Maximising the benefits of the digital dividend

Ofcom today published its Digital Dividend Review for public
consultation, setting out proposals for the most effective use of the radio spectrum released by the switch to all-digital television broadcasting between 2008 and 2012.

Spectrum is a national resource that underpins broadcasting, fixed and wireless communications as well as essential services such as defence, transport, the emergency services and healthcare.

Business activity that is largely dependent on the radio spectrum contributes ?37bn, or 3 per cent, to the UK's GDP. This means that uses of spectrum account for nearly one pound in every 30 generated by the UK economy.

The spectrum that will be released by digital switchover is in the sought-after UHF band in the frequencies 470-862 MHz. Transmissions in these bands cover large geographical areas with relatively few base stations, offering national network rollout at lower costs when compared to services delivered at higher frequencies which offer greater bandwidth but at shorter range.

The amount of spectrum released through digital switchover will be one of the largest in the UK for many years, potentially supporting a range of new and innovative services of benefit to millions of people every day.

Ofcom estimates that the benefit to the economy from the use of this spectrum (as opposed to revenues raised for the Government from the auction of the spectrum) is likely to be around ?5bn-10bn in total over 20 years.

MAXIMISING THE VALUE TO SOCIETY

Ofcom's primary duty, as defined in Section 3 of the Communications Act 2003, is to further the interests of citizens in relation to communications matters and further the interests of consumers in relevant markets, where appropriate by promoting competition. Ofcom has a number of other statutory duties relevant to the Review, including a
duty in the Act, to secure the optimal use of the electro-magnetic spectrum.

Over the past year Ofcom has undertaken extensive research into the potential uses of the digital dividend spectrum, the potential benefits each would offer to UK citizens and consumers, and the overall value to society as a whole.

There are many possible uses - or combinations of uses - of the spectrum. Those currently identified include:

* local digital terrestrial television channels;
* additional national digital terrestrial television channels, in either standard definition or high definition;
* television services for mobile phones and other types of mobile video and multimedia;
* mobile communications, such as voice calls and data;
* broadband wireless applications;
* wireless microphones for theatres, television and radio production and
live music events;
* low-power wireless applications, such as wi-fi in the home; and
* public safety services, such as wireless communications for the emergency services.

Additional new uses are likely to emerge in the future as rapid innovation continues across the wireless sector.

Ofcom's research indicates a wide range of uses with high social and commercial value. It is also clear that demand is likely to exceed supply. However, under such circumstances Ofcom does not believe that the regulator is best placed to decide which services should get access to spectrum; nor which should not. This is because:

* to do so would distort incentives: users who benefited from preferred access to the spectrum would have less of an incentive to use this allocation efficiently, as well as less of an incentive to consider more efficient alternatives;
* it would reduce flexibility: the more the regulator stipulates preferred uses, the more the use of the spectrum is constrained to those uses alone; and
* it assumes that the regulator can make better decisions than the market, when in reality there is significant uncertainty and information is limited.

The consultation document, published today, proposes that the most effective way to maximise the value to society of the spectrum is to give freedom to spectrum users, with appropriate incentives, to decide how these frequencies should be put to use. This includes both commercial and public service or public sector users.

SPECIFIC PROPOSALS

Ofcom proposes to make the spectrum available in a way that allows the widest possible range of uses. Licences would be tradeable and liberalised to allow users the flexibility to decide what technology to use, what services to offer, and to change their use of the spectrum over time.

The released frequencies will be offered in packages that are suitable for as many uses as possible, including national digital terrestrial television and mobile services. Ofcom proposes to award the spectrum by auction, as the most open and transparent mechanism available. The consultation seeks public views on a number of different auction
designs.

The auction is likely to be held towards the end of 2008, subject to the outcome of this consultation. The spectrum should become available for re-use on a region by region basis as digital switchover takes place on a phased basis between 2008 and 2012.

In a small number of cases Ofcom is making specific proposals which are relevant for particular spectrum uses:

1. WIRELESS MICROPHONES FOR COMMUNITY USE. Every day thousands of people use wireless microphones at community events, such as in places of worship, schools and small theatres. These users currently have to obtain a licence to use a specific spectrum band (854-862 MHz). Ofcom proposes to continue making the spectrum available for this use, but to deregulate it by making access free of charge and licence-exempt.

2. TRANSITIONAL ARRANGEMENTS FOR PROFESSIONAL PROGRAMME-MAKING AND WIRELESS MICROPHONE USE. Programme and film-makers, theatres and events organisers use reserved UHF spectrum for a range of uses, such as
wireless microphones and wireless relays for outside broadcasts. This requires co-ordinated access to the spectrum to prevent interference.

In the long term Ofcom believes that moving to a more flexible, market-based approach to spectrum access across a number of bands will carry many advantages, such as less regulation and greater flexibility.
However, in the meantime, Ofcom proposes to ensure that a number of UK-wide packages of spectrum are available for the professional programme-making and events sector until at least 2012 to ensure a smooth transition to a market-based approach.

3. SPECTRUM SUITABLE FOR LOCAL TELEVISION BROADCASTING.
Interleaved UHF spectrum is particularly suited for local, rather than UK-wide, services. Ofcom therefore proposes to release through auction more than
40 assignments of interleaved UHF spectrum for particular geographic areas.

4. RESERVING SPECTRUM FOR NEW INNOVATIVE SERVICES IN THE FUTURE. Ofcom is consulting on whether to hold back a small amount of spectrum until after digital switchover to ensure that potential new developments in technology in the future - such as new low-power wireless uses - have access to UHF spectrum.

Ed Richards, Ofcom Chief Executive, said: "The Digital Dividend Review offers the prospect of a range of new services for the benefit of numerous communities and businesses across the UK."

He added: "Our aim is to ensure that as many users as possible have the freedom to innovate and the scope to deliver the maximum benefits to UK society."

To download a copy of the consultation document go to:
http://www.ofcom.org.uk/consult/condocs/ddr/

The consultation closes on 20 March 2007.

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