Liz Duthie
Department for Transport
Great Minster House
76 Marsham Street
London SW1P 4DR
Michael Richardson
Ofcom
Riverside House
Southwark Bridge Road
LONDON SE1 9HA
Direct Line: 020 7944 5843
Email: [email protected]
Web Site: www.dft.gov.uk
30 October 2008
Dear Michael
APPLYING SPECTRUM PRICING TO THE MARITIME AND AERONAUTICAL
SECTORS
The attached detailed comments, which are summarized in this letter, constitute the
Department for Transport’s response to the consultation paper of 30 July 2008. The
Department’s Maritime and Coastguard Agency (MCA) and the Civil Aviation Authority
(CAA) are submitting separate responses in relation to their specific responsibilities. We
strongly support those responses.
We welcome the opportunity to comment. DfT is already working to improve the
efficiency with which the aviation and maritime sectors use spectrum, in co-operation with
the CAA, private and voluntary sector industry users, and international partners. This
work has two principal aims, which are specific to both sectors: to ensure that enough
spectrum is available to accommodate forecast growth and in some cases to meet stricter
requirements, for instance on improving safety or reducing the risk of pollution.
We accept that wherever possible, spectrum should be made available for alternative or
additional use, and that some aviation and maritime spectrum is attractive for other users,
for instance in telecommunications. In some cases, however, international constraints
mean it is not be possible to allow alternative use, so that freeing up spectrum in the UK
could increase congestion for aviation and maritime users without bringing any
corresponding benefits.
In implementing the response to the Cave audit, the Government is committed to
ensuring that safety remains paramount, and that there continues to be full compliance
with international obligations. DfT is also required, under the Government wide PSA
targets, to deliver efficient, reliable and sustainable transport networks that support
economic growth. Both aviation and shipping are important for the wider economy and
the UK’s international trade and connections. Spectrum used for navigation in each of
these sectors is essential for delivering both safety and efficiency.
In summary, DfT fully supports the Government’s aims of:
 achieving efficiency in the overall use of public sector spectrum
 making use of the potential for pricing to incentivise more efficient use, and
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
implementing the range of commitments made in response to the Cave audit.
The proposals in the Ofcom consultation paper, however, give us cause for concern on
two grounds. First, they go beyond the Cave recommendations and Government
commitments, in proposing incentive charges for internationally regulated spectrum where
Cave held that there was no alternative user, and so the opportunity cost was zero.
Secondly, it is proposed that DfT meet some costs for spectrum, including the navigation
aids fitted to aircraft. This would conflict with long established Government and EC policy
that transport industries and users should bear their own safety costs. Agreeing to meet
some industry costs would set an unwelcome precedent and would potentially raise state
aid issues, which have not been addressed.
It is accepted that DfT should bear the full cost, as determined by Ofcom, for spectrum
which it uses operationally. The Maritime and Coastguard Agency (MCA) is operationally
responsible for search and rescue and is a “blue light” Category 1 responder, using radio
spectrum extensively for communications. Their response sets out their responsibilities
under international obligations and for vessel traffic services in more detail.
DfT’s use of spectrum is small compared with the use made by the private and voluntary
sectors, and recreational users, in both maritime and aviation. The industries are both
internationally competitive. Neither receives Government subsidy. As a result, charges
for navigation are generally higher than in other EC countries. These are levied by
airports, ports, air navigation service providers – NATS for all en route air traffic - and
through light dues to fund the services provided by the General Lighthouse Authorities. In
most other countries, some of these services are subsidised or free at the point of use –
for instance, no charge equivalent to light dues is made to vessels using continental ports
because navigational aids are funded from general taxation.
UK airspace, particularly in the south east of England, is already some of the most
congested in the world and is nearing capacity. The Government has recognised the
need for a structured programme for airspace redesign to help protect safety standards,
relieve constraints, take account of environmental impacts, and accommodate the
forecast increase in traffic where additional capacity is supported. The redesign is the
responsibility of the CAA. Its Safety Regulation Group has a strategic objective to ensure
that the UK’s excellent aviation safety performance is, at least, sustained at its present
level. The CAA’s response gives more information about the framework for navigation
regulation, which is the responsibility of the Directorate of Airspace Policy.
Shipping drives globalisation and the benefits that trade brings, while ports are the UK
gateways to global distribution. Unlike many of their continental counterparts, all UK ports
have to be run on a commercial basis, and they handle a higher volume of goods than in
any other European country. The value of UK imports is equivalent to about 30% of UK
GDP, and the UK economy is dependent more than ever on access to efficient, reliable,
and resilient worldwide connections, for example because of reduced stockholding. As
globalisation increases, the ports and shipping sectors will play an increasingly important
role in the economy.
DfT agrees that incentive pricing can be helpful in ensuring that spectrum is used
efficiently, and that such pricing should be extended to aviation and maritime. Incentive
pricing is applicable only where it has the potential to achieve efficiency.
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However, as the Government recognised in its response to the Cave audit, there are
cases where there is no efficiency gain to be generated by applying fees, for instance
where there is no prospect of alternative use because of international restrictions. Also,
there are cases which are closely linked to overriding safety requirements, where there is
equally no possibility of efficiency gain. We consider that it would be inconsistent with
Government commitments for Ofcom to fail to take full account of international constraints
in deciding its pricing strategy. We find that Ofcom’s proposals fail to evaluate the
additional cost that would be incurred by existing aeronautical spectrum aviation users
denied or granted use at the margins. Again, this does not follow the Cave
recommendations.
Overall, the rationale given by Ofcom for pricing on the basis of alternative use is
inconsistent with the basis on which the UK aviation and maritime sectors operate under
international regulation. It could also disadvantage them in relation to international
competitors. A recent study for the European Commission found that there would indeed
be efficiency incentives for the public sector if it faced opportunity costs in an effective
secondary market. However, since such markets do not yet exist, the report ‘hesitated to
recommend overall adoption of market-based mechanisms today’1. There is a risk that
introducing market incentives in the UK only could damage the UK’s credibility in arguing
for spectrum efficiency, given that there is not yet firm support for market mechanisms
either in Europe or among major international partners.
We are also concerned about whether the proposals meet better regulation guidance.
There has been no impact assessment or options appraisal of the principles behind the
consultation. The impact assessment which is proposed for the next stage of consultation
would cover only the impacts identified by individual licensees, without taking into account
the full range of externalities, including the UK’s competitiveness overall, adverse
distributional impacts, any environmental impacts and safety. The evidence base is less
weighty than would ideally be the case for a Government consultation. The CAA and the
MCA have expressed their readiness to assist Ofcom on the technical factors involved in
charging, and DfT is equally willing to assist on the assessment of impacts.
We accept Ofcom’s view that it remains for Government to take into account factors such
as international credibility and other reputational risks, particularly in terms of aviation and
maritime conventions and agreements. The Government will also take note of the position
on transport within the European Community.
The CAA and MCA, with their responsibilities for safety regulation, will ensure that there is
no adverse impact on safety from the introduction of incentive pricing, in whatever form
Ofcom decides. Industry stakeholders have also stressed their commitment to safety.
As they presently stand, Ofcom’s proposals might entail unavoidable adverse impacts on
transport efficiency, with potential economic disbenefits. Also, if non-regulated users
were priced out of using VHF communications or radar coverage, this might require
explicit new regulation in areas where codes of practice or voluntary measures apply at
present.
1
Optimising the Use of the Radio Spectrum by the Public Sector in the European Union, presentation
at public workshop, 1 October 2008
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The Department’s detailed comments are attached. We hope they will be useful in
clarifying the issues to be taken into account in considering the way forward. We look
forward to continuing to work collaboratively with Ofcom and other departments in this
regard.
We are content for this response to be published on the Ofcom website.
Yours sincerely,
Liz Duthie
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APPLYING SPECTRUM PRICING TO THE MARITIME AND AERONAUTICAL
SECTORS
DfT responses to the Ofcom questions, and detailed comments
Question 1: How should Ofcom manage the process of taking advice from users,
regulators and government on efficient apportionment of AIP fees in the maritime
and aeronautical sectors? Are any new institutional arrangements needed?
1.1
DfT considers that this process goes well beyond the ‘efficient apportionment of
fees’. We believe there is a prior question, which requires more consideration, on
whether the introduction of AIP as proposed will increase spectrum efficiency in the
aviation and maritime industries. This may require a more complex options appraisal, as
well as a cost benefit analysis. DfT is anxious to contribute fully to this work, and to
ensure that the Government’s commitment to increasing the efficiency of public sector
spectrum use is carried forward effectively. We also consider that, in keeping with the
Government’s Better Regulation commitments, the costs and administrative burdens of
improving spectrum efficiency should be kept to the minimum required to meet the policy
goal. Our comments below expand on our views.
Detailed comment
1.2
Ofcom, as an independent regulator, has developed its spectrum policy beyond the
commitments made by Government in its response to the Cave audit of 2005 and in the
Forward Look 2007. The most recent of Ofcom’s policy statements, since the Spectrum
framework review of November 2004, are the Spectrum framework review for the public
sector, January 2008, and Progress on key spectrum initiatives, April 2008. Ofcom has a
principal duty to further the interests of citizens and consumers in communications
markets, and to secure optimal use of the spectrum. Its position is to allow public bodies
to release and share spectrum on a flexible, liberalised basis, since too rigid an approach
would risk locking in sub-optimal use, and Government has accepted this approach.
However, where spectrum is regulated internationally under ‘command and control’ type
arrangements, as it generally is for aviation and maritime, public and private sector users
can neither make use of any opportunities offered by flexible and liberalised mechanisms,
nor freely respond to pricing signals. In Europe and worldwide, spectrum markets are at
a very early stage of development, and this makes the costs and benefits of a liberalised
approach uncertain for aviation and maritime.
1.3
Government has also made binding commitments to ensure safety and to comply
with international obligations. Whereas Ofcom may decide to price spectrum on the basis
of ‘users who value it most highly’, for example in terms of price paid at auction,
Government also has to consider and to assess the costs of externalities and market
failures. In aviation and maritime these include quantifiable and non-quantifiable costs
and benefits, and risks which could be catastrophic. Government’s commitment to its
international obligations does not sit well with Ofcom’s proposal to set fees for aviation
and maritime under an ‘application neutral’ approach, especially when it is recognised
that international harmonisation can create economic benefits.
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1.4
So for these sectors, a fully liberalised approach and incentive pricing is unlikely to
be either sufficient or appropriate to encourage more efficient spectrum use by private
sector users – airlines, shipping companies, ports and airports, and navigation providers.
There are also voluntary sector providers like RNLI, and a large number of recreational
users. Another factor which needs to be taken into account is the slow pace of
technological change in the industries, because equipment, operational standards, and
spectrum frequencies are all regulated internationally.
1.5
As a public sector spectrum user, DfT accepts that it should pay, comparably with
the private sector, for spectrum which it uses operationally. In some cases, for instance
where Ofcom has allocated frequencies to the Highways Agency, this process could be
put in hand quickly. In aviation and maritime, the DfT ‘own use’ is confined to a relatively
small number of MCA installations. These include the International Maritime Organization
(IMO) mandated Channel Navigation Information System at Dover, with two MCA X-band
radars and shared feeds from two others. For the future, with the continuing development
of offshore renewable energy installations, and consequent vessel traffic surveillance
requirements, this usage is likely to increase. HM Coastguard also co-ordinates ship to
shore communications, and operates search and rescue, and counter-pollution
communications.
1.6
DfT and MCA , together with Defence, are also directly responsible for fulfilling the
Government’s international responsibilities on search and rescue, for which there is no
individual ‘user’ who can be licensed. There are also internationally designated ship to
ship VHF channels, reserved to protect their use in the waters around the UK.
1.7
The use of spectrum by Government departments for operational purposes, like
MCA’s counter-pollution communications or MOD operational uses, can be distinguished
from spectrum which is used by private and voluntary sector transport operators to
comply with international requirements or safety regulation, as a condition of their doing
business. In many cases the users are not free to make decisions on their use of
spectrum in response to market pressures. Some aviation and maritime spectrum use,
however, while sometimes constrained by international co-ordination, is not specified in
the same way, and there may be opportunities for improving efficiency in response to
market mechanisms. DfT is committed to pursuing these.
1.8
Ofcom also proposes that the responsible Government department should pay for
spectrum which is ‘reserved’ for a sector where there is no licensed user. This proposal
would have to be considered across Government, because there could be no basis for
such payment unless Government reviewed its conclusions on the Cave audit. The Audit
position was clear:
Where there are international requirements which mean that the UK has no scope
to act unilaterally, the opportunity cost of use is zero and there is no merit in
introducing AIP for these licence classes. In these cases, spectrum efficiency
measures should instead be pursued through international negotiations to update
frequency allocations or adopt new standards or through the prescription of
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carriage requirements for more efficient technology (but again these would need to
be implemented for equipment satisfying internationally recognised standards).2
1.9
Another proposal is that DfT should pay for spectrum ‘where it is not practicable or
efficient’ to charge individual users. This would conflict with Government and EC policy
that users pay for their own safety costs, as Ofcom recognises in paragraph 3.47 of the
consultation. Subsiding the safety costs of some transport users could not be justified
unless the policy were changed. It would not be a rational basis for subsidy that it was
impracticable to charge individual users, and such subsidy might attract criticism or
challenge as a state aid. For these two reasons, DfT disagrees with Ofcom’s proposals
that it should pay for such spectrum.
1.10 Ofcom’s policy is not clearly stated in the consultation paper. It is based, at least in
part, on a 2007 consultancy study3. In the consultation paper, the methodology and
conclusions of the study are described as “robust and reasonable” (paragraph 3.6).
However, when stakeholders were consulted on the study, it was stated that the study
’did not represent Ofcom policy or proposals’ (Annex 6, para. A6.2.) Annex 6, which
gives Ofcom’s responses to the comments stakeholders made, represents an explanation
of the position. However, in terms of better regulation guidance, a transparent exposition
of policy would be preferable. The consultancy study aimed ‘to develop concrete
proposals for the extension of AIP to frequency bands allocated to aeronautical and
maritime services’. It did not assess externalities, on the basis that these should be
tackled by regulation or other pricing mechanisms. So in the evidential base for Ofcom’s
proposals is not complete.
1.11 In summary, DfT does not accept that there is a substantiated case for introducing
AIP in cases where the Cave audit found it to be inappropriate because it would not
improve spectrum efficiency. Also, it would be inconsistent with Ofcom’s past practice. In
February 2007, Ofcom set non-incentive fees for radio astronomy ‘in frequency bands in
which international constraints prevent sharing with other applications’. We accept that it
is for Ofcom to decide on spectrum pricing and charges. But in doing so, Ofcom has
proposed to take no account of policy constraints, including those imposed by regulatory
policy or international agreement. Government cannot ignore such constraints, and has
made firm commitments on maintaining safety and international obligations.
1.12 Another factor is the availability of such spectrum for trading or sharing. Ofcom’s
view in the January 2008 Spectrum framework review for the public sector (SFRPS) was
that:
The objective of the new framework is to enhance the efficiency with which public
sector spectrum holdings are used. Allowing public bodies to trade spectrum will
provide important new opportunities and incentives for them to act in a way that
secures the effects of AIP.
However, it would not be possible for Government to trade or share spectrum which is
required to be made available under an international agreement, unless that agreement
were changed. Nor would it be possible to allow sharing without satisfying the
2
3
Independent audit of spectrum holdings, 2005: section 7.4
Aeronautical and maritime spectrum pricing, 2007
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international organisation concerned – the International Civil Aviation Organization (ICAO)
or International Maritime Organization (IMO) - that there was no risk of interference to the
international use of spectrum. The current discussion concerning search and rescue
spectrum under the COSPAS-SARSAT agreements, in the context of Ofcom’s RSA
proposals, demonstrates the complexity of such a process. In the SFRPS, Ofcom’s view
was that:
It is for the public bodies themselves to judge how much spectrum they need to
discharge their responsibilities and their statutory duties and they are better placed
than Ofcom to do so.
MOD, in its May 2008 consultation, concluded that for many of the aviation and maritime
bands shared with MOD,
… decisions regarding RSA cannot be taken yet and no proposals are made by the
MOD for sharing or releasing [them].
So if spectrum cannot be traded or shared, for whatever reason, there will be no
efficiency gain if users give it up.
1.13 Ofcom’s proposals affect two major industries, as well as the recreational and
voluntary sectors, whether the spectrum use is regulated or not. The aviation and maritime
industries operate essentially without subsidy, and all key players are either in the private
sector or operate commercially, with the exception of voluntary search and rescue services
such as the RNLI. In these circumstances, we consider it essential that a comprehensive
impact assessment is produced and we welcome Ofcom’s commitment to do so. The
impact of the proposals is not simply the sum of the impact on individual users of spectrum,
if a ‘socially optimal’ allocation is to be achieved. There is also the potential for impacts on
citizens and consumers more generally, across a wide range, including safety of aviation
and shipping, pollution and other environmental impacts, and the costs and efficiency of
transport, including freight. Equally, we believe, there is a potential impact on the
Government PSA target for reliable and efficient transport networks to support economic
growth.
1.14 A comprehensive impact assessment, and an appraisal of the available options for
increasing spectrum efficiency, would also help to clarify the basis for the proposals. It is
not always clear whether the main objective is spectrum efficiency, or the improvement of
decision making. We accept that having a reliable basis for estimating the cost of
spectrum used would be helpful in promoting better decision making. However, it is not
clear that the UK’s cost estimates would be accepted in international regulatory
discussions, when few if any other states charge for spectrum used for public safety.
Some states which have a liberalised approach on spectrum, like the US and the
Netherlands, have nevertheless explicitly rejected the option of charging for aviation and
maritime use of spectrum. So UK arguments on spectrum efficiency in aviation and
maritime international discussions could be criticised as being driven by the objective of
reducing costs to UK industry, or to DfT, and this would be counter-productive.
1.14 In terms of incentive pricing, the Cave audit approach was cautious. It considered
that in some cases, the opportunity cost of internationally regulated spectrum was zero,
since trading or sharing was not possible. Government accepted this position, and the
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Forward Look made a commitment to the initial application of pricing, in selected bands.
Government’s aim is spectrum efficiency, and the objective proposed by Ofcom, that
pricing will increase awareness of spectrum costs, could contribute to efficiency. But the
introduction of pricing cannot inform past decisions, or change the timescale for
international regulation. This should be taken into account in the impact assessment and
options appraisal.
1.15 It is clear that the generalised incentive pricing approach developed by Ofcom’s
consultants is not a best fit for aviation and maritime, and nor is the comparison with
Business Radio usage, for technical reasons. Where there is international regulation,
responses to market signals are not possible and users cannot change to an alternative
technology or a less congested band. Where only a limited number of bands are
available under international regulation, congestion may be unavoidable. For instance,
ports have to use designated ‘port operations’ channels: these are co-ordinated by
Ofcom.
1.16 If there are historic allocations of spectrum, which have not been increased and
traffic has increased significantly in the intervening period, ‘congestion’ could mean that
the bands are being used to maximum capacity as a consequence of previous efficiency
gains. In aviation, the number of passengers using UK airports quadrupled between 1980
and 2006 and the number of air transport movements at these airports has doubled.
Over the same period, the rates of passenger fatality, per billion passenger kilometres,
dropped from 2 to flatlining at zero. The use of spectrum in air traffic management was,
of course, only one contributing factor to this increase in efficiency and safety, but it was
an essential one. One good example of increased efficiency is the phased change of
aeronautical VHF channel spacing from 25 KHz to 8.33 KHz – allowing more use of the
same frequency allocation.
1.17 DfT accepts, however, that ‘congestion’ might arguably be an indication that more
economically valuable uses of spectrum are being crowded out. We also accept that,
over a longer timescale, there is potential for newer technologies to be applied to aviation
and maritime spectrum use. This could enable transport users to use either less
spectrum, or spectrum of a type which is less desirable for the communications industries,
or both. None of these changes can be introduced at short notice, and in our view,
incentive pricing will make little if any positive contribution to bringing them about. For
one thing, the high costs of changing technology, added to the cost of spectrum, may be
a disincentive. For any safety-critical use, and some uses which are safety-related, a
complex technical assessment is likely to be required before a new frequency can be
adopted, or type approval of equipment can be granted. The technical criteria for such an
assessment are not yet available, and work is continuing to scope them through the
interdepartmental Radar Group. DfT is committed to this work.
1.18 These technical assurances are essential requirements for any changes of
frequency. The Government is committed to ensuring that aviation and maritime traffic
operates safely in the UK’s airspace and around its coasts. Sea passenger traffic has not
increased as much as for aviation, and (as with aircraft) ships have got larger, so the
number of commercial arrivals in UK ports has not increased. However, the volume of
freight carried is over a third higher than in 1980. Recreational traffic has also increased
significantly.
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1.19 Another factor which Government must consider is the importance of protecting the
sea and the coast from accidental pollution. Both the International Maritime Organisation
(IMO) and the European Community have put in place regulations for carriage of
automatic identification system (AIS) technology. Under the EC requirements, ship
movements are monitored through a network of shore-based stations. Ship-source
pollution can create significant economic as well as environmental damage.
1.20 In the light of Government commitments on safety and international obligations,
and the clear conclusions of the Cave audit, DfT remains of the view that some
internationally regulated spectrum has a zero opportunity cost. Ofcom takes a different
view, based on the consideration of other demands for the spectrum. That is, if there are
strong grounds for believing that the competing use is valuable, then incentive pricing is
valid. Government has not accepted this development of the Cave approach. It is also
questionable whether Ofcom’s concept of a ‘long run opportunity cost’ would be
acceptable in international negotiations. An OECD report of April 2005, Secondary
markets for spectrum: policy issues concluded that the secondary market for spectrum
remains under-developed in those relatively few countries that have introduced it. In most
countries, including those that support a market approach, public services are allocated a
significant portion of valuable spectrum. Moreover,countries that have introduced
spectrum trading continue to reserve spectrum for public services, including aviation and
maritime. Some countries have argued that spectrum used to support services for which
governments require universal service provision should be deemed unsuitable for
secondary trading and should thus be ring-fenced.
1.21 In the context of international regulation, we disagree with Ofcom that users might
be encouraged by low spectrum prices to lobby ICAO or IMO for exclusive use of
spectrum which was not in fact required. Such arguments would not be acceptable, and
would certainly not be supported by the Government. We agree that users should not be
able to ‘freeload’ because of international requirements – eg by using a free
internationally required channel in preference to paying charges for a UK-specified
channel. However, it is not a tenable argument that in aviation and maritime, the same
services could be offered in compliance with an international requirement or not in
compliance with it, since the safety regulators would not allow operators to circumvent, or
substitute for, international regulations. In terms of HMG’s international obligations, it is
immaterial whether frequencies are used by some or no UK users, and whether these
users are fixed or mobile. If the frequency is required to be made available for
international use, it must not be constrained by UK-specific limitations.
Question 2: If you consider that our proposals for pricing ground station users for
any spectrum would be likely to have a detrimental impact on safety, please let us
know. In order for us to understand your assessment fully, it would be helpful if
you could outline the mechanisms whereby this might happen.
2.1
The Government is committed to maintaining safety standards and, where
possible, improving safety performance. Commercial aviation and maritime operators
and service providers regard safety as an essential business requirement. They cannot
therefore respond to pricing signals where safety requirements are mandated, because
there is no alternative option or frequency.
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2.2
Recreational users and small ports or airports might be deterred from using radar
or VHF communications because of increased cost. DfT, MCA and the CAA would have
to assess whether this increased risks overall, and if necessary, introduce regulation
where voluntary measures currently apply. This would unnecessarily increase the burden
of regulation, contrary to Government policy.
2.3
The responses of individual users are unlikely to provide a comprehensive basis
for any decisions on potential safety impacts, and this should be considered in the full
impact assessment of the proposals. DfT is keen to help by providing information, from
established transport models, on safety, interoperability, and environmental costs and
benefits. Any impact on transport efficiency would also have to be included – for instance
if there had to be a reduction in the volume of traffic through a shipping channel or port, or
the runway rate at an airport. Options appraisal might be necessary to consider whether
creating a requirement for regulation by charging for spectrum was the optimum outcome.
Question 3: Do you have any evidence which indicates that AIP charged to ground
stations could have a material detrimental impact on UK competitiveness?
3.1
Just as for safety, the responses of individual spectrum users should be
considered as part of a comprehensive impact assessment of the proposals. Both the
aviation and the maritime industries make important contributions to the competitiveness
of the UK economy, and evidence is available in Treasury reports. The Eddington
Report, commissioned by the Treasury and DfT and published in December 2006,
examined the long-term links between transport and the UK's economic productivity,
growth and stability. There is also evidence that aviation is particularly important for
service industries and other key growth sectors of the economy.
3.2
NATS and the three largest airports – Heathrow, Gatwick and Stansted - are
subject to price cap regulation by the CAA. As part of this, the CAA sets the maximum
charges that NATS and the airports are permitted to levy, generally every 5 years. This
may limit their ability to pass on directly any increased charges for spectrum.
Question 4: Taking into account the information available in this document,
including that set out in Annex 5, our initial views on VHF radiocommunications
licence fees and on the reference rates for bands in other uses, and any
information that you have about the organisations to whom we are proposing the
charge fees, please provide any evidence that you think is relevant to us in
considering the financial impact of the fees we intend to propose for VHF
radiocommunications, or for other uses.
4.1
DfT is anxious to work co-operatively with Ofcom to ensure that all relevant
information is considered in the impact assessment, to ensure it is comprehensive. We
consider this could be best achieved by collaboration, as envisaged in the Government
response to the Cave audit. Our views on the principles on which Ofcom has based the
current proposals are set out in this response. Our views on specific bands are in line
with the Government response to the Cave audit and the 2007 Forward Look. We also
support the detailed comments made by MCA and CAA in their responses.
Question 5: Do you agree that there is little to be gained, in terms of economic
efficiency, from charging AIP to WT Act licences for aircraft?
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5.1
The Cave recommendation was that Ofcom should review this in conjunction with
the CAA, and we note the CAA’s view that the application of reasonable fees could be an
effective tool to incentivise operators to move to radios which use less spectrum. Since
the Government’s objective is to increase the efficiency of spectrum use, we believe this
option should be considered by Ofcom. In terms of Ofcom’s own objective, that users
should recognise the costs they impose on society by using spectrum, it would seem
inconsistent to exempt some users from the proposed charges.
5.2
We do not see any cogent evidence for Ofcom’s assumption, in paragraph 4.8, that
‘the incentive properties of AIP are expected to operate most strongly on users of
aeronautical spectrum’.
Question 6: Do you consider that we should discount fees for any particular user or
type of user? Specifically, do you consider that there should be a discount for
charities whose object is the safety of human life in an emergency?
6.1
We consider that the charging proposals should be internally consistent. Ofcom’s
current licence fees are discounted for maritime licences held by charities which have as
their object the safety of human life in an emergency. No reasoning is given in the
consultation paper that would support any decision by Ofcom to change these
arrangements.
6.2
As MCA notes, Government has committed to provide rescue services at sea. DfT
recognises and commends the valuable contribution made by the RNLI and other
voluntary search and rescue services.
6.3
We also consider that the difference between ‘safety of life in an emergency’ and
‘safety of life’ operational functions should be clarified in the impact assessment of the
proposals, as CAA suggests.
Question 7: Do you agree that Ofcom should apply AIP to ground stations’ use of
maritime and aeronautical VHF radiocommunications channels, to help manage
growing congestion in current use and to ensure that the cost of denying access to
this spectrum by potential alternative applications is faced by current users?
7.1
We agree with the comments made by MCA and CAA. Evidence on congestion in
these channels should be given in the impact assessment, differentiating the aviation and
maritime conditions. It is not clear that Ofcom has considered whether applying AIP will
increase efficiency.
7.2
DfT does not agree that policy decisions on regulated spectrum used by licensees
would be better informed by incentive arrangements for DfT. The Government is
committed to increasing the efficiency of spectrum use, and incentive payments by
individual departments would not strengthen that commitment. Departments are already
required to take into account the costs and benefits of international and EC regulation, for
instance in the assessments which have to be produced for all regulatory proposals and
the explanatory memoranda which are laid before the European scrutiny committees.
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7.3
Unless there were no constraints on public spending, incentive payments could
reduce the funding otherwise available for promoting spectrum efficiency – for instance
through research to ensure adequate protection against interference in band sharing, or
for the European Single Sky programme. We do not understand the proposal that
Government should decide on the incentive arrangements for bands used only by
airborne users. This is a decision for Ofcom as the spectrum regulator.
Question 8: Do you agree with our initial view that it would be appropriate to apply
a pricing system similar to that already existing for Business Radio licences to
maritime and aeronautical VHF radiocommunications? If not, what are your
reasons for proposing that we should develop a fee structure for maritime and
aeronautical VHF channels which is distinct from that already established for
Business Radio?
8.1
In the absence of an impact assessment, there is no evidence on which to base a
response to this question. In paragraph 1.14 of the consultation paper, the reason given
for introducing pricing for these VHF channels is that the pricing regime for Business
Radio provides an ‘effective and reasonable template’. This is a matter of administrative
efficiency, not efficiency in spectrum use. We support the comments made by MCA and
CAA on the inadequacy of the model.
Question 9: Are there any short term reasons specific to the sector(s) why it would
not be appropriate to apply fees from April 2009?
9.1
We consider it inappropriate to consider only the short term impact on the sectors,
rather than the opportunities for producing longer-term efficiency in spectrum use.
However, we accept that the short term impact on aviation and maritime industries should
be carefully considered in any decision on the timing of pricing changes.
9.2
We consider the timescale proposed is too short to to be consistent with the
recommendations of the Government’s Better Regulation guidelines, including the
production of a comprehensive impact assessment, and with Ofcom’s practice in other
sectors. The comments made by MCA and CAA about timescales should also be taken
into account.
Question 10: Ofcom would welcome stakeholders’ views on the factors which
should be taken into account in apportioning fees between individual users of
radars and racons.
10.1 These are complex technical questions, on which MCA and CAA stand ready to
advise Ofcom. Stakeholders have also provided advice in meetings with Ofcom. We
would expect Ofcom to take this into account in reviewing the technical basis of its
proposals.
Question 11: Do you agree with our initial view that a reference rate of £126k per 1
MHz of national spectrum for L band and S band radar spectrum would achieve an
appropriate balance between providing incentives to ensure efficient use of
spectrum while guarding against the risks of regulatory failure in setting the
reference rate too high? If you consider a different rate would be more appropriate,
please provide any evidence that you think we should take into account.
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and
Question 12: Do you agree with our initial view that a reference rate of £25k per
single MHz of national spectrum would be appropriate for deriving fees for licences
to use X band radar.
11/12.1
We believe that both these questions are premature, and that Ofcom should
provide more evidence that the rates proposed will increase spectrum efficiency, in the
light of international and safety constraints, and the technical characteristics of band use.
Question 13: Do you agree that, generally, spectrum used by aeronautical
radionavigation aids is currently uncongested? Do you believe that this may
change during the next few years and, if so, approximately when?
13.1
We strongly endorse the CAA’s response to this question.
Question 14: Do you agree with the basis on which Ofcom has arrived at its initial
view on reference rates for aeronautical radionavigation aids?
14.1 For the reasons given in our response to Question 7, we do not accept that there
are potential benefits in DfT either recognising the opportunity cost, or making payments,
in respect of these bands. The potential damage to the UK’s credibility in arguing for
spectrum efficiency is probably not directly related to the amount and scale of the fees
proposed. The direct impact of fees would be felt either as an additional funding
requirement at a time of public sector constraints, or as a reduction in the amount of the
money available for departmental priorities, including spectrum efficiency.
Annex 5 and Annex 6
We would welcome the opportunity to discuss with Ofcom our detailed comments on
these Annexes, including the impact assessment of the proposals and the evidence base
for them.
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