Radio Spectrum Policy and Management
A Turning Point?
Gérard POGOREL
ENST, Paris
<[email protected]>
Exerpt from Communication & Strategies 49/2003
Radio Spectrum Policy and Management: A Turning Point?
Growing requirements on radio spectrum usage have led, in the last decade, to a
search for greater technical and economic efficiency. However, some point to a
conflict between achieving economies of scale through technical standardisation
– which requires rigid ties between frequency band, service(s), and
technology(ies) – on the one hand and, on the other, achieving efficiency
through increased flexibility by relaxing those ties, and by allowing the
existence of diverse technologies, and possibly services, on the same frequency
bands.
Predominant in the debate has been the idea that granting extended property
rights over the radio spectrum was the prerequisite for more efficient usage. In
this sense, the introduction of new services and technologies (mobile, for
instance), and management of the newly reorganised portions of the spectrum,
have been influenced above all by a pervasive market paradigm. It translates
into the extension of property rights and the corresponding payments – namely
fees for frequency usage and licenses, which have been introduced in many
countries. In some cases, these fees have been determined through an auction
process. In other cases, they cover only management, monitoring and control
costs. But increasingly, administrative procedures (“beauty contests”) have
tended to approximate, or mimic, market prices. Auction procedures have been
used for PCS licenses in the USA since 1993, and were used for awarding
UMTS licenses, like for instance in the UK and Germany in 2000.
A combination of several factors have now (March 2003) given rise to a heated
debate that encompasses the full range of issues relating to radio spectrum
management and processes – a debate which could lead to a major turning point
in the radio spectrum management process.
- The UMTS licensing process in Europe has been widely criticised. The
absence of a coherent scheme across the European Community has sent
negative signals to the market experiencing its lowest point ever, coinciding
with a drastic reversal in IT industry prospects. For those countries like the
UK and Germany which have upheld the outcome of license auction, the
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resulting windfall for government budgets now appears as an unjustifiable
boon. Some even hold the sums paid at auction as being partially responsible
for the crisis affecting major telecom operators in Europe.
- The growing and largely unexpected ubiquity of R-LAN - and especially WiFi technologies, operating on unlicensed bands, has led to speculation over
the potential of innovative, more flexible and efficient ways to manage the
spectrum.
- The actual, present and future level of radio spectrum scarcity is being
questioned. The transition from analogue to digital TV will make frequency
bands available. Some UMTS frequency bands might be left unused. Field
surveys geared to gaining a better knowledge of spectrum users and usage,
have identified non-permanent, and possibly inefficient, users and uses of all
kinds. Existing spectrum re-farming procedures have not been sufficiently
wide-reaching. Spectrum trading, which already exists in Australia and
Canada, is also being considered for the future in the U.S. and the E.U.
- Spread spectrum, CDMA, TDMA, etc., and cells have enabled the expansion
of (digital) mobile telephony. The future may hold even more far-reaching
changes from a technological perspective. Present or future radio
technologies seem to make spectrum use potentially more efficient, flexible
and adaptable. New radio technologies may change, either partially or totally,
the way we look at existing and future spectrum usage.
- A correlated issue: discerning the institutional arrangements and regimes at
the domestic and international levels, which are best suited to properly
addressing those issues.
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Alternative regimes of spectrum management: a research agenda
There are concerns in most of the world’s regions about the future rules and
regulation of the radio spectrum. Many countries are currently engaged in a
review process. But not much has been done in terms of co-ordinating or even
comparing these efforts. To give a few examples: Australia, the UK, and the
U.S. performed extensive reviews in 2002. The CEPT has also contributed to
some extent. The European Union created two committees in September 2002 to
deal with the radio spectrum.
Alternative and possibly divergent choices and approaches could be taken when
establishing future radio spectrum management policies.
We will try here to briefly list those options and alternatives as they emerge
from the present debates taking place at the academic and political levels.
Nature of the radio spectrum and objectives for its management
As it stands, the radio spectrum is widely considered to be public domain.
Interestingly enough, this issue is generally dealt with summarily in current
literature. Most authors addressing the issue begin with one of two opposing
assertions: the radio spectrum is part of the public domain, or is a public asset
or, conversely, is wrongly considered a public asset and should soon be
privatised. This is an instance where ideology often precedes methodology. In
the end, only a minority advocate full privatisation. The majority holds to the
notion that the spectrum should retain its definition of public domain, but has
not precluded the granting of private “property rights.” Spectrum usage has
increasingly followed this pattern, in fact. Exclusive usage rights have been
granted to licensees; the right to resell a license has also been granted, or is now
being considered.
The absence of contradiction between the public domain concept and property
rights may seem to put the matter to rest. Three issues still need to be
considered, however:
- Where does the correlation lie between the “property” nature of the spectrum
and the “right and capacity for people to communicate,” with which the
spectrum is often associated (in telecommunications and broadcasting). This
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might give rise to “access” considerations of various kinds, such as essential
facility, or even freely accessible “commons.”
- What are the public objectives of spectrum management: value
maximisation, consumer welfare, government budget, etc.
- How to secure public services in a changing radio spectrum environment.
The extent and flexibility of the government-controlled allocation
(planning) process
The prevalent spectrum management models all entail a government
agency(ies)-led allocation (planning) phase. It aims at reserving frequency bands
for the most appropriate uses and at preventing or limiting interferences.
In this respect, questions arise concerning:
- the treatment of interferences: should they be minimised or just “optimised,”
by combining technical feasibility and the handling of social costs
considerations;
- the obligation to perform specific services in specific bands (spectrumservice linkage or flexibility);
- the existence of a determined technology (standard) attached to those
services (service-technology linkage or flexibility).
The present spectrum planning processes are entrenched in longstanding
traditions. It would not be vain to further explore the issues of ties and
flexibility, in terms of consumer welfare and industrial economics.
The taxonomy of usage (property) rights
Coase (1959) introduced the discussion on the rationale behind considering the
spectrum “private property.” After a slow start, starting in the 1980s this idea
that spectrum should to a certain extent be considered “property” gradually
gained momentum, and by the 1990s had achieved the status of overriding
paradigm. The notion of freely awarded property, however, sounds very much
like an oxymoron and, in most cases, it followed that property rights should be
paid for according to the terms of the “licence” (until now no full property rights
have been awarded).
The terms of these “property rights” themselves have been the subject of a great
many debates. The options concern:
- types of licensing, usage rights, exclusive or not (allowing easements)
- geographic coverage
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- service flexibility (the possibility of providing any service, a certain category
of services, or only one service)
- technological flexibility (the possibility of implementing the designated
services or categories of services, through any technology, a set of
technologies, or only one technology)
- limited or unlimited term of application; the issue of timeframes. Short terms
are supposed more in line with the “public” nature of the spectrum, and are
more open to change and innovation. Long-term implies stronger property
rights and is supposed to provide more visibility and certainty, although there
is a risk of rigidity in terms of competition and technological change.
Whether the term should be part of the administratively determined conditions
has been questioned. Some argue, for instance, that the public nature of the radio
spectrum demands short, strictly defined periods for licenses. Others insist that
industrial players need set, long-term licenses to develop their strategies. Some
have advocated that the lifespan itself should be left up to the market to
determine.
It should be noted that, conceptually speaking, property rights with full serviceand technological flexibility preclude any need for spectrum allocation. In this
case, we could move toward replacing the spectrum regulator by a Court to deal
with interference disputes from a legal standpoint.
It should also be noted that there is a natural conflict between flexibility and
stability and predictability. It is frequently pointed out that industry
requirements are contradictory in this respect.
The issue of spectrum trading
Full property rights would evidently be tradable. Licences have been tradable in
Australia and New Zealand for a decade. Whether and under what conditions,
license holders can re-sell them (“Secondary market” for spectrum or, more
precisely, for licences) is the subject of current debates taking place in the U.S.
and in Europe, as part of telecom regulation reviews. Member States have to
make a decision concerning this issue by July 2003.
The issue must be considered in the perspective of:
- a move toward an extension of property rights (in Roman legal terms: from
usus-usage only right, to abusus-disposal right included)
- a means of coping with difficulties arising form the sub-optimal process and
outcome of UMTS licensing in Europe, and to help in the bailout of suffering
telcos.
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Those pressing considerations should not, however, conflict with broader
considerations of the evolution of spectrum management over the long term.
The taxonomy of assignment procedures and fees
Given the current focus on “property rights,” the debate has being largely
concentrated on auctions vs. administrative procedures (beauty contests). In both
cases, assignment procedures (awarding licenses) have tended to involve a fee.
Types of fees include:
• an up front capital fee
• a “royalty” – percentage- fee or rent, alternatively:
• of an amount covering administrative costs only,
• an administratively determined amount aimed at providing an incentive
for efficient use of the spectrum.
• a fee determined through one of many types of auctions, hence:
• an up front payment,
• or a fixed “rent” or “royalty,”
• or a “rent” or “royalty” proportionate to a variable deemed significant
(turnover, income, profits, etc.), with a possibility of auctions taking place
to determine that percentage.
To what extent are technologies’ efficiency and flexibility capable
of radically changing the way the radio spectrum is used
A lively debate arose in 2002 on how far future radio technologies could change
the way the spectrum is used and managed.
A list of those technologies could include:
- Increased component (transmitter and receiver) resilience and tolerance to
interference,
- Software-defined radio (which would allow “agile radio,” dynamic spectrum
allocation), etc.,
- Mesh networks,
- Spectrum sharing and hopping,
- Spectrum on demand.
The use of these and similar technologies on some frequency bands would make
traditional spectrum planning and assignment obsolete on those bands, which
would then be easier to share, or even designate as “commons.”
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The question of spectrum commons revolves considerably around the extent to
which spectrum planning could be made more flexible and innovation-prone –
transmitters and receivers being able to gain access to more portions of the
spectrum without requesting licenses. The assessment of the feasibility and
impact of those technologies is still incomplete. On the technical side, it
involves the feasibility of software techniques like UWB, SDR, of hardware
multi-standard components, or combinations of the two. We will not delve here
into the issue of evolving technologies, their efficiency, flexibility, adaptability
and their impact on interferences and interference management.
Notwithstanding the existence of sound technical considerations on the one
hand, and of the inherent uncertainty of technical evolutions on the other, it
seems in many cases that ideology often supersedes scientific reasoning. A fully
actual survey of those technologies, and their potential in terms of management,
is needed. Their very definition (what precisely is SDR, for instance) also leaves
room for improvement.
The extension of unlicensed bands or commons is clearly both a technical and
economic policy issue. On the management side, this would result from the
decline of two powerfully established paradigms:
- a decline of the faith in technical determinism and clairvoyance, which would
undermine the spectrum planning and allocation process itself;
- a reversal in the trend towards ever more pervasive property-like usage
rights, whether restricted (licences) or extended (privatisation).
Naturally, this Spectrum as Commons debate is also connected to the more
general Commons vs. Property rights debate in the area of Intellectual Property.
It also involves the issue of Public infrastructure insofar as we can observe a
revival in the concept of making a public common infrastructure available to all.
This comes to uphold the special nature of information and communication
services as contributing to maintaining the integrity of the social fabric.
Transitions
In cases where changes are introduced, solutions must be found for the transition
process.
- technical transitions (spectrum re-farming);
- stages in the transitions from the old regimes to the new.
Conclusion and Institutional Arrangements
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To summarize, the present technological and paradigmatic evolution requires an
overall assessment of property rights, commons and administrative procedures,
and of their respective roles (on a backdrop of the issue of securing government
services).
These options should be weighed against the feasibility and flexibility provided
by future radio technologies.
These issues are being addressed in a number of forums: by the ITU at an
international level, by the CEPT and the European Commission in Europe and,
at the national level, by the competent government agencies (the FCC, for
instance). Noteworthy, however, is the fact that we are currently witnessing
parallel attempts at coming up with an overarching view of the totality of
spectrum-related issues. This has been the case in Australia, in the UK, and is
coming to be the case in the U.S. (FCC Spectrum Task Force), in CEPT
countries and in the European Union (Radio Spectrum Committee and Radio
Spectrum Policy Group). Although these exercises mention the need for an
internationally co-ordinated effort, their emphasis, and the constituencies
involved, do not all share the same international perspective. Some fear a
potential disruption of the present system and of the existing role of the ITU,
CEPT and other regional agencies, as loci of convergence and harmonisation of
radio spectrum policies.
Others favour a greater role for market mechanisms, with competition taking
place not only between firms, but also between technologies and even
institutional arrangements. One could actually imagine a world where
international co-ordination would give way to the lightly regulated interplay of
industrial strategies. The basic rationale is of course the notion that competition,
especially in situations of technical and market uncertainty, is the best bet for
maximising consumer welfare and economic efficiency. The contrasting
evolution scenarios have not yet been explored. Neither have potential market
structures and generic and specific regulatory tools. As an example, one could
consider that the unleashing of market forces on radio spectrum use could lead
to a situation similar to the one that exists in the PC industry. A restricted
number of dominant players would emerge from a competition phase. The
present state of economic analysis of industry organisation and competition, and
their impact on innovation processes, leaves open the question of whether this
should be viewed positively or negatively.
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BIBLIOGRAPHY
R.H. Coase, “The Federal Communications Commission,” J.L. & Econ. 1
(1959).
Electronic Communications Committee (ECC-CEPT)
"Refarming and secondary trading in a changing radio-communications
World", September 2002
http://www.ero.dk/
and
The role of spectrum pricing as a means of supporting spectrum management
http://www.ero.dk/doc98/official/pdf/REP076.PDF
Federal Communications Commission
Spectrum Policy Task Force Report
November 2002
http://www.fcc.gov/sptf/
Review of Radio-communications Acts and of the Market-Based Reforms and
Activities undertaken by the Australian Communications Authority
February 2002
http://www.pc.gov.au/inquiry/radiocomms/
Review of Radio Spectrum Management
An Independent review for the Department of Trade and Industry and HM
Treasury
By Professor Martin Cave
March 2002
http://www.spectrumreview.radio.gov.uk/
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