DocumentNumber: RL 6/172
Organisation: Hooper Communications
Address: 4 Western Road Fortis Green
Town: London
County: London
PostCode: N2 9HX
Author: Mr R Hooper
Source: Consultative Document
Date: 17 July 1994
HOOPER COMMUNICATIONS
17 July 1994
Mr Green
RE:- The Future Management of the Radio Spectrum
Submission to the Radiocommunications Agency on the Consultative document
The future management of the radio spectrum
by Richard Hooper
Managing Partner, Hooper Communications
These are the personal views of the author and do not necessarily reflect those of MAI plc, ABFL
Marketing Management and GA Pindar & Son on whose Boards he serves as a non-executive director.
Introduction and summary
These comments will be very brief for one good reason. Chapter 8 (A possible outcome) would seem to be
an eminently sensible basis on which to proceed. It is inventive and flexible and addresses the key issues
raised in the body of the Consultative document.
I have only one objection in the body of the paper, concerning the auctions ushered in by the Broadcasting
Act 1990. It seems
unreasonable public policy for broadcasters' spectrum to be auctioned (which is what has happened) when
telecommunications operators' spectrum is not. The telecommunications market in the UK is some four
times as big as the broadcasting market. Thus broadcasters seem to be unfairly disadvantaged at a time
when convergence between media and telecommunications is happening.
4.26 Past performance of RA
In recent times the Radiocommunications Agency has become much more open and transparent in its
dealings with current and
potential users of spectrum. Historically, spectrum discussions and decisions were hidden behind closed
doors. Those on the
outside feared that dominant spectrum users, eg Post Office Telecommunications/BT and the BBC for
example, had an inside track. This view has now changed and the Agency appears to handle current players
and new entrants with fairness and common sense.
5.10 Standing independent advisory committee
It is doubtful that this could be representative of sufficient
interests, and if it were, the conflicts of interest would
abound. The Spectrum Review Committees would seem to have been a better way of meeting the same
goals.
However, if Chapter 8 is adopted, and the RA becomes more of a
regulator and less of an executive agency, HMG should consider
adopting the Radio Authority/ITC model of regulation rather than the Oftel model. I have doubts as to
whether a single individual should be vested with as much power as is the case with Oftel (this in no way
reflects on the specific individuals, Carsberg and Cruickshank, who have done and do an excellent job). I
would prefer the model of the Radio Authority where a cross-section of seven Members including a strong
Chairman, rotating every five years, ensures broadly based and reasonable views.
5.27 Open access to RA's databases
With the exception of Defence/Security users of spectrum, I can see no reason for not allowing more open
access. Spectrum is in the public domain, licensed out to particular operators for specific terms. Its use
should be publicly scrutinised. More open access is likely to "frighten" users into making more efficient use
of spectrum and stop any tendencies towards spectrum hoarding. This is highly consistent with the relevant
recommendations in this Consultative document.
6.27 Charging for spectrum
Charging for spectrum should be introduced (as long as it does not make UK firms uncompetitive with EU
firms not paying for spectrum). The recommendation in 6.9 is especially important. Public sector users,
including the major spectrum user MOD, should be charged like non-Government users to stop spectrum
hoarding and increase spectrum efficiency. Scarce spectrum should not be used for applications which
could be accommodated by cable networks under the ground. Charging, using a combination of the methods
outlined in Chapter 6, will help to ensure that fixed applications and wireless applications make appropriate
choices. Television has historically been a very fixed application whereas radio broadcasting has been
usefully mobile, meeting the needs of commuters and car travellers. If, with new technology (flat screens,
PDAs eta), mobile applications of television broadcasting do not eventuate, then its very greedy use of
spectrum might have to be questioned in the light of genuinely mobile applications seeking spectrum space.
7.13 Changing the legal basis
It would seem to be reasonable to permit a secondary market in radio licences during the term of the
licence, especially where there had been any use of auctions. Under administrative pricing, the case for a
secondary market would appear less strong and could cause political problems if licences started changing
hands for prices well in excess of the original administrative price. However, given that spectrum is a scarce
resource, radio licences should be for a fixed term, should be revoked if misuse occurs, and should at the
end of the fixed term not necessarily be returned to the previous licensee. In this sense, spectrum is not like
property. Or rather it can be understood as leasehold rather than freehold. All users of spectrum will
therefore remain under pressure to use it efficiently and properly, whilst they have "ownership" of it.
Government should not pay much heed to
incumbent users of spectrum arguing against new spectrum entrants on the grounds that the market will not
stand additional competition. As consolidation continues to happen at the top of the telecommunications,
media and computing industries, Government can use spectrum decisions to encourage new entrants "at the
bottom".
7.27 Privatising spectrum management
There is a strong case for introducing SMOs to improve spectrum
management at the assignment level, leaving the RA with the task of spectrum allocation, with the
wholesaling and regulatory/policing role. In today's complex information markets, the retailing task includes
sophisticated value added services none of this is proper to the role of the RA even if it were staffed to do
so. Such a split of wholesaling and retailing would lead to more innovative uses of the spectrum.
Retailers/value added resellers can understand the customer far better than the RA. Most would
acknowledge that the success of mobile telephony was partly caused by the decision to split retail and
wholesale in the first decade.
7.38 Enforcement
The RA should remain the policeman of the new structure of spectrum management. I do not think that this
role is appropriate to SMOs. If a Microsoft value added reseller's customer is found to be pirating software,
that is a problem for Microsoft and its lawyers, not the VAR.
7.58 Auctions
I do take strong issue with the statements in para 7.42 that the
auctions in the Broadcasting Act 1990 for ITV and national
independent radio were for the franchises, not the spectrum. This is disingenuous. The franchises are
meaningless without the
specified frequencies associated with those frequencies.
The Broadcasting Act 1990 ushered in the era of spectrum auctions. The public policy failure concerns
fairness. It is surely unfair that Vodafone, for example, should pay very little for its spectrum, yet be
allowed to make such handsome profits (margins of 45%), whilst tv and radio stations are paying some £4
billions gross to the Treasury over and above corporation tax during the next decade. Why should the
telecommunications industry pay virtually nothing for spectrum whilst the media industry next door is
highly taxed? At a time when Government is urging UK media players to become global players, it is
curious indeed.
Auctions should be tried out, but building on the valuable lessons from the Antipodes. Above all, auctions
should be fair to all sectors. If the Government wants broadcasters to pay an extra tax, then why not all
commercial users of spectrum.
Chapter 8 - A possible outcome
This would seem to be eminently sensible. It is a flexible plan which is not dogmatic. It clarifies the core
business of the RA (regulatory) and allows the private sector to take over many of the day to day
management functions. It uses price to drive efficiency, via a combination of administrative pricing and
auctions. It allows a sensible secondary market to emerge. It learns from other countries
I do however commend the Radio Authority rather than Oftel model of regulatory structure (see 5.10
above).