JRCL Response to the Government White Paper entitled
"Spectrum Management: Into the 21st Century"

The shareholders and members of the Joint Radio Company Ltd comprise the gas and electricity industries of the UK. Taken together, these industries account for some 3% of GDP, but interruption to the vital supplies provided by these industries would have a devastating impact on the whole of the British economy. Radio networks thus provide not only significant efficiency gains for these industries, but also provide resilience in cases of emergency and vital safety of life protection. As the appointed manager for the radio spectrum sub-allocated to the gas and electricity industries, JRC submits the following comments on the above document (with references in brackets to the relevant sections or chapters in the White Paper) ...

... recognising a need ...

• ... for change (ch3);
• ... for an economic influence over the allocation of radio spectrum in the UK and internationally;
• ... for a more rational process for assignment of radio licences (7);

... welcomes ...

• ... the changes which Government and Radiocommunications Agency have already introduced into management of the radio spectrum in the UK (5);
• ... the consultation process for the proposed new legislation;
• ... the proposed improvement in security of tenure to the protect the £250m investment by the gas and electricity industries in radio systems (s8.10);
• ... the intention to set any charges in a way to avoid distorting competition (11);
• ... the intention to retain in the public sector the core functions of spectrum management (s9.2);
• ... encouragement for private sector bodies undertaking self management for their members (s9.3);
• ... the regular publication and up-dating of a spectrum strategic plan (s2.6);
• ... the intention to establish a spectrum scheme to accelerate spectrum management changes (s4.18);
• ... the intention to make the process of transferring licences when businesses are bought less burdensome and cumbersome (s8.5);

... encourages the government ...

• ... to recognise that incentives through licence fee discounts must be provided for members of self management organisations (SMOs) to ensure their stability [to avoid the 'free rider problem' whereby non-members can claim access to the spectrum managed by the SMO under certain circumstances under the fees contained in the statutory regulations but without having to make any contribution to the running costs of the SMO](s9.4);
• ... to recognise that auctions are not a sensible way of allocating spectrum for use by self provided networks (s6.8);
• ... to recognise that secondary trading in a scarce commodity such as radio spectrum will simply lead to speculation and increased prices without improving spectrum efficiency (s8.3);
• ... to recognise that incentives through licence fee discounts must be provided for members of self management organisations (SMOs) to ensure their stability [to avoid the 'free rider problem' whereby non-members can claim access to the spectrum managed by the SMO under certain circumstances under the fees contained in the statutory regulations but without having to make any contribution to the running costs of the SMO](s9.4);
• ... to share the benefits of any licence fee funded research into improved spectrum management techniques with its private sector spectrum management partners (s4.19);
• ... consider more fully the International context of spectrum management since this has a large impact on the freedom of the UK to plan its own services, at all levels, ie allocation, assignment and licensing;
• ... to reconsider the role which spectrum pricing can have at the allocation level, otherwise large disparities will continue between different services [the constraints of international obligations are not always as great as might at first sight appear: for example, the UK successfully operates a mobile radio system in spectrum used by its neighbours for VHF television];
• ... to establish a standing advisory committee reporting directly to Ministers: the spectrum reviews have fulfilled an important role, but this function needs to be extended: this will be especially important if a spectrum scheme is implemented and decisions have to be made on its priorities, as well as crucial issues such as advice on the UK negotiating stance in international radio conferences where industry has large investments at risk, strategic UK frequency allocation policy, etc (s10.2) [The existing Radiocommunications Agency Steering Board does not have authority in such matters and is not constituted so to do: industry must have a clear voice.];
• ... to pursue more open access to the Radiocommunications Agency's databases to allow greater opportunities for organisations to engage in scenario planning (s10.3);

... but is concerned that ...

• ... safeguards for essential public services that use radio appear to be restricted to the public sector, which does not recognise those organisations which are under a statutory obligation to meet minimum service levels or whose operations have major implications for public safety (10);
• ... the framework for progressive spectrum pricing must include recognition that any changes must be implemented on a time scale commensurate with investment cycles in the industry, which may extend to ten years between initial concept and completion of the infrastructure in the case of national networks (s4.6);
• ... the detail of charging regime will be set in regulations, thus the enabling legislation will not limit the ability of government to subvert the sole intention of good spectrum management and use the legislation for tax raising purposes (s4.7) [The White Paper should define how fees will be set in areas where congestion is not a factor: the mechanism to differentiate between congested and uncongested areas: the way in which services will be elevated to 'congested' status and returned to 'uncongested' status, and place an overall ceiling on the sum that can be levied through licence fees];
• ... the White Paper provides numerous examples of increased licence fees, but no examples of reductions (s5.6); no examples of the 'substantial discounts in areas where spectrum pressures are less' are given (s7.13)(s7.16);
• ... industries facing intense price competition and those regulated through 'RPI-X' formulae must have confidence in the long term price stability of access to the radio spectrum: licence fees for areas not subject to congestion should thus be subject to 'RPI-X' price controls based on the current fee scales;
• ... no quantitative measures for congestion are proposed; the parameters and mechanisms for designating areas as congestion zones, and reversion from the elevated status back to uncongested areas must be defined (s7.15);
• ... the White Paper only considers the Smith/NERA study option of 'least-cost practical alternative' [the impact of a strict commercial value or straight £/kHz for all services, etc ought to be assessed (s7.5);

... and objects most strongly to ...

• ... the initial targeting of mobile radio and fixed services when radio fixed access and broadcasting are both areas of intense excess demand over supply (s5.6);
• ... the inequity of treatment proposed between national private business radio users and public access mobile radio operators using identical technology, operating with the same spectrum efficiency, and having similar business requirements: but where the former will pay £16,000 per national 2x12.5kHz channel and the latter £9,400. If the objective is spectrum efficiency, there is no justification for this difference.

Adrian Grilli
Managing Director