practice learnt from the delivery of the main aspects of the
research, in relation to the preparation of future cross-industry
business cases that may encompass segments or all of the rail
industry in Great Britain.
Good practice and lessons learnt from the research relate to
dealing with the GB rail industry structure and its conflicting
incentives, identification of applications and opportunities,
measurement and quantification of benefits arising, identification
of costs, the subjective nature of valuation, and finally project coordination and leadership.
The recommendations provide approaches to overcome some of
the issues that were faced in this project, and represent key
starting points that should be considered in the commencement
of future cross-industry projects. The six key recommendations,
agreed by FC&PS AG, VTC&C SIC, and TSAG were:
1 Voice of the railway
A 'Project Champion' should be drawn from a leading
organisation for focussed, time-limited opportunities;
otherwise RSSB's current facilitating remit provides a good
starting point.
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2 Benefit measures
Co-ordinated and centralised documentation should be
prepared on the whole range of benefits, their definition,
metrics, and approaches to measurement, taking into
account intra-industry commercial confidentiality.
3 Application development
Create a body of understanding of 'applications' and system
developments across the rail industry, their impact on
staffing, system and process requirements, equipment
requirements, and realistic timescales to deliver
development projects.
4 Commercial awareness
Communications plays an increasingly vital role in rail
operations. Co-ordinate across industry the commercial and
non-technical aspects of networks and communications
systems to be used for operational purposes, and in future
for passenger services.
5 Opportunity valuation
Although some project opportunities will be unique, a set of
common financial measures and parameters, agreed as the
basis for initial evaluation of an opportunity, will standardise
and expedite opportunity appraisal.
6 Project co-ordination
Develop a cross-industry 'register' of key positions and job
descriptions to facilitate timely identification of contributing
skills and key staff.
Deliverables
The main deliverables from this research project were:
1 Business case model and spectrum valuation - held by
RSSB and issued to NR and DfT only at present.
Consideration will be given to requests from RSSB
members to support their own operations as appropriate.
2 A set of 'best practices' derived from the spectrum business
case that can be generically used to build business cases to
support other cross-industry investments. This is in the form
of a series of slides and has been published alongside this
research brief.
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Development of a cross-industry business case and spectrum valuation for wireless
telecommunication
T911 - September 2010
Next Steps
The FC&PS AG, VTC&C SIC, and TSAG have all accepted that
the main objectives of the research have been addressed, ie the
successful production of the business case and spectrum
valuation and that the final decision on whether to bid during the
auction has not yet been made as the final dates and nature of the
Ofcom auction have not been publicised. There are no plans to
regularly update this business case.
The FC&PS AG has been working with RSSB to develop a
programme of future work on operational communications for
consideration by TSAG. It is anticipated that some of this work
may involve further research that will utilise the business case
developed here.
RSSB has agreed to implement the lessons learnt to any of its
future research where a cross-industry business case is
developed. Similarly, the members of the project steering group,
drawn from the FC&PS AG, will retain and promote the best
practice highlighted in this research. On a more formal basis, the
lessons learnt were also shared with TSAG in support of its wider
interest in 'Enabling Innovation' and the other system interface
committee chairs. The VTC&C SIC will also review the benefit
and extent of any further dissemination and communication by the
SIC and FC&PS AG to key cross-industry project sponsors.
The T795 Proof of concept trial demonstrating 900 MHz wireless
Internet protocol connectivity research page on the RSSB website
includes a note that the technical reports would be published
following completion of the T911 research. Currently it is not
appropriate to publish these technical reports. This will be
reviewed at a future date.
Contact
For more information please contact:
Head of Engineering Research
R&D Programme
RSSB
research@rssb.co.uk
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