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3. Spectrum policy

 

This module summarises Chapter 3 of the Toolkit which addresses the topics of spectrum planning, management, licensing, assignment and valuation, as well as policies to promote the efficient use of spectrum, such as spectrum trading, sharing and refarming. Spectrum is a key resource for expanding wireless access to broadband services and a crucial element for broadband policy making. Moreover, this chapter aims to shed light on the current challenges of spectrum management, such as those related to the switch-over to digital terrestrial television (DTT) and the increased need for spectrum resources for wireless broadband.

Explore this module

Main policy objectives
Tools for measurements and analysis
The LAC region
Leading good practices

 

Main policy objectives

For the LAC region, spectrum policy and efficient spectrum management is especially important in the context of broadband development. In many geographical regions without fixed telecommunications, infrastructure broadband development will depend on wireless access. The main spectrum policy objective can be broadly defined as guaranteeing its “efficient use”. This general objective has several more specific objectives:

  • Maximise the social and economic utility of spectrum use. As spectrum is a scarce resource essential for the provision of services that have positive externalities, active management is required to maximise these externalities, both from an economic and social perspective.

  • Increase the availability, penetration and use of telecommunications services. Inefficient management of spectrum usually translates into insufficient wireless telecommunications infrastructure and investment, inadequate coverage for the population of wireless telecommunication networks, low quality and high prices. These facts reduce availability (thus impacting the possibility of universal access), slow down penetration, and hinder demand for telecommunications services. Usage of services is the main cause of the economic spillover effects attributed to telecommunications services, and the lever that policy makers should aim to increase. Wireless networks are often the most cost-effective way of reaching rural and remote areas, especially with the advent of technologies that use lower frequencies with a wider reach.

  • Provide a level field for competition in allocating spectrum. Spectrum plays a fundamental role in developing competition. First, as spectrum is limited, and there is a minimum amount of spectrum needed to operate, the number of licences that can be made available in any given place is very low; this leads, naturally, to concentrated markets. (Even six locally concurrent licenses, which is rare, implies a minimum Herfindahl-Hirschman Index of 1 667, which falls in the range of what is considered a “moderately concentrated market”). Secondly, not all spectrum bands are equal.

    Higher frequency bands, although they can accommodate more bandwidth, have lower reach, which translates into a larger number of radio base stations required for similar coverage than if lower frequencies are used; this, in turn, implies higher investment requirements, which influence costs and end-user prices. Thirdly, spectrum is valued very differently by different players. As a rule, incumbents value it more than new entrants, which means that unmanaged spectrum auctions may provide less scope for new entrants. Policy makers have to consider these three facts when managing spectrum, to encourage effective competition.

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Tools for measurement and analysis

With the rapid evolution of telecommunication services that require spectrum, and with the difficulty of pulling regulatory levers expeditiously to respond to the ever-changing technological environment, spectrum management requires detailed long-term planning, backed by certain tools (some of which have been in use for a long time) and objective periodic measurements.

  • National frequency allocation tables (NFAT).
  • Spectrum inventories and licensee database
  • Long-term planning
  • Measurement of efficient use
  • International benchmarking

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Overview of the situation in the LAC region

Mobile communications have become ubiquitous in the LAC region. Although penetration was low in the late 1990s, they have become the preferred way for voice communication and broadband access. The advent of prepaid mobile plans, which allow users to control their telecommunications spending without recurrent financial commitment and to top up with very small amounts, has dramatically increased the number of users. The combination of decreasing prices for mobile access and the growing use of new devices (e.g. smartphones and tablets), as well as the burgeoning use of Internet applications, has substantially increased the demand for spectrum.

Historically, LAC countries have not been generous with the licensing of spectrum. In 2003, on average only 104 MHz had been assigned to mobile operators, equivalent to less than 38% of the amount licensed in OECD countries. By 2011, this number had increased to 195 MHz, but it still represented only 46%. As of September 2015, after several years of intense regulatory activity in the region, the average had grown to 311 MHz (Figure 2). Though the amount of licensed spectrum grew by 60% in only four years, it is still below the OECD (less than 60%) and well below the International Telecommunication Union (ITU) recommendation of spectrum required. For 2020, ITU recommends that 1 280-1 720 MHz be made available for wireless communications (ITU, 2006); LAC countries have only assigned around 20%.

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Good practices

Some of the good practices covered in Chapter 3 relate to:

  • Spectrum planning, management and control
  • Policies to promote efficient use of spectrum
  • Spectrum assignment procedures
  • Spectrum valuation
  • Digital television, digital dividend and analogue switch-over

This module raises important implications of spectrum management for competition dynamics. Close collaboration with the competition authority is advised, as is flexibility in assignment, not only in terms of technological neutrality, but also in terms of service (“service neutrality”). Setting spectrum caps, spectrum trading, development of secondary markets, spectrum sharing and spectrum refarming are other tools policy makers can use to increase competition and the efficient use of spectrum.

While spectrum may be assigned via non-market-based procedures (whether by lotteries or direct administrative channels) and different contest procedures (such as comparative selection), this chapter demonstrates that the most efficient mechanism of spectrum assignment is through auctions. Well-designed auctions are less discretionary, increase market certainty and can be an invaluable price-discovery mechanism, leaving the regulator the role of setting minimum reference prices, setting aside blocks for entrants and/or establishing restrictions (such as caps) and obligations (such as coverage or offering wholesale service to MVNOs) as necessary for attaining policy goals.

Finally, this module addresses the current challenges associated with the digital dividend (the 700 MHz band in LAC countries) and the switch-over to digital terrestrial television. To ensure a smooth transition and greater spectrum efficiency, well-planned, orderly transitions, public awareness campaigns and targeted subsidies (for decoders or migration costs of broadcasters), will help to minimise public and private costs involved in the transition.

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BROWSE TOPICS OF THE TOOLKIT

Introduction •  Regulatory frameworks and digital strategies •  Spectrum policy •  Competition and infrastructure bottlenecks •  Extending broadband access and services •  Affordability, government charges and digital inclusion •  Convergence •  Regional integration •  Skills and Jobs •  Business uptake, entrepreneurship and digital content •  E-health •  Digital government •  Consumer protection and e-commerce •  Digital security management •  Privacy protection
 

 

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