Presentation on the regulation of radiofrequency spectrum used for mobile telecommunications. What is spectrum ? How is it regulated ? What are the key commercial issues ?

1. Spectrum licensing
Regulation of radiofrequency spectrum
December 2013
Dr Martyn Taylor
Partner

2. Overview
What is spectrum?
•
Electromagnetic radiation
•
Which telecoms technologies use which frequencies
•
How do mobile networks use spectrum
•
Interference management
How is it regulated?
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International Radio Regulations
•
Spectrum planning
•
Licensing of spectrum
•
Approaches of different jurisdictions
Key commercial issues
•
•
Licensing fees
•
Restrictions on use
•
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Ownership and transferability
Risk of resumption
Spectrum licensing – Regulation of radiofrequency spectrum
Dr Martyn Taylor
Partner
+61 45 777 4711 (Mobile)
martyn.taylor@nortonrose.com

3. 1. What is radiofrequency spectrum ?
•
Energy is conveyed by electromagnetic waves that
propagate outward from an energy source at the
speed of light.
•
Electromagnetic waves have different wavelengths
and hence frequencies (measured in Hertz).
1 Hertz (Hz) = 1 wavelength per second
•
The electromagnetic spectrum is the complete set of
wavelengths/frequencies, including visible light.
•
The radiofrequency spectrum is the set of frequencies
(3kHz – 300GHz) associated with radio waves.
•
Radio waves have wavelengths of 1mm to 100km
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Spectrum licensing – Regulation of radiofrequency spectrum

4. How are radio waves created and received?
Marconi won the Nobel prize for physics in 1909.
Radio transmitter
•
When a direct electrical current is applied to a wire the current
flow creates an electromagnetic field around the wire.
•
Switching on this field sends an electromagnetic wave outward
from the wire at the speed of light. If the current is removed, the
field collapses and sends a wave.
•
If the current is repeatedly switched on an off (or reversed), a
series of waves is propagated at a discrete frequency.
Radio receiver
•
When the electromagnetic wave hits another wire (e.g., an aerial
on a phone), it induces a current in the wire.
•
Tuners are used to detect the current at particular wavelengths.
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Spectrum licensing – Regulation of radiofrequency spectrum

5. Which are the better mobile frequencies?
•
•
Different frequencies have different characteristics
regarding site coverage and building penetration.
Frequency
Wavelength
•
Lower frequencies have less attenuation (i.e., pass
through walls with less energy loss), so better inbuilding penetration. Signals also travel further,
giving reduced cellular tower density.
•
Higher frequencies give greater bandwidth.
•
850MHz is best suited to sparsely
populated, densely vegetated, or highly
urbanised environments where signal
penetration is the key focus.
•
2GHz is best suited to densely populated
areas where network capacity and
bandwidth is the key focus.
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Spectrum licensing – Regulation of radiofrequency spectrum
60 cm
850MHz
35 cm
1GHz
30 cm
2GHz
Mobile antenna are traditionally a half or quarter a
wavelength long (850MHz = 9cm; iPhone = 12cm).
500Mhz
4 cm
5GHz
1.5 cm

6. How do mobile networks use spectrum?
Multiple access technique
Mechanism for multiple transmitters to
broadcast in the same block of frequency.
Frequency Division Multiple Access (FDMA):
Each call is carried on a separate
frequency channel.
Time Division Multiple Access (TDMA):
Each frequency channel is divided into a
set of timeslots. One timeslot per call.
Code Division Multiple Access (CDMA):
Duplexing technique
Mechanism for differentiating uplink (talk)
and downlink (receive) channels.
Frequency Division Duplexing (FDD):
Two frequency bands are used, one
containing the uplink channel (talk) and
the other the downlink channel (receive).
FDD requires ‘paired’ spectrum bands.
Time Division Duplexing (TDD):
The uplink and downlink channels are
carried in the same frequency band.
Radio signals are spread across a band
of spectrum (know as ‘spread-spectrum’).
Each transmitter is assigned a code and
the call is encoded. At the receiving end,
the call is isolated by decoding the signal.
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Spectrum licensing – Regulation of radiofrequency spectrum
2G (GSM) uses FDMA/TDMA and FDD
3G (W-CDMA) uses CDMA and FDD
4G (LTE) uses FDMA/TDMA and FDD or TDD

7. Management of radio interference
•
If signals are broadcast at the same frequency by different
transmitters, they interfere with each other and may be difficult
for a receiver to differentiate, resulting in radio interference.
•
Potential legal solutions to interference issues include:
•
•
regulatory dispute settlement; and
•
•
commercial negotiation and common law litigation;
pre-determined co-ordination of radio emissions.
In practice, interference is now managed by the combined effects of
licensing, regulations, standards and frequency planning.
•
Unintentional emissions are subject to regulations and technical
standards. For example, commercial electronic products must comply
with maximum permitted radio emission requirements.
•
Intentional emissions are subject to licensing and frequency planning.
•
New Zealand enacted the world’s first radiocommunications laws in 1903.
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Spectrum licensing – Regulation of radiofrequency spectrum

8. 2. How and why is spectrum regulated ?
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Spectrum is regulated by Government for two key reasons:
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co-ordination of radio emissions so to avoid radio interference;
•
allocation of scarce radiofrequency spectrum between competing uses.
•
Radiofrequency signals do not stop at the border, meaning that crossborder interference disputes arise, requiring an international solution.
•
Modern spectrum regulation therefore involves the following key elements:
•
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national frequency planning, typically giving effect to the agreed
international standards;
•
licensing for intentional emissions, typically by way of class licences,
apparatus licenses and/or spectrum licences;
•
regulations and standards to minimise unintentional emissions; and
•
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international co-ordination of frequency planning;
procedures to resolve any remaining interference disputes.
Spectrum licensing – Regulation of radiofrequency spectrum

9. ITU Radio Regulations – international co-ordination
•
The first radio regulations were concluded in Berlin in 1906.
•
The current “Radio Regulations” are a legally binding intergovernmental
treaty of the International Telecommunication Union (ITU).
•
The ITU is a specialized agency of the United Nations which
coordinates the global operation of telecommunication networks.
•
The Radio Regulations incorporate the Final Acts of the World
Radiocommunication Conferences, essentially meetings between all
nations to agree binding resolutions and non-binding recommendations.
•
The Radio Regulations define, among other matters:
•
•
procedures for the coordination and notification of frequency
assignments by national governments; and
•
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the allocation of different frequency bands to different services;
mandatory technical parameters to be observed by transmitters.
Spectrum licensing – Regulation of radiofrequency spectrum

10. National spectrum planning
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Spectrum licensing – Regulation of radiofrequency spectrum

11. Class licensing - communal use
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Typically reserved for low emission devices that cause
limited interference. Such devices can co-exist without
the need for greater frequency co-ordination.
•
Examples: airport body scanning machines; industrial, scientific and
medical equipment; radio frequency identification (RFID) for stock
control and monitoring; bluetooth and Wi-Fi transmitters
•
Class licences are communal so are not held by an entity. A transmitter
can either be used as of right within the scope of the class licence, or a
simple registration under the class licence could occur required.
•
Registration may involve payment of a minimal registration fee.
•
The class licence will typically set out requirements regarding the
permitted radiofrequency emissions and the permitted maximum power
of those emissions.
•
In some jurisdictions, class licensed frequency bands may also be
referred to as ‘unlicensed’ bands.
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Spectrum licensing – Regulation of radiofrequency spectrum

12. Apparatus licensing - particular equipment
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A licence is issued for a particular transmitter at a particular location for
a particular use.
•
The licence gives ‘first in time’ priority to the holder of the licence
against any other entity in relation to any disputes over interference.
•
Apparatus licences are normally acquired ‘over the counter’ and tend
to be short term in nature, typically between 3 and 5 years.
•
An administrative pricing arrangement usually applies, often in the form
of annual fees plus an up-front application fee. These fees may
involve a scarcity premium as well as administrative cost recovery.
•
Apparatus licences do not confer exclusivity, so have little intrinsic
value (except providing a right to operate a particular transmitter).
•
Most regimes have a combination of class, apparatus and spectrum
licensing, including hybrid licensing constructs. Australia – all 3;
Philippines – hybrid; Japan – apparatus, but undergoing reform.
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Spectrum licensing – Regulation of radiofrequency spectrum

13. Spectrum licensing - exclusive use
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A spectrum license for a particular band gives the holder of
the licence the exclusive right to use and manage the frequency band
in a pre-determined geographic area.
•
The licences are long-term in duration, typically 15 - 25 years. They
are intended to correspond with the expected life of a mobile network.
•
A spectrum licence normally confers various rights and obligations on
the licensee. However, the licensee normally has a reasonable
amount of flexibility regarding the use of the band.
•
Spectrum licences normally involve a ‘market based approach’ and
hence may be traded and transferred. The licensee can normally sublicence the use of the spectrum to other users.
•
In most jurisdictions, mobile networks would have been deployed
under spectrum licences. However, this is not always the case.
•
Telecommunications regulators sometimes place limits, or caps, on the
amount of spectrum that can be licensed to a single operator, thus
ensure that an incumbent cannot hoard spectrum as a barrier to entry.
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Spectrum licensing – Regulation of radiofrequency spectrum

14. 3. Key commercial issues
Country and regulatory risks remain a key issue
Example: Indian 2G spectrum scandal (2008)
•
Politicians and government officials in India were alleged to be illegally
undercharging for 2G spectrum licenses, resulting in losses to Indian
taxpayers estimated at up to USD 27 billion.
•
Various criminal prosecutions are continuing in India, including a prosecution
of the former Minister of Communications. Various allegations of corruption
have also been made in those prosecutions.
•
The Supreme Court of India declared the allotment of 2G spectrum as
"unconstitutional and arbitrary" and quashed all 122 licenses issued in 2008.
As a result, ownership of the spectrum reverted to the State.
•
A number of telecoms operators lost hundreds of millions of dollars as a
result. Operators reputed to have suffered substantial losses include Telenor,
Axiata, Etisalat, Batelco and Tata.
•
Ranked by TIME as #2 on global abuses of power list, beaten by Watergate.
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Spectrum licensing – Regulation of radiofrequency spectrum

15. Ownership and transferability
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Key issues in due diligence:
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What is the bundle of ownership rights in the spectrum?
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Can such ownership rights be transferred and, if so, how?
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Most jurisdictions consider spectrum the exclusive property of the State.
However, the State may confer property rights in spectrum to private entities.
•
The bundle of ownership rights conferred by the State depends on the particular
regime. In most instances, a statutory “right of use” is conferred.
•
•
•
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At the more flexible end of the continuum, such rights are fully tradeable and
may be sub-divided and sub-licensed. Transfer can occur by way of simple
registration without any need for formal regulatory consents.
At the less flexible end of the continuum, such rights are allocated to a
particular entity for its personal use for a specific telecoms purpose and
cannot be transferred, sub-licensed or used by any other entity.
The various Asian jurisdictions lie on a continuum between these to extremes.
Different models also apply for different licence types and frequency bands.
Spectrum licensing – Regulation of radiofrequency spectrum

16. Licensing fees and renewals
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Licensing fees are affected by the licensing model
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If spectrum licences are allocated on an administrative
basis (eg beauty parade), then licence fees are typically
set as periodic annual charges.
•
If spectrum licences are allocated by auction or tender, the
licence fees are determined by a competitive bid process.
•
Key questions include:
•
•
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should fees include a scarcity premium for congested
bands in order to encourage efficiency?
•
•
should fees be based on admin cost recovery?
should fees be market benchmarked?
Many of the original 2G spectrum licences are due for
renewal. A key issue is whether such licences should be
renewed or reallocated and, if so, at what price.
Spectrum licensing – Regulation of radiofrequency spectrum

17. Restrictions on use
•
Spectrum licences typically contain various restrictions on the
use of the spectrum.
•
Generally all spectrum licences will:
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restrict radio emissions within certain levels and apply international
standards as set out in the Radio Regulations;
•
apply national frequency plans, so will be restricted to a general use
(e.g., mobile cellular networks, satellite networks).
•
Restrictions on use become an issue where the spectrum is not technologyneutral and sets out the permitted use with a high degree of granularity.
•
Example: can a 2G GSM or Wireless Broadband licence be used for 4G LTE?
•
In some instances, the spectrum licence may be tied to the underlying
telecommunications licence. The telecoms licence may then require the
licensee to deploy a particular network and technology.
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Spectrum licensing – Regulation of radiofrequency spectrum

18. Risk of resumption
•
Generally, all spectrum licences involve some risk of resumption. The
State normally reserves for itself the right to revoke licences if required
due to changes in radiofrequency plans.
•
Given that radiofrequency planning is normally linked to the ITU Radio
Regulations, in practice the risk of resumption is low. Many nations
also provide for compensation if resumption occurs.
•
The greater risk arises in the context of failures to meet various licence
conditions. A contravention of a licence condition can sometimes
result in the forfeiture of the licence.
•
Some jurisdictions also impose ‘use it or lose it’ conditions on spectrum
licences (or network licences to which spectrum licences are linked).
These may be automatic or at the discretion of the regulator.
•
If a network is not deployed to meet certain requirements by certain
milestones, the licence may be revoked by the state and reallocated to
another party.
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Spectrum licensing – Regulation of radiofrequency spectrum

19. Spectrum auctions
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Because spectrum is centrally allocated by the State, it is possible
for the State to extract a scarcity rent for the allocation of certain
spectrum that is in high demand.
•
An auction is generally recognised as the means for the State to
extract an optimal scarcity rent.
•
Australia used a ‘combinatorial clock’ auction for the allocation of its
700MHz spectrum and 2.5GHz spectrum in 2013. (Multiple bidding
rounds for multiple bands of spectrum).
•
A reserve price is normally set for the auction and bids are submitted
electronically in each round via sophisticated software.
•
A policy issue with spectrum auctions is that they result in the payment
of substantial scarcity rents. Accordingly, they tend to favour
incumbents with deep pockets as a barrier to entry. They also result
in higher costs that are ultimately paid by end users of mobile services.
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Spectrum licensing – Regulation of radiofrequency spectrum

20. Case study: Digital dividend spectrum
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Analogue broadcasting technologies (radio and television) have
traditionally used substantial spectrum in bands 174 - 230 MHz (VHF)
and 470 - 862 MHz (UHF). These bands provide greater coverage and
high building penetration.
•
Digital broadcasting technologies use much less spectrum. More digital
channels can be offered and some of the spectrum can be reallocated for
other purposes.
•
The ITU redesignated the 700MHz frequency band in 2007 so that it
could be used for either mobiles or broadcasting. The band provides
greater coverage and penetration, but is still appropriate for mobiles.
•
As the digital switchover from analogue to digital television occurs, the
digital broadcasters will use different spectrum and 700MHz will be free.
•
The ability to auction the 700MHz spectrum has provided Governments
with a so-called ‘digital dividend’.
•
The 700MHz spectrum is ‘waterfront property’, so is particularly valuable.
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Spectrum licensing – Regulation of radiofrequency spectrum

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Spectrum licensing – Regulation of radiofrequency spectrum