Simplifying Spectrum Trading - Spectrum leasing and other market enhancements

Statement published 29|06|11

Summary and introduction

1.1 This document explains our conclusions following the consultation of 22 September 2009 (the September consultation) ^(-1-) on simplifying spectrum trading, how we intend to modify our proposals and our plans to make available a new, streamlined form of spectrum trading called spectrum leasing'.

1.2 Radio spectrum is a limited and valuable resource. One of our main duties is to secure its optimal use ^(-2-) . Spectrum trading provides an important mechanism for achieving this as it enables spectrum to migrate into the hands of those that can use it more productively, making it easier and faster to access spectrum for innovation and growth.

1.3 It is in citizens' and consumers' interests that the spectrum market should function as efficiently and effectively as possible. The changes we intend to simplify the trading process will facilitate this by reducing transaction costs and execution times.

Spectrum trading and leasing

1.4 We distinguish in this statement between two types of transaction.

• Spectrum transfer, in which a new user is granted a licence by us to use spectrum following a commercial transaction with an existing licensee involving the transfer of the licence rights and obligations.
  
• Spectrum leasing, in which spectrum may be accessed for a specified period under a contract with an existing licensee without obtaining a further licence from us.

Our proposals to simplify spectrum trading

1.5 The existing spectrum transfer process, comprises several steps: advance notification of trades, obtaining our consent, publication of details of proposed and actual transfers and the issue of new licences. We were concerned that these requirements, some of which are embedded in the Wireless Telegraphy Act 2006 (the WT Act) and some in European Union (EU) law, might be holding back market developments and acting as a barrier to trades that would have benefitted citizens and consumers. In the September consultation, we sought evidence on this and views on proposals to simplify the trading process. In particular, we proposed introducing spectrum leasing once changes had been made to EU and UK law to allow this.

1.6 We also proposed a variant of spectrum transfer called transfer without licence issue' (TWLI), in which transfers could take place without the need for us to issue new licence documents. At that time, the EU framework had not yet been revised to allow spectrum leasing and TWLI was envisaged as a stop-gap until that had been done.

Responses to the September consultation and our conclusions

1.7 Responses strongly supported our initiative to simplify spectrum trading and introduce leasing while commenting on details of our proposals. We published a statement on 15 April 2010 (the April statement) ^(-3-) announcing our intention in principle to proceed. Now that the applicable legislation has been amended, we are in a position to do so. Having considered the responses to the September consultation, we have decided to modify our original proposals as summarised in the following table. The main changes are to simplify the leasing process further and to allow limited sub-leasing.

Table 1: Developments since the September consultation

Subject	Original proposal	Modification or other development
Spectrum transfer process for currently tradable licence classes (-4-)	Remove the need to obtain Ofcom's consent for spectrum transfers	As original proposal in preceding column for the generality of licence classes (paragraph 5.11)
Spectrum transfer process for other licence classes, including 2G/3G cellular	To be considered on a class-by-class basis when extending trading	Statement published on 20 June 2011 on making 900/1800/2100 MHz tradable (paragraph 5.23)
Time-limited transfer	Simplify process for low-volume transactions Consider feasibility of wider application	Specific proposal for selected products involving creating a separate licence covering the transfer period (paragraphs 5.27-5.29)
Spectrum leasing	To be introduced in currently tradable licence classes when necessary change has been made to the WT Act In other licence classes, including 2G/3G cellular, to be considered on a class-by-class basis when extending trading	WT Act amended to allow for leasing on 26 May 2011 (paragraph 2.6) Leasing to be implemented by licence variation and phased. We will consult separately in due course on leasing of 2G/3G cellular licences (paragraphs 6.36-6.39)
Notification watershed for leasing and publication of details	No need to notify leases up to 24 months Longer leases to be notified in advance and details published	No need to notify leases regardless of length (paragraphs 6.10-6.16)
Sub-leasing	Sub-leasing not allowed	One level of sub-leasing allowed Licensees required to keep records of any sub-leases (paragraphs 6.17-6.20)
Responsibilities of lessors (ie those granting leases)	To keep records of leases and sub-leases and make these available to Ofcom on demand Leases to be in writing To draw leaseholders' attention to licence terms and conditions governing their use of the spectrum	In addition, lessor required to provide for dispute resolution (paragraphs 6.21-6.25)
Interference investigation and resolution	Band managers (and other lessors) to be first port of call for complaints of interference from leaseholders We will intervene in line with enforcement guidelines if the lessor cannot resolve the complaint	As original proposal in preceding column (paragraphs 6.26-6.28)
TWLI	To introduce TWLI as stop-gap if EU framework had not been revised to allow leasing	No longer necessary as revised EU framework now in place (paragraph 6.46)

1.8 Simplifying trading procedures will benefit citizens and consumers by enhancing the ability of the market to make spectrum available for innovation and competition. We recognise that reducing ex-ante regulation of spectrum trading is not risk-free and, in making the changes, will ensure that the exercise of our powers in relation to competition and interference investigation is not compromised.

Next steps

1.9 For operational and practical enforcement reasons, we intend initially to limit leasing to auctioned and exclusive Area Defined assignments. We expect shortly to be in a position to accept applications for licence variations to allow holders of the varied licences to grant leases. Further details will be published on our website ^(-5-) . If there is sufficient market interest, we will consider positively an extension of leasing to higher volume licence products in due course. This would require changes to our assignment processes and business systems and thus take longer to implement and we would need to confirm that the expected benefits outweighed the costs and any risks. In so doing, we would take account of experience of leasing to date.

1.10 We will take the earliest convenient opportunity to remove the requirement for the parties to a transfer to obtain our consent in the generality of tradable licence classes.

Footnotes:

  1.- The consultation, non-confidential responses and statement on Simplifying Spectrum Trading may be found, at http://stakeholders.ofcom.org.uk/consultations/simplify/.

  2.- Section 3 of the Communications Act 2003

  3.-http://stakeholders.ofcom.org.uk/consultations/simplify/statement/

  4.- At the time of the consultation, spectrum at 900, 1800 and 2100 MHz was not tradable but will become so on 4 July 2011 (http://stakeholders.ofcom.org.uk/consultations/trading-900-1800-2100/).

  5.-http://stakeholders.ofcom.org.uk/spectrum/spectrum-trading/