Government response to the Independent Audit of Spectrum Holdings

22 March 2006

Executive Summary

1. The Government welcomes Professor Martin Cave’s report The Independent Audit of Spectrum Holdings, published in December 2005, which reviewed the management of radio spectrum in the public sector. The Government agrees with the Audit that there is scope for more effective use of public sector spectrum through the introduction of spectrum trading and increased sharing with other users, and will work with Ofcom to enable this. The Government also supports greater consistency in the application of spectrum pricing across the public sector.

2. In implementing changes to public sector spectrum policy, the Government will ensure that sufficient spectrum remains available for national security, defence and essential public services. We will also seek to minimise harmful interference and ensure continued compliance with international obligations, including international spectrum management. This Government Response has been prepared in consultation with Ofcom.

Market Mechanisms

3. The Government supports the introduction of market mechanisms into spectrum management in the public sector. This will create new opportunities for public bodies to make more efficient use of their spectrum holdings, by enabling and encouraging trading and increased band sharing. In order to implement this new approach:

  • From March 2006, there will be a presumption that public bodies will acquire spectrum through the market, with administrative assignment by Ofcom only being made in exceptional cases.
  • Ofcom will take forward work on defining the spectrum rights of public bodies. Ofcom will aim by the end of 2006 to clarify how RSA can facilitate public sector trading.
  • Government departments will submit to HM Treasury, assessments of spectrum holdings and specific proposals for release by the end of 2006. This will inform discussions between departments and HM Treasury on targets and budgeting in the 2007 Comprehensive Spending Review (CSR) , with the aim of providing effective and proper incentives.
  • The Government will publish a strategic Forward Look, assessing current spectrum use and forecasting future needs, in March 2007 and every two years thereafter. The effectiveness of market mechanisms in encouraging more efficient use of spectrum in the public sector will be reviewed in 2012.

Pricing

4. The Government agrees with the Audit that administered incentive pricing (AIP) remains an important tool for promoting efficient use, that it should be applied more consistently, and should more accurately reflect the market value of the spectrum.

  • The Government supports the principle that pricing for public sector spectrum should be set on a comparable basis to the private sector.
  • Ofcom has agreed to review the difference in pricing levels between spectrum classed as “fixed” and “mobile” by 2008. The extension of AIP to the 225-400 MHz band and to military radar, and rationalisation of MOD pricing below 3GHz, will be considered in the context of the CSR in 2007.
  • The Government is committed to paying AIP on its spectrum holdings, and supports Ofcom’s intention to progressively migrate to payment based on spectrum use defined by Recognised Spectrum Access (RSA). Better-defined Government use will improve opportunities for sharing with other users.

Band sharing

5. The Government notes the emergence of technologies intended to facilitate more automated sharing of spectrum between users, and supports the Audit’s recommendation that new regulatory and operational opportunities should be further investigated.

  • The Public Spectrum Safety Test Group (PSSTG) has already initiated the development of a clear and open safety certification regime for spectrum band sharing.
  • PSSTG is carrying out initial assessment work to consider potential opportunities for commercial applications to share spectrum currently used for radionavigation, radiolocation and military radars in the 2.7 - 3.4 GHz band, bearing in mind that in the civil maritime sector these also provide a safety of life function.

Ministry of Defence

6. The Ministry of Defence (MOD) is the single largest user of spectrum in the UK, using spectrum for communication, radar, sensing and control applications. The MOD already works closely with Ofcom in managing spectrum holdings and will engage fully in the implementation of the Audit’s recommendations.

  • The MOD will contribute to the UKSSC Forward Look strategy in March 2007, and every two years thereafter. The MOD will report more detailed information on its usage and plans for key bands identified by the Audit.
  • The MOD will identify key bands where action could be taken and outline specific proposals for these bands by the end of 2006. On the basis of these assessments and the Audit’s band-by-band study, HM Treasury will discuss and set spectrum targets with the MOD during the CSR process in 2007.
  • The MOD expects to establish its Spectrum Acquisition Authority (SAA) in April 2006 to improve internal co-ordination and management of spectrum requirements, and will report on progress in the UKSSC Forward Look in 2007.

Aeronautical

7. Economic incentives such as AIP could be effective in promoting greater efficiency in aeronautical spectrum where there is flexibility to influence choice of technology or service. In many cases, international agreements limit the scope to improve spectrum efficiency, and safety considerations will remain paramount.

  • By the end of 2006, Ofcom will initiate a study to estimate the levels of aeronautical radar pricing. Subject to public consultation and impact assessment, Ofcom would expect to introduce incentive pricing from 2008.
  • The CAA will lead a review, with MOD and Ofcom, of navigation aids including radar and landing systems, to determine whether fewer systems could continue to satisfy the operational requirements. The study will take account of the outcome of WRC - 07.
  • The CAA and MOD will work together more closely through two new sub-groups of the UK Spectrum Strategy Committee (UKSSC) to plan and manage the use of aeronautical spectrum. The CAA also plans to consider the introduction of band sharing in navigation bands, subject to the outcome of the band sharing safety certification process .

Maritime

8. The MCA and Ofcom will, where appropriate and there is scope for UK autonomy, extend AIP to cover navigation and communication systems from 2008 in radar bands, and more slowly for Differential Global Positioning System (DGPS) as new Global Navigation Satellite Systems (GNSS) deploy. Safety considerations, including MCA’s capabilities as an emergency service, will remain paramount. The MCA will also consider increased sharing opportunities in the 3 and 9 GHz Safety of Life At Sea (SOLAS) radio navigation bands.

Emergency and Public Safety Services

9. Emergency and public safety services depend on spectrum for effective and efficient communications The Government will not compromise their operational effectiveness. The Public Safety Spectrum Policy Group (PSSPG) will continue to coordinate policy for public safety and emergency spectrum use, and a new Terms of Reference to reflect the Audit’s recommendations will be agreed in 2006.

Science Services

10. The Government agrees that principal users should be exposed to the cost of their spectrum use, but will remain aware of others who depend on measurements made in these bands. Ofcom consulted in 2005 on the introduction of RSA for radio astronomy spectrum and has announced its intention to proceed.

Fixed Links

11. The Government notes the Audit’s conclusions that it is too early to tell whether a different spectrum management approach is appropriate for fixed links bands. Ofcom plans to work towards an auction for the 1790 - 1798 MHz band in 2007-08; award further spectrum at 32 GHz in 2006-07; and expects to have information available from the auction of 1452 - 1492 MHz within this timescale to inform plans for the future management of other spectrum around 1.4/1.5 GHz

Band Specific Audit

12. The Government, together with Ofcom, will use the Audit’s band-by band study to prioritise action on pricing, sharing studies, definition of spectrum usage rights and consideration of a third party band manager. The Government, working with Ofcom, will also undertake the necessary preparatory work to enable decisions on specific spectrum bands to be taken, in response to the Audit’s band-by-band recommendations. To deliver this:

  • Ofcom will clarify the mechanism for defining spectrum rights by the end of 2006, to enable trading or sharing by Crown bodies
  • Departments will identify key bands and outline specific proposals for action in these bands by the end of 2006. This will include an appraisal of any significant costs involved in implementation, for example, in re-certification, or procuring new equipment.
  • Departments will address the need for more detailed internal Audits to establish current spectrum use and include consideration to the accommodation of future needs
  • Specific spectrum targets will be discussed and set by departments and HM Treasury in the context of CSR 2007, on the basis of these assessments.

13. Some of the frequency bands in the band-by-band analysis identified in green have already been opened up for commercial use. For example, the 900 MHz band, which was previously exclusively reserved for use by the MOD, is now almost entirely available and used for civil use. The main NATO band at 225 - 400 MHz has already been opened up to a limited but important extent for digital audio broadcasting (in the lower 5 MHz) and for emergency services mobile radio (2 x 5 MHz at the top).

14. The bands identified as green or amber by the Audit, where there is scope for increased sharing or spectrum release, account for approximately 65% of public sector spectrum. This gives an indication as to the amount of public sector spectrum within which there is scope for action, suggesting that more efficient use can be made within the majority of public sector spectrum. Not all of the green or amber bands will be opened to commercial use: in some cases there will be increased opportunities for sharing with other users, or release of spectrum at the margins of bands. Further work is needed to assess in detail what action is appropriate, and how to take this forward effectively.

15. It is difficult to quantify the total economic benefit of the changes under consideration since this will depend on future commercial decisions by network operators, equipment manufacturers and others, and on choices made by consumers about which products and services to buy. The Government's provisional estimate, based on expected AIP charges, is that it would realise efficiency savings of between £250m and £900m over the next 5 years although this does not take into account the costs incurred to generate these gains. However, the benefits to the wider UK economy can be expected to be considerably greater since there will be more opportunities for increased competition and innovation.

Government response to the Independent Audit of Spectrum Holdings (PDF, 128 Kb)