In the fixed line world the original ISDN-B definition of broadband was 144 Kbps; that is a bit rate or in other words the size (byte) over a period of one second of a video or audio stream download or upload. Modern broadband wireless access (BWA) networks and devices operate at bitrates that now run into Mbps and, under laboratory conditions, even Gbps.

Bit Rates and Frequencies

Although there is no direct relationship between bitrates and radio frequencies or Hertz (“wave cycles per second”) it is the case that higher frequencies with shorter wavelengths occupy broader bands of spectrum. So, for example, 1.8GHz is twice the spectrum of 900MHz. By allocating higher frequencies to services such as public land mobile networks (PLMN) there is additional spectrum available for more operators and therefore more competition in the market. Because they are broader and shorter, the higher frequencies, (above 1GHz) are well adapted for densely populated urban areas, but offer less coverage for wider suburban and rural areas. This can be an important commercial issue because it means that lower frequencies offer lower costs in terms of base stations, towers and backhaul coverage to operators who are looking at less densely populated markets. As a consequence in a spectrum auction mobile network operators (MNOs) may bid more for these lower band frequencies than for the higher ones, although historically the opposite has been true because MNOs first targeted urban markets. Ultimately, 10MHz, 15MHz or 20MHz of bandwidth is the same whatever the frequency; what really matters is the technical capacity of the network equipment and of the access devices operating at these frequencies. An example of this is the development of broadband satellite services for fast Internet access and HDTV.

Policy Aims

What are the aims of policy? This question has to be the first thing to consider from a regulator’s perspective when deciding the allocation and assignment of spectrum for broadband services. Different policy aims require different regulatory objectives. For example, if the policy aim is to stimulate service innovation, then the regulatory objective could be to increase the supply of unlicensed spectrum and/or to facilitate spectrum sharing. If the primary aim of policy is to ensure greater competition and consumer choice, then the regulatory objective will be to assign spectrum to new entrants and maybe to facilitate the entry of mobile virtual network operators (MVNO) – see Box 3.1.

A Mobile Network Operator (MNO) has market power by virtue of owning radio spectrum and a network. By contrast, a Mobile Virtual Network Operator (MVNO) is dependent upon an MNO for both to provide services such as voice, SMS and data to end-users. MVNOs do have full control over their branding, marketing, billing and customer care operations, and compete by providing flexible plans, tailored services, loyalty programs etc. With the advent of broadband and smartphones a new range of possibilities is opening up, including m-payment services and specialized apps and content for targeted markets.

Broadband has encouraged MNOs to shift from charging high wholesale prices to MVNOs to selling ‘buckets’ of bandwidth. In some cases they take a revenue share from MNVOs who create new markets, such as the MNVO in the US that has started a retail portal that sells almost any brand of smartphone. In other cases the MVNO is an affiliated company operating in an overseas market – see below for the example of the Philippines. Basically, broadband is giving MVNOs a new lease of life. The first MVNO was launched in 1999 by Virgin Mobile (UK) and as of late 2012 there were over 630 licensed MVNOs worldwide. 

PLDT and Remittances

MVNOs tend to focus on customer maintenance rather than customer acquisition, bundling value-added services (VAS) with a suit of other product offerings such as remittance and e-commerce. The Philippine Long Distance Telephone Corporation (PLDT), which links its MNVO services overseas with other offerings catered to Filipino migrant workers, is a good example. These include a remittance service called Smart Pinoy Remit and an e-commerce website called Smart Pinoy Store. The Smart Pinoy store allows Filipinos working overseas to purchase groceries, gift cheques, flowers and other items online to be sent to their families back home or pay for their family’s PLDT landline or Smart post-paid bills. Through agreements with different MNOs, PLDT has been able to launch its MVNO services in Hong Kong, Singapore, Guam, Taiwan, Macau, Malaysia and the UK and has plans to launch in the Middle East, North America, Africa and other parts of Europe.

Brazil and MVNO Regulation

Brazil is a good illustration of how targeted regulation can open up a market for MVNO entry. Brazil is the largest mobile market in Latin America with more than 260 million subscriptions in 2011 of which 80% are pre-paid, and a penetration rate of over 130% as of April 2013. The Brazil market is highly competitive with the four biggest mobile network operators (Vivo, TIM, Claro, and Oi) holding close to a quarter of the market each. 

In 2010, the telecom regulator Anatel approved regulations that would create two types of MVNOs. The first is where an agent (‘credential’ model or credenciado de red virtual) of a mobile operator, with ANATEL’s approval, reaches a commercial agreement with an institutional customer such as a bank, a retail chain store or a football club. By falling outside the definition of a public telecommunications service this is an encouragement to non-telecom players. The second is the traditional MVNO (‘authorized’ model or autorizado de red virtual).

The first two MVNOs, Porto Seguro Conecta and fixed-line operator Sermatel (Datora Telecom), were approved in 2011 and launched in 2012. Porto Seguro Conecta is operated by Porto Seguro, an insurance company. Its initial service offering focuses on Machine-to-Machine (M2M) communication providing vehicle tracking services owned by its insurance customers. The two MVNO licence holders have partnered with the TIM network. As of March 2013, Porto Seguro reported having 41,377 subscribers and Datora 1,000, while four more MVNOs have announced their entry and three more are in the planning process. Maybe not all will survive but by opening the market to MVNOs ANATEL has succeeded in stimulating investment in services competition and innovation.

MVNOs and Regulators

MNVOs offer regulators a way to increase competition at the retail level and innovative services that can cater for market minorities. They offer MNOs a way to raise more revenue from networks that have spare capacity. In China in 2012 the Ministry of Industry and Information Technology (MIIT) announced a two-year MVNO trial plan as a way to attract more private capital into its telecommunications market. Unlike MNO VANS (value-added network services) operators, VAS operators have little or no direct control over the network, its capabilities and performance. Therefore many of the regulations regarding QoS applying to MNOs are not necessarily applied to MVNOs. On the other hand, MVNOs do control their own billing systems, so regulations safeguarding consumers can apply. Although wholesale pricing is usually left to commercial negotiations, if the ministry wishes to positively encourage MVNO entry there may be a case for regulation, but care needs to be taken that it does not remove the incentive for the MNOs to share their networks.

BOX 3.1

If the policy aim is to raise revenue for the treasury, then the regulatory objective will be to design an auction in  a way that  maximizes the bidding prices. If the policy aim seeks to achieve is mix of the two then the regulatory objective may be to reserve some of the spectrum to be auctioned for new entrants only. A successful auction will then allow a new entrant into the market but maybe at the expense of raising less revenue than if the entire spectrum were open to all bidders. The means of achieving regulatory objectives will vary. Auctions have become popular among regulators who look for market solutions, and are tending to replace the traditional ‘beauty contest’ approach by which regulators pick and choose the winners. One big disadvantage of the beauty contest approach is its lack of transparency, making it vulnerable to corrupt practices. But not all spectrum will be assigned by a market mechanism. Many public services, such as public protection and disaster risk (PPDR) services used by the police and first responders such as fire and ambulance services, are assigned spectrum by administrative means, also known as ‘command and control’. In many countries the armed services also control large swathes of spectrum, as do utility companies running facilities such as seaports, airports, electricity grids, roads and rail networks. Increasingly regulators are looking for ways to increase the efficiency with which these legacy assignments are used so they can free up spectrum for new broadband services. The use of ‘administrative spectrum pricing’ or ASP (sometimes called ‘administrative incentive spectrum pricing’) is one way to do this by assigning a price usually based upon some notion of the ‘opportunity cost’ of using the spectrum for some other purpose. Another way is to carry out an efficiency audit using radio engineers to make an assessment.

Executive Summary

This Statement follows Ofcom’s consultation on the future pricing of spectrum used for terrestrial broadcasting. It sets out our intentions in respect of:

  • implementing charging for spectrum used for digital terrestrial broadcasting of television and radio; and
  • extending the current charging regime for analogue commercial sound broadcasting to the spectrum used by the BBC for its radio services.

Ofcom’s decision

In July 2006, we consulted on proposals to implement administered incentive pricing (AIP) for spectrum used for terrestrial broadcasting. We did so on the principle that one of the best ways of ensuring that the opportunity costs of spectrum are fully and accurately reflected by decision-makers is for those opportunity costs to be reflected in prices that have to be paid to hold spectrum. The consultation produced a number of responses, which this Statement outlines and which we have considered fully. Our overall conclusions are that:

  • it is right that broadcasting use of spectrum should be subject to appropriate charges in future, in the same way as almost all other uses are or will be;
  • the right time to introduce charging for spectrum used for digital broadcasting – both television and radio – is the end of 2014;
  • the right time to extend the existing charging regime for commercial analogue radio spectrum to that used by the BBC is 2008;
  • before introducing any charges, we will consider carefully any potential effects on broadcasting output, and the right options to address or mitigate them.

Preventing Radio Interference

Given the new focus upon broadband wireless the starting point for all spectrum management policy making and regulation remains the recommendations of the ITU’s World Radiocommunications Conference (WRC), held every three to four years. The topics are set six years in advance and the final agenda around three years in advance. This gives time for the Study Groups and technical standards bodies to make their recommendations. 

The only mandatory requirement for ITU membership is a commitment to avoid radio interference with neighbouring countries. All else is about the adoption by national regulatory authorities (NRAs) of WRC and ITU recommendations on policies, standards, etc.

The avoidance of radio interference clearly should always be the number one consideration and in light of new ‘intelligent’ technologies, an interesting reaffirmation of this came in the US from the FCC’s 2012 Notice of Proposed Rulemaking (NPRM) for broadband satellite services. FCC Chairman Julius Genachowski explained: “We’re proposing to modernize, streamline, or eliminate hundreds of rules or subsections governing satellite services. Among the changes, this Notice includes a shift in the focus of the rules from a ‘tell us how you built it’ approach to a ‘tell us how you will avoid interference’ approach.” 


An issue of growing significance for NRAs are efforts to achieve harmonization of spectrum allocation across neighbouring countries to gain economies of scale in the equipment standards used across the region and to facilitate roaming. Roaming was previously a voice service on mobile phones, but that is changing as broadband data roaming services using smartphones, tablet computers, etc., become more popular. Important past initiatives by the ITU have included the ‘Harmonization of the ICT Policies in Sub-Sahara Africa’ (HIPSSA) with EU support and a joint programme with the Caribbean Community and Common Market (CARICOM) named ‘Enhancing Competitiveness in the Caribbean through the Harmonization of ICT Policies, Legislation and Regulatory Procedures’ (HIPCAR). Both these programmes have now concluded.

In Asia, the ASEAN group of nations is also working towards harmonization, including freeing up the spectrum in the VHF and UHF bands through the switch from analogue to digital terrestrial TV (DTT), known as the digital dividend. Asia somewhat lags behind other regions in making progress towards harmonization as the paper ‘The Digital Dividend in Asia’ explains. One of the most influential organizations in the region promoting a common approach towards the digital dividend is the Asia Pacific Telecommunity or APT based in Bangkok. However, as each ASEAN country has its own legacy of spectrum allocations which include military and government as well as commercial bands, harmonization is not easy to accomplish. ASEAN has its own general policy document for the harmonization of ICT developments within South East Asia—the 2010 Masterplan on ASEAN Connectivity: One Vision, One Identity, One Community (MPAC) —with a roadmap called the ASEAN ICT Masterplan 2015. Both are discussed in ‘ASEAN ICT Masterplan 2015: IIC Asia Forum, April 2012’. 

Spectrum Scarcity Debate

Alongside the rising demand for spectrum for broadband services there has been an accompanying debate over whether or not there is a spectrum supply shortage. The arguments consist of several different points. There is a straightforward view that demand has outstripped supply, especially with the rise of social media and video streaming, massive multiplayer online gaming (MMOG), etc. Equipment vendors and operators typically argue this point.

There is another view that too many operators are not using their spectrum fully and efficiently and if they did so there would be little or no shortage. This view was put forward in a report by two CitiGroup researchers in 2011 who argued that in their estimation in the US only about 35.7% of spectrum set aside for wireless communications was being used for that purpose.*

Those with spare spectrum, they argued, lacked the capital to invest in networks, while those with networks lacked the additional spectrum to expand their services. Others have pointed out that at least some of the spectrum held in reserve by operators is not necessarily inefficient but rather good investment management, ready to take advantage of emerging new technologies and standards. It is also the case that under-used spectrum can be held by non-telecom bodies such as the armed forces, the emergency services, public utilities such as power and transportation companies, etc.

In the US the FCC (Federal Communications Commission) takes the view that there will be a shortage as demand outpaces supply unless more spectrum is released as part of the 2010 National Broadband Plan. The FCC also considers that a lot of spectrum is being under-utilized and that smart regulation should find a market solution to this problem. The FCC “needs to create new incentives for incumbent licensees to yield to next-generation users” and proposes ‘incentive auctions’ as one way to do this. In an incentive auction the licensee who gives up the spectrum to the highest bidder either keeps the revenue and pays a commission to the FCC for running the auction, or shares the revenue with the FCC.  The reason why incentive auctions may be necessary is because historically the cost and time of clearing entire bands of spectrum from previous occupants and reallocating them are too high and takes too long, sometimes beyond 10 years.*  

Allocating additional spectrum is one issue; how to assign it to users is another. The most valuable spectrum below 1GHz has been assigned by methods such as ‘command and control’, ‘beauty contest’ and increasingly through market auctions, but an alternative approach is to release spectrum for free as a public commons. This already happens in many frequency bands as unlicensed spectrum, but a public commons approach implies higher emissions and therefore the need for some form of regulation. These issues are discussed in the next modules.


Making judgements about the future supply and demand for radio spectrum is precisely that, a judgement, and one that will require continuous revisiting. On the supply side, new technologies are rapidly increasing the efficiency of frequency usage, yet which technologies will succeed in the marketplace can never be known with certainty. On the demand side, service innovations and changes in user preferences also happen quite quickly, especially over broadband wireless networks. Given this reality, regulation needs to become smarter, that is to say: it needs to mimic market incentives as far as possible; it needs to be transparent so that investors and users can plan ahead; and, it needs to become more flexible to take account of changing conditions and requirements. The rest of this section of module 3 will further explore these issues.

  • 3.3.1 Spectrum Licensing Regimes

    The growing demand for spectrum for broadband covers a range of wireless technologies and standards. Each category lends itself to different regulatory approaches.

    Low-powered short-to-medium range communications

    The broadband era is seeing the coming of the ‘Internet of things’. Every object, whether it is a device such as a mobile phone, a TV or a refrigerator, a vehicle or even a piece of clothing, can be connected to the Internet or directly to another object by short-range radio using Internet Protocol. Different technologies, such as Bluetooth and Zigbee, have been developed to provide the communications standards. The spread of these machine-to-machine (M2M) communications will grow exponentially and are becoming the central component of smart cities. Already smart cars send system alerts to mobile phones and computers. Electronic Road Pricing (ERP) schemes, as used in Singapore, deduct payments from stored value cards displayed on vehicle windscreens each time the vehicle passes under a gantry. Hundreds of millions of electricity meters, water meters, early warning sensors ready to detect earth tremors or fires are operational; because the power emission from these devices is extremely low and radio interference is not an issue the frequencies do not need to be licensed.

    Along with these developments there will be an increasing level of innovation surrounding the ‘Internet of things’. New devices and new services will emerge and in some cases this may call for a raising of the limits on power emissions. In such cases, an alternative to licensing is to allow industry to adopt its own codes of conduct with respect to frequency sharing and frequency hopping, but the regulator needs to be reassured that this is technically possible and presents no risk to public health. It is important that regulators have access to the independent technical expertise necessary to make these judgements, for example, by establishing a Radio Advisory Committee or by bringing in a consultant.

    Mass wireless communications

    The licensing of MNOs (mobile network operators) to build PLMNs (public land mobile networks) has traditionally followed the contours of the technology standards being used, but this is starting to change. 2G standards typically used 800MHz (CDMA) and 900MHz (GSM) bands, while UMTS standards for 3G used a variety of bands for W-CDMA, notably 2100MHz (Band l) and 900MHz (Band Vlll) in most of Europe, Africa and Asia, 1900MHz (Band ll) and 850MHz (Band V) in the Americas, 1700MHz (Band lll) in the USA, etc., while WiMax, a different standard, is typically allocated 2.3 GHz, 2.5 GHz and 3.5 GHz frequencies and WiFi 2.4GHz. The equipment itself can be manufactured to be tuned into whatever frequencies are allocated, and licences were linked directly to these allocations.

    With the arrival of 4G LTE and LTE Advanced and Mobile WiMax a new stage has been reached in spectrum management. On the one hand, these standards are meeting the demands for greater bandwidth or frequency capacity driven by the growing demand for bandwidth-hungry applications. This puts regulators under pressure to find additional spectrum. On the other hand, the digital dividend which frees up large amounts of bandwidth from analogue radio and TV in the VHF and UHF bands offers regulators a once-in-a lifetime opportunity to re-allocate 150MHz or more spectrum. In addition, regulators are searching for spectrum that is either unused or under-used in other frequencies. The result is an opportunity for 4G MNOs to occupy and operate from a variety of frequencies as suits local circumstances and increasingly regulators are starting to look towards multi-frequency auctions called, somewhat clumsily, Combinatorial Clock Auctions or CCA auctions where bidders can combine ranges of frequencies from different bands.* Frequency aggregation techniques (discussed later) are an advanced method by which MNOs can use these frequencies in combination.

    With all these changes regulators need to revisit their licensing regimes to allow MNOs greater flexibility in their use of frequencies from different bands, because licensing that links an MNO’s network to a specific band simply will not work in this situation. This is discussed further under 3.3.3 Allocation and Assignment.

    Flexibility has arisen in another aspect of licensing of MNOs where they need to buy or build backhaul capacity to manage the growing demands of traffic across their cellular networks. Leasing backhaul capacity from a fixed-line incumbent can be very costly while the lack of such capacity threatens the quality of service that can be offered to the public. Regulators would seem to have at least six options to choose from to relieve this bottleneck problem.

    First, where the incumbent fixed line operator also has a licence to provide wireless mobile services a unified licence can be issued to replace the separate licences and thereby encourage greater network integration or fixed-mobile convergence. India was the first jurisdiction to introduce this innovation. However, this does not solve the problem if the incumbent is permitted to discriminate against competing MNOs. Equal access is an important part of maintaining free and fair competition. A second option is to licence MNOs to build their own fixed-line or microwave backhaul networks but limit the use either to own-services or to wholesale services; the latter of these options has the virtue of introducing greater competition into the wholesale market. A third option is to allow MNOs to share backhaul facilities such as towers, as well as to share cell sites and thereby spread the costs. A fourth option is to licence a separate wholesale network provider who can serve the entire market in competition with incumbent fixed-line operators. A fifth option is to licence non-telecom entities such as utility companies to lease their own fixed-line or microwave capacity to MNOs. A sixth option is to allocate spectrum to WiFi, which can be used to offload data traffic from congested cellular networks. In addition, public-private partnership (PPP) arrangements can sometimes help in each of these cases where there is a need to reduce operational and capital risk, but as one former finance minister warned there is a danger of them escaping “both the discipline of effective state (i.e. Treasury) control and the discipline of the marketplace.”* PPP may be especially helpful in areas which are serving national policy interests such as providing access to rural and remote locations.   

    Long-distance terrestrial backbone and backhaul microwave technologies

    Licensing non-telecom companies such as national rail and road systems and energy grids to lease their long-haul capacity is an obvious step towards greater capacity for MNOs and for competition in the wholesale market. Licensing to permit facilities sharing such as towers, ducts and leased circuits is another way to solve the bottleneck problem and is being adopted in many countries.

    Extra-terrestrial satellite microwave

    Broadband satellite services currently offer fast internet connections to many areas that are not served by terrestrial connections. They will become even more important in the coming era of ‘connected TVs’, television sets with Internet connectivity enabling viewers to download movies, watch live sports, view videos, play MMORPG, etc. In many low income countries these developments may seem an age away, but in the metropolitan centres of countries that are well integrated into the global economy these are the new consumer products of the present day. In many rural areas, mountainous landlocked countries and remote small island economies, satellite remains the only way to gain access.

    Traditionally, C-band satellites requiring receiver dishes several feet in diameter were used mostly for broadcast services, and as a back-up for telecom services. L-band is used for GPS and more and more devices use GPS. Ku-band satellites offer higher bandwidth and a narrower footprint and are widely used by Vsat transceivers to provide commercial access mainly to data services. Now Ka-band satellites, which operate at speeds 100 times faster than Ku-band, are offering high-speed broadband Internet access to areas previously unreachable, although attenuation problems often arise on these higher bands due to tropical rainfall. Many countries cannot afford a satellite of their own, but they can licence local service providers who lease satellite channels. Licences need the flexibility to take advantage of technologies such as dynamic frequency allocation that can supply different levels of service to different locations.

    Licensing and Innovation

    Flexible licensing policies can help unlock innovation. With the coming of the ‘Internet-of-things’ and the real possibility of smart cities that can, among other things, help address the issue of energy consumption, carbon emissions and climate change, the role of licensing has extended beyond its initial aims of imposing strict operational requirements upon service providers, and even beyond the aim of making competition work. It is now addressing the issue of how to stimulate and facilitate innovation in the use of spectrum and in the provision of new services. This affects the competitive advantage of an economy and helps to create jobs and revenues: regulation, technologies and markets are all interconnected, each affecting the other. The demands of the market spur on technology innovations such as cognitive radio for spectrum sharing, intelligent antennae for better radio coverage, and spectrum aggregation techniques for a more efficient use of available spectrum. The changing role of licensing is therefore an important facilitator of this virtuous cycle and necessary to encourage investment in these new network services.

  • 3.3.2 Flexible-Use Technical and Service Rules

    The management of radio spectrum is an area of policy and regulation that has greatly expanded in recent years. This module is focused upon broadband which, in the early years of wireless telecommunications, was more or less synonymous with the higher shorter frequencies. For example, 1GHz is a band of spectrum twice as broad as 500MHz. The disadvantage of the limited propagation characteristics of shorter frequencies was offset by the fact that broadband cellular services, notably 3G and beyond, were focused upon dense clusters of customers in urban areas. Dual-band handsets allowed handoff to lower frequencies when users roamed from urban to suburban and rural areas. In more recent years another dimension has become important, the vastly increased bitrates cellular and other wireless networks and devices can now handle.

    In addition to these two dimensions – the propagation effects that determine coverage and the uplink and downlink speeds that determine traffic loads – there have been a multitude of other technological advances. These include: cognitive radio (CR), which is software-defined radio (SDR) that allows devices to detect other users to avoid radio interference; intelligent antennae and the use of multiple antennae or MIMO (multiple-input and multiple-output), which give radio signals greater sight around obstructions; and, spectrum or frequency aggregation techniques, which allow service providers to operate across several different spectrum bands simultaneously. This increases the efficient use of under-utilized or isolated frequencies which may have resulted from an earlier fragmentation of frequency assignments. The figure 3.4 below illustrates the principle of spectrum aggregation.

    FIGURE 3.4

    Source: Dr Anil Shukla, Brian Willamson, John Burns, Eddie Burbidge, Alan Taylor, David Robinson (2006) ‘A Study for the Provision of Aggregation of Frequency to Provide Wider Bandwidth Services’ QINETIQ


    The concept of spectrum aggregation is to exploit spectrum fragments simultaneously to create wider bandwidths for communications systems.

    Efficiency and Innovation

    Rapid technological advances in network capabilities and a growing demand for broadband access (network availability) and usage (network capacity) are starting to throw up major challenges for regulators. There is only so much spectrum available, so using it efficiently has become an issue of prime concern. Promoting innovation is one way to do this. It is also a way to raise the efficiency and competitiveness of the economy-in-general, create jobs and new services. The regulator’s job is becoming much broader in its scope than before.

    As the number of services that can be offered across BWA networks has multiplied, regulators often took to licensing networks and services separately in recognition that some services would be provided by MVNOs (mobile virtual network operators) or by third parties such as content aggregators and application service providers. This distinction is now more complex with the interconnectedness of the Internet because many services can be provided from outside the country OTT (over-the-top of the network). Technically, everything from making telephone calls to downloading movies to installing apps on a smartphone or a tablet can be done OTT without a licensing regime in sight. While these developments are more advanced in the most developed economies of the world, they are rapidly establishing themselves as global trends and they make many of the old regulations look outdated, which means they can become obstacles, or in some cases irrelevant, impossible to apply or enforce.

    A good example of innovation is the growing interest in ‘white space’ or ‘TV devices’. These are transceivers that either use SDR or cognitive radio, or consult a master database, to detect frequencies that are not being used by others and are available for use to provide ‘white space’ service such as ‘super WiFi’ (also known as White-Fi and as the IEEE 802.22/IEEE 802.11af standard for Wireless Regional Area Network or WRAN). Their name comes from their use of the unused or ‘white spaces’ between TV channels in the UHF 700MHz frequency band and as and when analogue TV shifts to digital terrestrial TV broadcasting (DTT) these frequencies become available for re-allocation. However, to make unlicensed use of these frequencies there needs to be agreement with the regulator and a set of acceptable standards in place to ensure non-interference with primary users, namely radio and TV broadcasters.

    IEEE 802.22/802.11af WiFi standards have a wide area range that can provide local community hotspots offering free Internet access far beyond ordinary WiFi. In addition, local operators could offer local apps and services but if business revenues are generated a licensing regime is likely to follow.

    In the US, the FCC has already allocated spectrum for white space ‘super WiFI’ services in the 700MHz “digital dividend” band. Although one way for white space devices to avoid interference with other users of shared spectrum is to scan the frequencies with CR, the method remains in its early stages and the preference in the US is to license companies to run databases of users which can be scanned at regular intervals.

    As of 2013, trials have been ongoing in Canada, the UK, Ireland, the Netherlands, Japan, Korea, Philippines, Singapore, South Africa, Nigeria, Kenya and Tanzania with some trials commencing in South America. In South Africa, for example, in Cape Town Google is collaborating with a number of international wireless vendors and local educational research bodies to offer Internet access on a trial basis to 10 schools. Using white space radio devices across 400MHz of fragmented TV spectrum that supports up to 15 broadcast channels, the school furthest away from the transmitter (6 kilometers) is still able to receive 6Mbps when the signal is uncontested allowing the school for the first time to download computer programme and anti-virus upgrades. In the highly urbanized environment of Cape Town, Google is demonstrating the value of its database that instructs white space devices which frequencies are available without causing interference to TV broadcasting and other users. In the northern and rural province of Limpopo, Microsoft in partnership with the Council for Scientific and Industrial Research, the University of Limpopo and a local network contractor, is demonstrating how WSDs can provide broadband coverage to a population thinly spread over a wide area.

    BOX 3.3
    TV Devices: White Spaces - Super WiFi

    Spectrum Markets

    The push towards market-oriented solutions is most evident in the use of auctions. Since the first auction in 1993 in the US they have become a frequently used instrument in the regulator’s toolkit. However, auctions do not always produce the desired results. This is sometimes due to the way they are designed and conducted, sometimes to a lack of investor confidence in the market, and sometimes to the opposite, over-bidding by investors. General economic conditions play a large part in investor perceptions, and changes in markets and in coming technologies also have an impact. So just as regulation impacts upon technological innovation and markets, so they impact upon regulation and, in this case, one answer is to allow secondary markets to operate which have the advantage of allowing market conditions rather than regulation determine the most efficient use of the spectrum. Allowing spectrum trading can be less time consuming and less expensive of regulatory resources. Also secondary trading markets can be operated as online spectrum exchanges run by independent third party specialists, subject to regulatory oversight. 

    In 1989 New Zealand became the first country to introduce a property rights approach to spectrum by establishing a management rights regime, mainly for cellular and data line services. The radio licensing regime remained a ‘command and control’ system but spectrum mangers were given the right to privately negotiate between themselves trades in spectrum. The trades had to be centrally registered. In the US, the FCC has been experimenting with “flexible licences” since the 1990s.

    Markets thrive upon liquidity and volume which means spectrum trading has been most successful in public land mobile networks. Trades can take different forms. They can be geographical:


    They can be outright transfers or leases or shared arrangements:


    The sharing could be a simultaneous joint use of network resources, for example an MVNO, or time-sharing:

    MVNO or time-sharing


    Countries that are encouraging trading include Australia, New Zealand, Canada, US, Guatemala and El Salvador. All of the EU member states and Norway are required to enable spectrum trading under the Common Regulatory Framework (CRF). In Asia, Hong Kong is considering it, and India’s 12th Five-Year Plan (2012-17) also includes a provision for spectrum trading but there is a debate as to whether the market is mature enough.

    Globally, trading has been rather slow to take off. For example, in Australia where trading has been encouraged, between 1998-2009 on average less than 8% of licences to use spectrum were traded annually. There are a number of possible reasons. Initial assignments may have proven relatively efficient, or the incentives to hoard under-used spectrum may outweigh the gains from selling or leasing it, or possibly the transaction costs of engaging in secondary markets are  be too high or there is insufficient access to information about spectrum for sale. The need to examine the reasons and look at new ways to facilitate trading is stated in the FCC’s 2010 National Broadband Plan.

    BOX 3.4
    Spectrum Trading

    If spectrum trading is assigned by market forces, then an even more radical approach is spectrum liberalization or allocation by market forces. Liberalization means an operator who buys spectrum on a secondary market can change its use, for example, from BWA to digital TV. This may undermine harmonization of allocation across country borders and disrupt roaming services. The GSMA defines liberalization in a slightly narrower sense, as applying when different technologies are used to provide cellular mobile services in different frequency bands, such as “UMTS or HSPA could be deployed in spectrum bands where traditionally GSM, CDMA or TDMA has been used.” The main issue is radio interference that may require masking controls over emissions or protection for receivers. This interpretation of liberalization is virtually equivalent to a technology neutral approach.

    In practical terms a hybrid approach is being tried. In the EU a Radio Spectrum Policy Programme was agreed by the European Parliament in 2012 which requires all Member States within five years to allocate at least 1200MHz of spectrum to mobile services and to create harmonized bands within which liberalization in the use of technologies and the services offered can flourish. So, for example, advanced high-speed Internet mobile services can be offered in the same bands as first-generation IP mobile network services.

    Over time it may well be that intelligent systems using SDR, CR and spectrum hopping techniques will overcome many of the problems of radio interference and the boundaries of liberalization will spread across a wider range of bands. For unlicensed spectrum, liberalization is already a reality since anyone can use the spectrum for any innovative idea that they come up with. The white spaces example above is a case in point.

  • 3.3.3 Allocation and Assignment

    The upcoming challenge facing all telecom regulators is the need to ensure sufficient spectrum for the exponential growth in demand for BWA services. An important part of the supply-issue will be to provide BWA to rural and remote areas where the costs of service provision may not be covered by customer revenues. The first part of the problem will be to find ways to increase the spectrum available. The second part will be to consider ways in which more flexible licensing of services to under-served areas can help in meeting demand.

    Finding sufficient spectrum is an allocation issue. Following the recommendations of the WRC is the first step towards providing BWA either as UMTS 3G services or IMTS-Advanced 4G services for two reasons. First, by adopting international and regional spectrum standards the cost of procuring network equipment and mobile devices is lowered. Second, it promotes mobile roaming services. The work of the ITU and other regional bodies in promoting cross-country harmonization of spectrum allocations is referenced in Module 3.3 above.

    Finding the spectrum will possibly involve re-farming spectrum from earlier uses. For example, as 2G mobile services run down so frequencies can be re-allocated to 3G or even to 4G services. This is what the GSMA refers to as liberalization as discussed in Module 3.3.2. It may also involve reallocation of spectrum freed up by the digital dividend, also discussed in Module 3.3.2.

    It is also possible to reassign frequencies from under-used to in-demand services. The regulator can seek ways to encourage public and private entities such as utility companies, the armed forces and emergency services, government agencies, etc., to yield up some of their frequencies. One way is by a ‘command and control’ method, but this can be a blunt instrument leading to disputes over how to audit the efficient use of spectrum. Another way is to introduce some form of spectrum pricing which may encourage cost savings and the return of unused frequencies. In the US, the FCC is advancing a third way, which is an ‘incentive auction’ as described in Module 3.3. the FCC in 2013 is experimenting with a third way which is an ‘incentive auction’ as described in Module 3.3.

    A policy to bridge the digital divide and support universal BWA to people in rural and remote areas is taking universal access to the next level, a level appropriate to next generation ICTs. This is where the argument for allocating part of the digital dividend in the UHF 700MHz band becomes compelling. The propagation qualities of this band are ideally suited to providing wide-area coverage over more sparsely populated regions of a country. When accompanied by other measures, such as the liberal use of unlicensed spectrum for local initiatives such as super WiFi and with licence conditions that encourage the sharing of infrastructure and of spectrum, a new momentum towards interconnectedness can be created.

    Assignment by Auction

    Spectrum auctions are now a well-established part of the regulators’ toolkit. By the end of 2012, the only continent that had not organized an auction was Africa, although Ghana, Nigeria and South Africa each had plans to do so.* In South America, auctions have either taken place, in Chile and Columbia, or are planned for BWA in most countries. In the Asia-Pacific region, Australia was the first to announce an auction in 1998 and since then more than 30 auctions have taken place or are planned in at least 9 countries. In Central Asia auctions have not yet been used. In Eastern and Western Europe the majority of countries have used auctions and plan to do so in the future.

    Auctions of 2G and UMTS 3G licences were confined to single bands of frequencies but with IMT-Advanced 4G standards and the growing pressure upon regulators to find additional bands and to re-farm and reassign existing frequencies, auctions are tending towards multi-band. 4G operators are also pressurizing for wider bandwidths to be made available as contiguous blocks, for example 2x25MHz, to cater for the growth of data traffic. A further complication is the demand for FDD (frequency division duplexing) and TDD (time division duplexing) in markets where the TD-LTE and WiMax standards are being used such as Brazil, in much of Asia and the US.

    The danger of multi-band auctions is that some carriers may end up with stranded frequencies. There are different ways to overcome that problem. If a traditional simultaneous multiple round ascending auction (SMRA) is used, the frequencies can be arranged into contiguous bandwidths before the bidding begins. In an increasing number of cases the combinatorial clock auction (CCA) is being used, for example in Austria, Denmark, Ireland, the Netherlands, Switzerland and the UK, and as of 2013 Australia, Canada and Singapore had plans to use it .  In the CCA auction one round of bidding determines how much spectrum is bid for by each contestant, and a final round determines which contiguous blocks of frequencies match those bids. The regulator makes the final decision based upon the combination that maximizes the sum of the bids, which may mean that some blocks do not go to the highest individual bidder as Table 3.1 illustrates.


    Lot A

    Lot B

    Lot C

    Highest Bid

    Highest Value

























    Table 3.1

    Source: Author

    In this hypothetical case the regulator maximizes value (27) by assigning lot A not to the highest bidder 1 but to the second highest 2. But auctions may not always be appropriate and even where they are they require resources in terms of expertise to design and conduct the auction. For example, they are not appropriate for frequencies that are to be assigned to emergency services or essential government functions. Their outcomes are subject to many variables, including the current state of investor confidence in the economy, and unless spectrum caps are introduced or spectrum set aside for new entrants, the bidding can be dominated by powerful incumbents who may be motivated in part by hoarding. If excessive prices are bid and if subsequent competition in the market is not sufficiently strong higher prices can hurt consumers, either through higher tariffs or by lack of investment in infrastructure.

    In theory spectrum trading should be able to correct any incorrect valuations that were bid in the auction, but trading has its own problems to resolve as seen in Module 3.3.2. In some cases, for example in Singapore, the regulator stipulates that trading will not be allowed until the bidders have met their performance targets, such as network coverage. This is to prevent speculative bidding for spectrum that the bidder has no intention of using but wants to resell later at a higher price.

    As a general rule, auctions have an important part to play if the aim of policy is to ensure transparency in the assignment of frequencies to competitive companies and to achieve an efficient use of spectrum. But the resources required by the regulator to ensure that the auction itself is efficient are often in scarce supply. An easier way to ensure competitive bidding is through a ‘beauty contest’ which can require bidders to state their non-monetary targets such as coverage, quality and scope of services, but this does less to guarantee efficiency and may end up as a windfall for the chosen winners. The simplest procedure is through administrative assignments, which are low cost and fast but also least transparent and still leave open to dispute what the price of spectrum should be. There are therefore two parameters to consider. The first is efficient spectrum pricing which is where the market is important. The second, which is the most important of all for the industry and consumers, is competition. Getting the second one right will tend to correct over time any mistakes made in the first one.

  • 3.3.4 License Renewal

    Although granting licences in perpetuity is not unknown, most spectrum licences have a finite life, typically around 15 years in the case of mobile cellular licences. Many of the original 900MHz 2G cellular licences issued in the 1990s either have or are coming up for renewal, and the same will soon apply to many 1800MHz UMTS 3G licences and some in 2.1GHz. Commercial sector broadcast spectrum licences are another category where the issue of renewal often has substantial implications for investment, although whereas most of the investment in telecoms is in the network most of the investment in broadcasting is in the production and purchase of content.

    A number of important issues surround the question of how to renew licences. Where the performance of an MNO has proved satisfactory there is a strong case to renew. One indicator will be the number of subscribers on the network who will be inconvenienced if they have to change their operator, their billing details and their telephone numbers. As an MNO upgrades from 2G to variants of 3G and then on to 4G, substantial investments are put at risk, and uncertainty over renewal can remove the incentive to put in more money. Legally, if the original licences stipulated that there was no guarantee of automatic renewal the regulator is probably safeguarded against appeals to the courts, but legal challenges have become part of the process. In the face of objections from incumbents, the regulator does have a legitimate responsibility to ensure a competitive market and to ensure that additional efficiencies are squeezed out of existing spectrum use and automatic renewal may not be consistent with that aim.

    In many cases, for example in the US, there is a “renewal expectancy” for cellular licences subject to the fulfillment of certain targets. Portugal and the UK have gone for renewal and it is the presumption in Canada. In Australia the regulator has taken the opposite view that all renewable spectrum will be auctioned. In Germany and France renewal has also been assured, but with the regulators taking back some of the spectrum for administrative reassignment to allow for new entrants and further competition. The Netherlands regulator extended the period for renewal by a few years and then committed the frequencies to auction with spectrum caps imposed to allow for new entrants. Under the EU’s Common Regulatory Framework (CRF) and its recent Radio Spectrum Policy Programme (RSPP) NRAs are required to include competition policy in their policy decisions, which means NRAs must at least consider the option of reassigning spectrum to new entrants, although not necessarily by auction. In New Zealand MNOs were given the opportunity to renew some of the spectrum if they agreed the regulator’s new administered incentive pricing (AIP) and if not all the spectrum would go to auction.

    Charging for unauctioned spectrum needs to use a form of ‘shadow pricing’ to mimic the market if it isn’t to be completely arbitrary. The ideal way is to find a measure of what price the spectrum would be worth in the next most profitable employment, known as the ‘opportunity cost’. If the AIP is significantly below that level then the incentive to use the spectrum more efficiently will be weak. One method is the Optimum Deprival Value (ODV) or ‘least cost alternative’ model which answers the question: if the present asset was removed what is the least cost system that could provide current level of service? Alternatively, if the MNO were denied the additional spectrum, what would be the additional cost of squeezing out the additional level of service from the existing spectrum or of adding more base stations? By awarding the additional spectrum these extra costs are avoided and therefore represent the value of the additional spectrum.

    The Best Alternative Use (BAU) method measures the value other users will place upon the spectrum based upon a modeling of their likely costs and revenues. Used in combination, BAU can be used to set the price within a lower and upper range approximated by ODV.

    BOX 3.5
    Administred Incentive Pricing

    The Hong Kong regulator adopted a hybrid approach in 2013 by offering to renew some of the spectrum and auction the rest with additional spectrum for new entrants, although this was hotly contested by the incumbents. As in Ireland and some other jurisdictions, Hong Kong also regularly imposes performance bonds when issuing new licences, related to geographical coverage within a specified timeframe, usually up to 3 years.

    When mergers and acquisitions (M&A) take place, if the regulator fears that competition will be reduced it is common practice to impose conditions such as surrendering some of the spectrum of one of the operators involved. This happens in the EU and in North America. Another method of encouraging competition is to encourage the merged operators to allow MNVOs into the market, although this is usually not specified in the conditions of the licence. [See Module 3.3]

  • 3.3.5 Unlicensed Spectrum and a Spectrum Commons

    The rapid changes overtaking broadband wireless services affect both licensed and unlicensed spectrum, and a key component of this is the phenomenal rise in M2M communications. Until the Internet-of-things, unlicensed spectrum applications were mostly associated with microwave ovens, radio car keys, Bluetooth connections and various industrial uses. Now the Internet-of-things connects potentially all devices and has given rise to the concept of ‘smart’ as in smart cities, smartphones, smart networks, smartcards in devices, etc. What is smart? In this context it refers to the use of algorithmic-driven software applications, such as sensors and alarm systems that automatically connect alerts to command centres, electricity meters that automatically monitor and regulate consumption, vehicles that can be tracked-and-traced through GPS systems, public bus stops that are connected to oncoming buses to inform waiting passengers of times and routes, home appliances that can be switched on and off remotely. Some forecasts suggest cellular M2M connections may reach 300 million people? by 2015. *

    In most cases these applications are used by businesses and utilities as a means of delivering a service and cutting costs and not to generate a revenue, and as such they are usually not subject to a licence. They may, however, require to be registered on a database of users if there is any likelihood of radio interference, excessive power emission or a sharing of spectrum with other users. This arises especially in the case of the white space/TV devices as discussed in Module 3.3.2.

    Spectrum Commons

    Unlicensed spectrum implies spectrum sharing among users. For short range devices this will not normally cause interference, but advocates of a spectrum commons argue that it is entirely possible to open up swathes of spectrum for common usage and manage the issues of interference and emission levels collectively. This view is the opposite of the view that all spectrum should be sold to property rights owners who can then own or trade spectrum as they do land according to market principles. There has been an extensive debate, especially in the US, as to what conditions may be required to make a public commons approach manageable in the future.

    Two diametrically opposed approaches to the spectrum management are the property rights or exclusive licence approach and the public commons approach.* They both stand in opposition to the traditional approach of ‘command and control’, but in practice most regulators use all three approaches for different parts of the spectrum. A paper in 2005 by William Lehr (MIT, USA) and Jon Crowcroft (Cambridge, UK) set out the following conditions that might be necessary to make the commons approach manageable:*

    • No transmit-only devices – a receiver function provides a control loop
    • Power restrictions
    • Common channel signaling (and/or use of single out-of-band signaling channel)
    • Congestion rules
    • Rule enforcement mechanism
    • Rules consistent with security and privacy

    In contrast to the property rights approach, which is governed by market principles such as secondary trading, the commons approach needs to be governed by protocols or an etiquette. If the protocol fails this gives rise to selfish behaviour and an inefficient use of spectrum or what has been called the ‘Tragedy of the Commons’. Advocates of the commons approach point to the emergence of new technologies such as UWB, spread spectrum techniques, mesh networks, smart antennae, MIMO, CR and SDR which offer intelligent networking (including ‘ad hoc’ and PAN networks) and dynamic frequency selection, and suggest that regulation could be ultimately distilled down to a minimum of certifying the conformity of equipment standards. Writing from the property rights perspective, a paper in 2007 by Jerry Brito (George Mason University, US) on the contrary reiterates the views of Ronald Coase that because the regulator has no direct knowledge of market costs and revenues there will be no incentive for the regulator to provide the same level of rule-making and rule-enforcement that private owners would undertake between themselves.

    Regulators need practical approaches that are suitable for different bands of spectrum. What is important is that regulators are fully conversant with the options that are available to them.*

    BOX 3.6
    Public Commons Conditions

    Unlicensed Spectrum for Underserved Areas

    Besides the issues of interference and spectrum sharing, unlicensed spectrum has a role to play in addressing the issue of universal access in sparsely populated areas. There is often little commercial incentive for MNOs and ISPs to provide services to these areas, yet there may be community groups, NGOs, local enthusiasts and village entrepreneurs more than willing to put time, money and energy into building local networks based upon white space and other technologies. Licensing spectrum at a price may kill off these initiatives. This is another example of where regulation needs to be flexible to achieve the objectives of innovation in access and in services.

  • 3.3.6 Re-farming and the Digital Dividend

    As the previous Modules have stressed, regulators today are facing the challenges of finding new spectrum from old uses. For BWA this is assisted in part by the expiry of many 2G licences issued in the 1990s, but if these networks still service many subscribers then the opportunity to refarm the spectrum is limited. One answer to this problem has been to set trigger points, so when 2G users fall below certain numbers part of the spectrum becomes available for refarming. The refarming in this context will usually imply the incumbent is allowed to migrate users to a UMTS standard and does not imply a reassignment of the spectrum to another MNO.

    By far the biggest opportunity for regulators, what has been called a once-in-a-lifetime opportunity is the digital dividend as reviewed in Module 3.3.2. In some cases as much as 150MHz or over could be available for reassignment as analogue TV switches off and digital TV switches on, but the transition period may take a decade to complete. The biggest hurdle is the percentage of the population who are unable to change their TV sets to digital. Many families may not be able to afford the cost which means government has to make a decision whether to subsidize lower income groups and possibly provide assistance to broadcasters to switch over their transmission equipment. The cost of doing this would need to be weighed in the balance against the gains from auctioning swathes of 700MHz of frequencies.