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Spectrum’s value to the UK economy

Spectrum: a scarce resource Chris Woolford Director, Spectrum and International Policy 2 December 2008. Spectrum’s value to the UK economy. Spectrum is a finite and valuable natural resource. It is the essential input for all forms of wireless communication.

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Spectrum’s value to the UK economy

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  1. Spectrum: a scarce resource Chris WoolfordDirector, Spectrum and International Policy2 December 2008

  2. Spectrum’s value to the UK economy Spectrum is a finite and valuable natural resource. It is the essential input for all forms of wireless communication. Business activity that is largely dependent on spectrum contributes around £40bn (over 3%) annually to UK GDP +59% in real terms *estimate of consumer + producer surplus Source: Europe Economics, 2006

  3. Wide range of different uses of the radio spectrum Radio TV (terrestrial & satellite) Cellular (2G, 3G) Defence & security Aeronautical and maritime Emergency services Astronomy Businessradio Satellites

  4. Take up of new wireless services

  5. Command & control All decisions made by the regulator Market mechanisms Decisions made in the market Licence-exemption Regulator sets rules, but users not licensed Approach that has historically been adopted for over 90% of the spectrum Approach advocated by Cave Reviews in UK. Trading, liberalisation, technology & use neutrality Approach currently adopted for 9% of spectrum. Some argue for radical increase There are three ways to manage spectrum

  6. Three ways - continued Command & control Licence-exemption Market mechanisms

  7. The effects of regulation are huge Numerous studies have shown that existing spectrum policy has very large effects: • An assessment of FCC spectrum management suggests costs to the US economy of $77 billion per annum (lack of spectrum for mobile, price effects) (Ellig, 2005) • Other studies show delay in innovation in US in 1980s reduced consumer welfare by $34 billion (Hausman, 2002) • Consumer benefits of UK 3G auction estimated at £40 billion NPV (Hazlett, Munoz, 2004) Excessive regulation and intervention, often poorly justified. Lack of flexibility, leading to extra scarcity, adverse effects on competition, innovation, and rigid industry structures

  8. Ofcom’s spectrum vision • Spectrum should be free of technology, policy and usage constraints as far as possible • It should be simple and transparent for licence holders to change the ownership and use of spectrum • Rights of spectrum users should be clearly defined and users should feel comfortable that they will not be changed without good cause Spectrum Framework Review, June 2005

  9. Major priorities for Ofcom • releasing more spectrum, to allow new services to develop • Digital Dividend, 2.6 GHz • public sector spectrum eg 3.4-3.6 GHz, 2.7-3.1 GHz • liberalisation and trading of spectrum now in use - 2G bands • licence exemption - Cognitive technologies

  10. WiMAX in the UK • Two operators using spectrum at 3.4 – 3.6 GHz • 2.6 GHz award scheduled for winter 2008/9 • Currently subject to litigation • Technology neutral award will allow flexibility between FDD and TDD WiFi in the UK Thousands of hotspots in the UK in range of locations (airports, cafes, hotels…) Number of companies that provide service

  11. Conclusions • Spectrum is a scarce resource • Huge importance to the economy • Increasing demand from ever greater range of services which are dependent on spectrum • Demand focused on certain spectrum bands which are very scarce • Regulators should not attempt to pick winning technologies • Increasingly impossible in dynamic electronic communication markets • Costs of getting such decisions wrong are huge • Technology and service neutral policies combined with market mechanisms will promote innovation and competition • Gives spectrum users maximum flexibility to deliver the services most wanted by consumers • Spectrum trading will get spectrum into the hands of the user that will make best use of it • Promotes technology development, the provision of new services and maximises benefits for citizens and consumers

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