Current developments in spectrum regulation in Europe including WAPECS, GSM directive and
Mobile TV
JUCONOMY Consulting AG
15 May 2008
2
Spectrum is a scarce resource with high economic relevance – EU Commission estimates its value to 250 billion € within the EU
There is a great expectation that a more efficient spectrum policy within Europe and the rest of the world will bring more innovation and economic growth
There has been a great dissatisfaction with the spectrum policy in the past, as it has created “artificial scarcity” and prevented market entrance for new operators
There is a great and extensive revision of the spectrum policy within Europe, including aspects such as: A market based approach including WAPECS and Spectrum retrading Harmonisation Revision of spectrum plans (frequency allocation tables)
Introduction
3
Main relevant market developmentsMain relevant market developments11
Analyses of the Commission ActivitiesAnalyses of the Commission Activities33
SummarySummary44
Activities by the European CommissionActivities by the European Commission22
4
Increased demand in retail markets for wireless services (esp. wireless broadband and broadcasting)
Increased demand in retail markets for wireless services (esp. wireless broadband and broadcasting)
Soaring demand in factor markets for
spectrum
Soaring demand in factor markets for
spectrum
Constant flow of new technologies and
standards
Constant flow of new technologies and
standards
Mobile operators
Broadcasting network operators
BWA operators
Fixed network operators
Etc.
The market for spectrum interacts with the end user markets as well as the development of new technologies and standards
The increasing demand in the end user markets for “mobile”, i.e. spectrum based services and the introduction of new technologies and standards implies an increasing demand for spectrum:
5
Technologies and spectrum bands below 1 GHz
Key factsKey facts
Attractive as lower bands are associated with higher coverage per transmitter Largest part of the spectrum historically allocated to broadcasting with high ERP The long reach and the high ERP requires extensive international coordination
Attractive as lower bands are associated with higher coverage per transmitter Largest part of the spectrum historically allocated to broadcasting with high ERP The long reach and the high ERP requires extensive international coordination
BroadcastingMobile
CommunicationsOthers
Analogue Radio
Analogue Television
Digital Television
Mobile TV
Analogue e.g. NMT
GSM
TETRA
(WiMAX)
Amateur radio
Short range devices
Aeronautical
Satellite
Paging
Etc.
6
New wireless usages and applications are driving the demand for spectrum
Mobile instead of fixed voice services (Fixed markets revenues declining by 4.5-8.5% per year; some EU countries experience decreasing number of fixed lines)
Drivers of demand Applications and usages
Fixed-Mobile Substitution
Introduction of Mobile TV (DVB-H, DMB, MediaFLO) Introduction of HDTV Growing and insatiable demand for additional TV and radio channels
Mobile TV/Broad-casting
Wireless Broadband
3G take-up increases in EU – 3G penetration in Italy already exceeding 20% Introduction of WiMAX and other BWA technologies
Fixed-Mobile Convergence
Quad-Play (Retail packages including fixed and mobile services) Integrative handsets (Handsets integrating fixed and mobile technologies, i.e.
WLAN, UMTS and DSL/DECT technologies) Personal networks
7
Mobile Communications still show increasing penetration rates Implying increased usage and need for spectrum
Success of Mobile Communications
Source: EU Commission, 13th Implementation report, Annex 2, p. 11
8
Mobile Communications still show decreasing prices Implying increased usage and need for spectrum
Success of Mobile Communications
Development of prices in EU
Low usage Medium usage High usage2006 2007
- 10%
- 12%
- 13%
Source: JUCONOMY based on EU Commission, 13th Implementation report, Annex 2
9
Situation of broadcasting
Analogue terrestrial TV to be switched off – generally spoken before 2012 but not later than 2016 The digitalisation is taking place on all platforms (including satellite and CATV) Heterogeneous situation regarding:
Digital TV penetration (EU27: 23,8% of all households; UK: 66,6%; Romania, Slovak Rep., Lithuania: <1%)*DTT penetration (EU27: 6,8%; Finland: 33,1%; Ireland: 0%)*
Terrestrial TV competes with CATV, satellite TV and in future also IPTV Situation differs from country to country, but satellite and cable have
increased their market shares the last decades
Aspects Findings
Intra-modal competition
Digitalisation
* (Q3/2005)
10
Do we need digital terrestrial television (DTT) and a reservation of spectrum?
Contra DTT privileges Pro DTT privileges
Generally very high demand for spectrum below 1 GHz
No need for parallel transmission of TV signals over CATV, satellite and terrestrial networks Terrestrial networks are expensive Universal service safeguarded in rural
areas through satellite and in urban areas by CATV networks
With a market based approach, the spectrum would be allocated more efficiently
Enough spectrum for mobile communications available
The spectrum enables too low bandwidth for rural broadband
High public value for DTT (universal service)
Problems of funding for terrestrial networks
Network externalities: requirement that DTT can sustain in competition with other platforms Need for large number of channels
Higher cost of spectrum for DTT crowding out investments in content
Interference problems between broadcasting and mobile communications
11
Do we need digital terrestrial television (DTT) – sources of public value?
Source: “THE EFFECTS OF A MARKET-BASED APPROACH TO UHF SPECTRUM MANAGEMENT AND THE IMPACT ON BROADCASTING”, a study made by Oliver & Ohlbaum Associates Ltd and DotEcon Ltd for European Broadcasters Union, February 2008, p. 23
12
Market developments and requirements on regulation
afdsafsda
Need to make spectrum available for new technologies, standards and applications
Eventually design allocation rules and processes to support innovation and growth
Need for efficient allocation of a scarce resource
Developments Requirements on regulation
Higher overall demand for spectrum
New technologies and standards (short term)
Need for flexible spectrum regulation (e.g. trading, reallocation, service and technology neutrality)
Higher uncertainties regarding spectrum usage due to new standards, technologies and applications (long term)
13
Main relevant market developmentsMain relevant market developments11
WAPECS / Revision of the frameworkWAPECS / Revision of the framework2.12.1
Conclusions on the Commission ActivitiesConclusions on the Commission Activities33
SummarySummary44
Activities by the European CommissionActivities by the European Commission22
Mobile TVMobile TV2.22.2
Other activitiesOther activities2.32.3
14
The predefinition of technology to be used by the spectrum leads to suboptimal allocation of spectrum regarding different technologies
Long licencing times result in unused spectrum due to failed technologies and business models
Current problems
Unused spectrum
Usage of spectrum for the wrong technologies
Due to suboptimal allocation and long allocation periods Spectrum scarcity (e.g UMTS)
Artificial scarcity
WAPECS more efficient and optimal allocation of
spectrum due to technology and
service neutrality (less
spectrum conditions)
Problems identified regarding the spectrum regulation of the past
15
The RSPG (Radio Spectrum Policy Group) is a working group established by the European Commission.
RSPG was delegated the task from the EU Commission to examine a possible reformation of the spectrum regulation.
Thereby an opinion should be published according to the objective to ensure that spectrum is available to a wide range of services to meet the requirements of the Lisbon agenda.
The results of the work conducted by RSPG are, among other: A definition of WAPECS: Technology and service neutrality and the reduction of
technical requirements set by the regulators (i.e. minimum requirements to avoid interference).
An identification of possible spectrum bands for the introduction of WAPECS on a European level.
WAPECS and the work of RSPG
17
Introduction of WAPECS (Wireless access platforms for electronic communications services) as a form of more flexible spectrum regulation including technology and service neutrality.
Introduction of EU wide regulation for spectrum trading and refarming. Introduction of a European Authority („EECMA“) dealing with:
Identification of EU wide license free spectrum, including administration of a registry of all spectrum allocations in the member states
Creation of minimum rights regarding frequency trading (to become obligatory in all member states)
Provide advice to the Commission and in special cases undertake the allocation of spectrum and spectrum conditions (acc. to Authorisation Directive Article 6b)
EU Commission Communication from 02/2007 recommends to “immediately” implement the principles regarding a more flexible approach to spectrum management set out in the Review of the Framework 2002 instead of waiting for the complete revision to come into force about 2010
The European Commission suggests the following changes to the framework regarding frequency regulation
18
A committee of the European Parliament has issued a discussion paper on the proposed changes, including: There is a strong need for harmonisation as spectrum does not regard national
borders The flexibilisation has to be balanced against the need for harmonisation Evolution instead of revolution Service neutrality should be the exception and not the rule Against the
principle of WAPECS!!! Spectrum trading should be decided on national level More spectrum should be harmonised for license-excempt spectrum on a non-
interference basis There should be pan-european selection procedures administered by the
European Commission There must be a balanced approach regarding the digital dividend, allowing
gains for both broadcasters and mobile operators
Reaction of the EU Parliament regarding the Commission suggestions
19
Main relevant market developmentsMain relevant market developments11
WAPECS / Revision of the frameworkWAPECS / Revision of the framework2.12.1
Conclusions on the Commission ActivitiesConclusions on the Commission Activities33
SummarySummary44
Activities by the European CommissionActivities by the European Commission22
Mobile TVMobile TV2.22.2
Other activitiesOther activities2.32.3
20
Mobile TV – convergence of broadcasting and mobile communications
Broadcasting Technologies Mobile communication
One-to-many communication No individualisation Efficient usage of spectrum Standards:
DVB-H DMB DAB-IP MediaFlo ISDB-T
One-to-One communication High level of individualisation High demand for spectrum Technology currently used for
Mobile TV is UMTS Also MBMS for broadcasting
TV in multicast networks
Mobile TV brings broadcasting to the handsets used for mobile communications This convergence implies large difficulties for market players and regulators alike
The situation is complicated through the number of available technologies and business models
21
Mobile TV Strategy of the European Commission
Problem
Requirements for success of
Mobile TV
Solutions provided by the
Commission
Commission: slow uptake and development of Mobile TV compared to other regions in the world
Risk regarding missed opportunities to fulfil the aims of the Lisbon Agenda
The Commission has concluded that the following criteria should be fulfilled in order to make Mobile TV a success; Solve technical problems: standards/interoperability Provide a regulatory environment conducive to innovation and investment Ensuring quality spectrum for Mobile TV services
Instead of a directive, the commission has decided (among others) to only publish a Mobile TV strategy, calling member states to provide spectrum dedicated to the DVB-H standard
22
Mobile TV – spectrum allocation
The Commission has published the following to illustrate their proposal for the allocation of spectrum to mobile TV
23
Recent developments in Mobile TV
Since the European Commission started to push DVB-H, this technology tend to prevail across Europe (e.g. as the standard in Finland, Italy, Austria, Germany…)
As the Commission recently included DVB-H in their official list of standards, this development is likely to continue
The optimal and sustainable business models are still to be determined: In Germany, the regulator preferred to give the rights to an independent
operator In Italy, the key operations are divided between mobile and broadcasting
operators Finland: Initiative of the mobile operators
Further uncertainties regard standards/technologies and the uptake in consumer markets difficulties in spectrum management (need of spectrum and spectrum conditions difficult to determine)
24
Main relevant market developmentsMain relevant market developments11
WAPECS / Revision of the frameworkWAPECS / Revision of the framework2.12.1
Conclusions on the Commission ActivitiesConclusions on the Commission Activities33
SummarySummary44
Activities by the European CommissionActivities by the European Commission22
Mobile TVMobile TV2.22.2
Other activitiesOther activities2.32.3
25
The removal of the GSM directive from 1987 (Directive 87/372/EEC)
Introduction in 1987
Defining GSM as the technology in the bands 890-915 and 935-960 MHz
Outcome: Harmonised usage of spectrum in Europe enabling:
Economies of scale International roaming
Mass market deployment of mobile communications
Proposal to open up 900 MHz spectrum to all technologies/service (WAPECS)
EU Commission: “This proposal is a concrete step towards a more flexible market driven approach…”
Outcome: Increased supply of spectrum lower cost of spectrum
Possible usages: UMTS900 by existing or new
operators Introduction of broadcasting
services doubtful due to interference
BWA
Proposal to open up 900 MHz spectrum to all technologies/service (WAPECS)
EU Commission: “This proposal is a concrete step towards a more flexible market driven approach…”
Outcome: Increased supply of spectrum lower cost of spectrum
Possible usages: UMTS900 by existing or new
operators Introduction of broadcasting
services doubtful due to interference
BWA
Removal in 2007
26
The deployment of UMTS 900 leads to significant cost savings and CAPEX reductions compared with the roll out of a UMTS 2100 system: OVUM: UMTS 900 provides between 44% (in urban areas) and 119% (in rural
areas) increased coverage per Node-B compared with UMTS 2100 due to the propagation characteristics of the lower frequency band
Field Trial Manx Telecom (UK): In-building coverage +30% compared to UMTS 2100
Field trials done in Finland, France, Portugal, UK and Australia
Several factors are important for the successful introduction of UMTS 900, i.e. a co-ordinated policy to refarm 900 MHz spectrum and a NRA spectrum policy on pricing and roaming
Development of UMTS 900
27
The European Commission has taken one decision and made one proposal for a decision to enable Pan-European “Mobile Satellite Systems”
Concerned is the spectrum 1980-2010 MHz and 2170-2200 MHz according to ITU WARC-92
As spectrum is currently unused in most EU member states, the Commission has passed a directive that member states should designate this spectrum to MSS*
Reasons to push MSS: MSS can improve coverage in rural areas Services are per se international The take-up has so far been too low, e.g. due to regulatory burden (assignment
in a large number of member states required)
MSS decision
* see Commission decision of 14 February 2007 on the harmonised use of radio spectrum in the 2 GHz frequency bands for the implementation of systems providing mobile satellite systems (c(2007)409)
28
Following the decision on allocation of spectrum for MSS, the European Commission has additionally suggested to select the MSS operators at EU level.
The proposal has still to be accepted by the European Parlament changes or rejection possible
Proposed is that: The MSS operators should be designated by the Commission Assignment should be done by beauty contest (in 2 phases) Following the designation by the Commission, the member states should
authorise the selected MSS operators
Proposal for decision on MSS
* see Commission proposal from 22 August 2007 “Proposal for a decision of the European Parlament and the Council on the selection and authorisation of systems providing mobile satellite systems”
29
Mobile communication services on aircraft refers to GSM (and eventually other mobile networks) where a base station with satellite link is installed on board
Mobile Communication Services on Aircraft (MCA)
Decision on harmonised conditionsDecision on harmonised conditions
Member states shall make spectrum available
1710-1785 MHz and 1805-1880 MHz spectrum
System considers a network control unit (preventing interference with terrestrial networks) and an aircraft BTS
Compliance with GSM standards by ETSI for GSM or equivalent standards
Interference with other mobile communication bands should be prevented (450, 900, 1800, 2100 MHz)
Minimum height for transmission: 3000 meters
Authorisation recommendationAuthorisation recommendation
Acc. to recommendation, the authorisation of MCA should be made by country of origin of the aircraft
The authorisation will automatically apply for all member states
Commission Decision of 7 April 2008 on harmonised conditions of spectrum use for the operation of mobile communication services on aircraft MCA services) in the Community (C(2008) 1256) AND COMMISSION RECOMMENDATION of 7 April 2008 on authorisation of mobile communication services on aircraft (MCA services) in the European Community (C(2008) 1257)
30
Main relevant market developmentsMain relevant market developments11
Analysing the Commission ActivitiesAnalysing the Commission Activities33
SummarySummary44
Activities by the European CommissionActivities by the European Commission22
31
The Commission is working intensely to centralise and create a Pan-European spectrum regulation Outcome is still open
In general, the Commission favours more flexibilisation and a more market based approach (acc. to WAPECS) This has partially happened, but there is still resistance from the Parliament, some member states and regulators
The initiatives on Mobile-TV and MSS is a breach against the implementation of a market based approach, which is motivated by the need of harmonisation for a success of these services
Remarks on the development
32
The initiatives of the Commission regarding Mobile TV can be analysed as a sort of practising of industrial policies Arguments in favour of industrial policies: Markets do not function optimally and
different state interventions are called for Arguments against: interventions will not make things better but may even
worsen the situation
Market failures call for state intervention and government failures speak against it.
A situative analysis has to be done to evaluate the exceptions suggested by the Commission for Mobile TV
Pros and Cons regarding the exception for Mobile TV as example for harmonisation
33
Pros and Cons regarding the exception for Mobile TV
Pro Mobile TV exceptions Against exceptions
The slow development of Mobile TV calls for action
Without detailed regulation there might be multiple standards causing lack of interoperability and economies of scale
The GSM directive of 1987 has been successful
Eventual costs of migration to a certain standard
Administrative burden and complience costs
Lock-in effects to a certain technology and service preventing further development (e.g. comparable to UMTS 900)
Dedicating spectrum to a certain service causes crowding out effects (for other services/ technologies)
Past problems, i.e. false alloca-tions (forecasting problems) and locked-in spectrum
The Mobile TV initiative is a high risk strategy which might be a success, but the downturn side is considerable
34
Outcomes on the factor markets and the end user markets
MHz
Price/MHz
Demand (t0)
Supply (t0)
Demand (Refarming/WAPECS)
Supply (for non Mobile TV-services/technologies)
P1
P1
P0
Refarming and WAPECS lowers demand as the spectrum can be used more efficiently (e.g. no new spectrum for new services required)
The Mobile TV strategy if implemented will reserve spectrum for DVB-H, reducing spectrum available for other services (crowding out)
35
Outcomes on the factor markets and the end user markets
Market based regulation/WAPECS: Lower costs of introducing new services and technologies Possibility to reduce retail prices in the long run due to lower spectrum costs Higher penetration/usageMobile TV strategy: Chance to get cheap spectrum to implement Mobile TV – higher ARPU and improved service provisioning
Mobile Communications
Broadcasting
Market based regulation/WAPECS: Risk for broadcasters to loose their privileged situation and thereby risk of less service provision over terrestrial networks Hence, criticised by the EBU and broadcasting companiesMobile TV: Chance to get cheap spectrum to implement Mobile TV – higher ARPUs and improved service provisioning
36
Main relevant market developmentsMain relevant market developments11
Analysing the Commission ActivitiesAnalysing the Commission Activities33
SummarySummary44
Activities by the European CommissionActivities by the European Commission22
37
The development goes towards a more market based and flexible spectrum regulation. Lower demand in the factor markets for spectrum lower prices for spectrum
and more spectrum available to new services lower prices and/or more innovation and technological development in the downstream markets
On the contrary, there is a call for harmonisation and Pan-European services including initatives on Mobile TV and MSS, which violates the principles of service/technology neutrality (WAPECS): If Mobile TV and the DVB-H standard is successful, the strategy of the
Commission will have positive effects, but it is a very high risk strategy which can just as likely end up with a negative outcome.
The decision on MSS might crowd out other services, with negative outcomes if MSS services are not successful
Important to strike balances between harmonisation, standardisation, a market based approach and the risks for artificial scarcity through command and control policies
Summary and final conclusions
38
Contact
JUCONOMY Consulting AG
Vienna Office: Düsseldorf Office:Parkring 10/1/10 Graf-Recke-Str. 821010 Vienna 40239 DüsseldorfAustria GermanyTel: + 43-1-513 514 0-0 Tel: + 49-211-68 78 88-0Fax: + 43-1-513 514 0-95 Fax: + 49-211-68 78 [email protected] [email protected]@juconomy.com [email protected]