Regulatory and Policy Implications of Emerging Technologies to Spectrum Management

Spectrum policy: what next?

Edited by Martin CAVE, Gérard POGOREL & Frédéric PUJOL

!WRC-07: the Technological and Market Pressures for Flexible Spectrum Access

! Regulatory and Policy Implications of Emerging Technologies to Spectrum Management

! Spectrum Allocation, Spectrum Commons and Public Goods:the Role of the Market

! The Role of Licence-Exemption in Spectrum Reform

! Emerging Technologies and Access to Spectrum Resources:The Case of Short-Range Systems

Interviews with

Rüdiger HAHN, Bundesnetzagentur, Germany Richard FEASEY, Public Policy Director, Vodafone

No. 67 / 3rd quarter 2007International journal of digital economics

Foreword

This issue of C&S is devoted almost entirely to the topic of European frequency management policies. For some years now, managing this scarce resource has been the topic not only of lengthy debate but also the focus of works by economists and of considerable innovation in the arena of practical application.

This issue is also of particular import as the ITU's next World Radiocommunication Conference approaches, and in light of the new directions that the European Commission is hoping to take subsequent to its review of the regulatory framework. It goes without saying that these decisions are among the most consequence-laden for public authorities around the globe, as they prepare for the switch-off of analogue broadcasting.

Finally, these pending spectrum management rulings are at the heart of growing concerns over the means that will enable equipment manufacturers and operators in both Europe and around the world to transition into the next stage of the mobile sector’s development, as they seek to achieve the greatest possible degree of ubiquity for broadband access.

The editors of this issue have sought to gather original contributions that will provide industry and institutional leaders with food for thought. To underscore this endeavour, the editors-in-chief, X and Y, have solicited the views of a key player from the mobile services sector and of the chairman of Germany’s regulatory authority.

In this issue you will also find contributions on other topics, along with points of reference that provide information and analyses on topics in the news.

Happy reading.

Edmond Baranes Yves Gassot Editor Publishing Director

Call for papers

No. 69 – 1st quarter 2008 Dossier: Real options in ICT sector

Editors: James ALLEMAN & Jérôme BEZZINA

A limited but growing literature exists on the application of real options methodology to the information and communications technology (ICT) sector. The methodology has been applied to examining the sunk costs of assets (as opposed to fixed costs) and the regulator's impact on the distribution of returns; economic depreciation; an analysis of capacity in long distance data service, and optimization of wireless capacity and other network optimizations. In addition, the approach has been used to examine strategic investments in technology standards. Overall, lack of consideration of real options methodology may distort investment timing and magnitude, and regulated prices. Getting the investment decision right becomes ever more critical in light of the disruption created by fiber to the curb/home/office (FTTx); competition from alternatives such as cable TV providers and wireless networks such as WiFi and WiMax as a replacement for the traditional infrastructure. Finally, ignoring real options implications may underestimate entry barriers, thus overestimating the ability of a competitive market structure to function. This call for papers solicits articles on real options in the ICT sector. Subjects include: antitrust analysis of ICT in the context of competition and strategic options, capabilities, infrastructure and network investments, valuation of ICT firms and IPOs, and public policy issues. We are particularly interested in applied, empirical or case studies papers. Please send proposals to: [email protected] – [email protected]

No. 67, 3rd quarter 2007

Dossier

Spectrum policy: what next? A Foreword Gérard POGOREL ......................................................................................... 9

WRC-07: the Technological and Market Pressures for Flexible Spectrum Access Martin SIMS .................................................................................................13

Opinion Interview with Rüdiger HAHN, Director, Head of Department, Legal telecommunications regulation issues, Frequency regulation, Bundesnetzagentur, Germany Conducted by Gérard POGOREL.................................................................31

Interview with Richard FEASEY, Public Policy Director, Vodafone Conducted by Martin CAVE & Gérard POGOREL .......................................35

Papers Regulatory and Policy Implications of Emerging Technologies to Spectrum Management Frédéric PUJOL et al. ..................................................................................43

Spectrum Allocation, Spectrum Commons and Public Goods: the Role of the Market Phillipa MARKS & Brian WILLIAMSON ........................................................65

The Role of Licence-Exemption in Spectrum Reform Gary TONGE & Pierre de VRIES..................................................................85

Emerging Technologies and Access to Spectrum Resources: The Case of Short-Range Systems Fulvio MINERVINI.......................................................................................107

Other papers Bottom-up Cost Modelling for Bitstream Services in ATM Based Broadband Access Networks Klaus HACKBARTH, Laura RODRIGUEZ DE LOPE, Dragan ILIC & Gabriele KULENKAMPFF .........................................................................................129

Competition in International Mobile Roaming: Alternative Clusters K.R.Renjish KUMAR & Heikki HÄMMÄINEN..............................................151

Features Firms and Markets

New Business Models: the Theatre of Ubiquity Henri TCHENG, Isabelle DENERVAUD & Jean-Michel HUET ..................175

The World Television Market Florence LE BORGNE................................................................................185

World telecom equipment market - Vendors review Julien SALANAVE.......................................................................................191

Book Review Laurent BENZONI & Patrice GEFFRON (Eds.), A collection of Essays on

Competition and Regulation with Asymetries in Mobile Markets by Edmond BARANES................................................................................195

Summaries ..............................................................................................196 The authors .................................................................................................197 ITS News.....................................................................................................205

Spectrum Policy: What next? A foreword

Gérard POGOREL Ecole Nationale Supérieure des Télécommunications, Paris

wo significant processes are underway in the radio spectrum policy domain. In the Spectrum Sections of its "Proposed Changes" to the

European Union Regulatory Framework for Electronic Communications Networks and Services, aiming at the Fall 2007, the European Commission exposes a set of forward-looking spectrum policy principles, emphasising the role of market flexibility, trading, technology and service neutrality. However, by stressing the need for a clear justification of exclusive usage rights, it differentiates itself from market-fits all propositions. Moreover, a World Radio Conference is to be held also in the Fall 2007, which should see decisions on major issues such as spectrum for after 3G in mobile applications. The issues to be examined on both a policy and an academic level include a re-visiting of the rationale for harmonisation and standardisation. Whether technical progress in wireless, culminating in extended dynamic access, will complement or contradict market mechanisms in fostering the efficient use of spectrum is also a case in point. The justification of opposed regimes for different services, like communications and broadcasting, is also in need of re-consideration in the context of convergence. The variety of trade-offs in the debates concerning the spectrum dividend of the transition from analogue to digital television warrants in-depth institutional approaches, which are also welcome in dealing with the diversity of spectrum usage, and consequently of the applicable spectrum regimes.

T

For obvious reasons, there has been a longstanding tradition of technical consultations on spectrum usage among government agencies and interested parties, especially within ITU and CEPT. Since the UMTS licences awarding conundrum, there has also been a growing awareness of the shortcomings of the case-by-case, nation-by-nation, approach to spectrum policy and management. The CEPT, the European Commission, RSC and RSPG have now been exploring for some time possible future policy

COMMUNICATIONS & STRATEGIES, no. 67, 3rd quarter 2007, p. 9.

10 No. 67, 3rd Q. 2007

avenues. We are still, however, witnessing a clash, if not of civilisations, then of constituencies, institutions, cultures, both within and across member states in the EU, and even more within ITU. The question to be asked is: what are the possible outcomes, what are the chances of coming up with an improved spectrum regime, at a time when the Commission is boldly, but cautiously, making proposals for more coherence between spectrum policy, the internal market rules, the electronic communications regulatory framework and competition policy, and when ITU is paving the way for the great mobile ubiquitous future?

In the "old" spectrum regime, constituencies of varied nature, defence and public safety agencies, the satellite and telecom industries, radio astronomers, amateur radios, to name just a few, entered in protracted potlatch sessions to share the spectrum. Mostly technical arguments were voiced, with industrial interests doing some arm-twisting behind or even on the scene. Spectrum agencies then acted as benevolent coordinators and traffic controllers. The level of technical complexity was high, but the government and industrial activities involved had distinct rationales, and decision-making on spectrum usage could converge. But we are now confronting added dimensions of complexity and potential conflicts. On a technical level, post-3G perspectives, how the selected systems will use the spectrum, the multiplicity of access radio technologies, the frequencies used, variety of the types of acquisition of rights on these frequencies, increasing sophistication and versatility of the transmitters and the receivers: the implementation and impact of these future technologies is potentially large, but it is far from being fully explored. For these reasons, the effective extent of the future needs for frequencies for the post-3G applications is undoubtedly very large, but remains oddly evaluated. Short of GSM-or UMTS-like mobilisation tools, post-3G perspectives, as explored by the IST programme, have not come up with enough compelling arguments for regulatory changes, and have not yet reached the kind of political momentum to effectively support a consistent and extensive change of policies all around the world.

On an industrial level, media-telecom convergence opens an era of cut throat industrial competition and activity re-configuration. Regarding spectrum usage, it is often observed big Telecom and big Media in Europe have difficulties speaking the same language. At government and policy level, the flexibility through market narrative, which is championed by the EC, is only partially adhered to by some member-states. Whatever its coherence with general EU policy objectives, this orientation however runs up against obstacles. For example, the diversity among European countries

A foreword 11

of the audio-visual industry structures, with contents considerations not always easily dissociable from their broadcasting. Many Member States governments would have important difficulties to modify the delicate fundamental balance of the audio-visual planet, the free (or almost free) use of the frequencies forming part of it. The radio spectrum environment in Europe would have to change, but, given the many dimensions of complexity, the processes will be more evolutionary than revolutionary.

The ill-fated attempt by a Google-led coalition to create special rules for part of the 700 Mhz to be put up for auction is another example. Actually the rules set by the FCC in August 2007 for the upcoming auction of 700-MHz spectrum went less than halfway on the four open access principles that Google and others had called for. The agency approved "open devices" and "open applications," requiring the auction winner to permit consumers to use any device (which is de facto the case in Europe) or application on the network. But the FCC rejected "open services" and "open networks," so the winners will not be obligated to let others buy access at wholesale prices in order to offer network services. This could be predicted given the lack of popularity of the « Open » Networks concept with the US regulator. It also illustrates the difficulties of changing institutional arrangements in the wireless industry.

This Dossier intends to shed light on these debates.

In his introduction, Martin SIMS sets the scene of the WRC-07 and analyses the nature of technological and market pressures to achieve more flexible spectrum access.

Two prominent members of the European radio spectrum Community, a Regulator, Rüdiger HAHN and a Mobile industry executive, Richard FEASEY have accepted to share with us their views on what is important and what should be done (or not done) at this time.

The papers by Fulvio MINERVINI and Frédéric PUJOL et al. share a connection with the IST Supporting Action "Spectrum Policies and Radio Technologies Viable in Emerging Wireless Societies" (SPORT VIEWS) . Their purpose is to explore the potential of emerging wireless technologies, with regards to their interactions, impacts and facilitating effects, with spectrum policy. Phillipa MARKS & Brian WILLIAMSON explore the relationship between spectrum allocation, spectrum commons and public goods, and the the role of the market, while Gary TONGE & Pierre de VRIES emphasise the role of licence-exemption in spectrum reform.

WRC-07: the Technological and Market Pressures for Flexible Spectrum Access

Martin SIMS PolicyTracker, London

Abstract: By examining the preparations for the 2007 ITU World Radio Conference (WRC-07) and associated developments this paper identifies practical examples of the market and technological pressures contributing towards a more liberalised approach to spectrum management. It argues that the need to find new spectrum for advanced mobile services (WRC-07 Agenda item 1.4), the growing orthodoxy on spectrum neutrality and the need to accommodate converging technologies are helping to undermine the stricter forms of command and control spectrum management. However, the need for global harmonisation of satellite frequencies and the international variation in rolling out digital terrestrial television place limits on this drive towards greater flexibility. Key words: 2007 World Radio Conference; WRC-07; mobile; IMT; IMT-2000; satellite; broadcasting; spectrum liberalisation; mobile TV; DVB-H; WiMAX; technology neutrality; ITU Radio Regulations

olicy development is usually a slow process, and when international co-operation is a key element - spectrum management is one example - then rapid change is even more unlikely. However, policy

does change, albeit at an all too glacial pace according to the more enthusiastic spectrum liberalisers. So every few years it is interesting to take stock of how far the ice floes have shifted. In the field of spectrum management the World Radio Conference, which takes place every three to four years is an ideal opportunity to do this.

P

Getting the agreement of the ITU's 191 1 member states is by no means easy, particularly when the body has a tradition of proceeding by consensus. The process is carefully managed, with a long series of pre-conference meetings to ensure that the debate is sufficiently focused to produce agreements in the few weeks allotted for the actual conference. This year's World Radio Conference (WRC-07) is being held from 22 October to 16

1 See http://www.itu.int/cgi-bin/htsh/mm/scripts/mm.list?_search=ITUstates&_languageid=1


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November: the pre-conference meetings for the World Radio Conference in 2011 are just beginning.

Opinion has been exhaustively pre-tested, so the proposals brought to World Radio Conferences are ones that have a realistic chance of success. This means that the extent to which they reflect the drive towards spectrum liberalisation is a good indication of how far the policy consensus has moved. The key battleground in this year's World Radio Conference (WRC-07), and the main focus of this paper, is agenda item 1.4 - the spectrum needs for the future development of mobile systems:

"1.4: to consider frequency-related matters for the future development of IMT 2000 and systems beyond IMT 2000 taking into account the results of ITU R studies in accordance with Resolution 228. (See ITU (2007) pages ii-v)".

CAVE, DOYLE & WEBB (2007) argued recently that:

"a command and control approach is becoming more difficult to manage as an ever expanding range of applications appears." 2

This paper seeks to provide concrete examples of this tendency by examining recent developments and decisions in spectrum policy, focusing particularly on the preparations for WRC-07. It seeks to show that technological and market developments are undermining what POGOREL (2007) 3 has defined as the stricter forms of the command and control method of spectrum management, and are contributing towards a more liberalised approach where frequency bands are less likely to be restricted to a single technology or service.

The argument made here is that the need to find new spectrum for advanced mobile applications has been a key driver in this process. Another important factor has been the growing international and cross-industry consensus on technology neutrality. The paper also seeks to point out some of the limitations on a more flexible approach to spectrum usage, principally

2 The quote comes from their September 2007 PolicyTracker article but the argument is made at greater length in their book Essentials of modern spectrum management, pp.1-9, especially p. 8 3 In "Nine Regimes of Radio Spectrum Management: A 4-Step Decision Guide", POGOREL identifies nine spectrum management regimes, pointing out that in practice there are several flavours of command and control regimes incorporating varying degrees of technology neutrality.

M. SIMS 15

the global nature of the satellite industry and the varied adoption rates of digital television.

Future spectrum needs for mobile systems

Over the next 15 years the International Telecommunications Union (ITU) expects that mobile services will require greatly increased access to spectrum. The ITU has estimated the total bandwidth requirement by 2020 for mobile cellular systems, ranging from 2G to 4G, as 1280 MHz if user demand is low and 1720 MHz if user demand is high, acknowledging that in some countries the spectrum requirements could be higher than this (ITU, 2007, p. 23). To take Region 1 4 as an example the total requirement is made up of 693 MHz already identified at previous World Radio Conferences and 587 MHz of new spectrum in the low usage scenario and 1027 MHz of new spectrum in the high usage scenario. In approximate terms this is at least a doubling if not a tripling of spectrum requirements.

This is a great deal of bandwidth and finding it inevitably puts pressure on the strict implementation of the command and control model of spectrum allocation where regulators or governments decide what service or technology should use a particular range of frequencies. To put it more simply: if mobiles need so much more spectrum, where is it going to come from? Analogue TV switch off will provide some free space, which will be discussed in detail later, otherwise it's a question of sharing with other services which already occupy a band or moving closer to those services than would previously have been considered.

The ITU's preparatory document for WRC-07 (ITU, 2007, pp. 23-42) identifies six candidate bands for new mobile services and explains the possibilities for sharing with services currently using these frequencies (ITU, 2007, pp. 29-32).

The candidate bands are 410-430 MHz and 450-470 MHz, 470-806/862 MHz, 2300-2400 MHz, 2700-2900 MHz, 3400-4200 MHz and 4400-4990 MHz. In the first two bands the ITU says mobile can share with low and medium power broadcasting services using mitigation techniques but says

4 ITU Region 1 is Europe, Africa, the Middle East west of the Persian Gulf including Iraq, the former Soviet Union and Mongolia.

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further studies are needed to resolve the interference problems raised by high power broadcasting and fixed services in these bands. In the 2700-2900 MHz band there is the issue of sharing between mobile services and aeronautical radionavigation service and meteorological radars to be resolved. In the 3400 - 4200 MHz band one of the problems is co-existence between radiolocation services and fixed satellite services currently using this band.

In order to accommodate mobile's increasing demand for spectrum the administrations gathered at WRC-07 are having to consider putting it in bands previously allocated for other services. These primary allocations, as they are known, will be split into primary and secondary allocations or co-primary allocations.

So the growth of mobile is contributing to an unpicking of the traditional command and control approach. International administrations are paving the way for the entry of popular and economically powerful mobile services into new frequencies which had previously been designed for other occupants. Opening up bands to several possible services facilitates a liberalized approach to spectrum management where the market decides which is the highest value service. This approach may not be adopted in all countries but the options being considered at WRC-07 for the expansion of mobile services create the space to apply an increasingly liberalized approach to this economically important area.

Furthermore, as the ITU preparatory document points out, there are many different views on which candidate band to choose:

'It should be noted that there was no consensus on the candidature or suitability of any of these bands as prospects for identification for IMT. […] For each band listed below or portions thereof, some administrations have indicated that they are considering it for IMT, while some other administrations have indicated that they use the band for other services and do not intend to deploy IMT.' (ITU, 2007, p. 34)

The diversity of national approaches to next generation mobile services is forcing the ITU to be as open as possible about allocating bands in order to accommodate all its members. Even if a single candidate band is chosen at WRC-07 is seems quite probable that further bands will be added at the next WRC in 2011 5.

5 Many administrations favour a mobile allocation in UHF at WRC-11 rather than WRC-07. See later in this paper.

M. SIMS 17

As we can see from the preparatory discussions for WRC-07, economics, consumer demand and international diversity are forcing national administrations to consider the use of mobile across a wide range of bands. While changing the band allocations would not compel national administrations to admit mobile services into these new bands, it certainly makes it easier for those countries seeking to take a flexible approach. The band allocations provide a pre-tested framework where certain applications are guaranteed protection from interference from neighbouring countries. Having such a structure readily available may encourage more traditionally minded administrations to implement greater flexibility.

Technology neutrality: the new orthodoxy

Administrations are increasingly moving away from the stricter forms of command and control and adopting a technology neutral approach. This is a step towards a more liberal system where the regulator would merely set technical limits and allow the market to decide which technology or application would be adopted. This paper argues that the build-up to WRC-07 demonstrates how restricting technology choice is becoming increasingly impractical. Firstly, technology neutrality seems the only policy option which can produce agreement between different countries and between diverging sectoral interests. Secondly, and connected to the above, technology specificity in the mobile field is being undermined by the pressure to make international standards embrace a wider range of technologies.

DVB-H

In recent months the clearest example of the impracticality of being technology specific has been the European Commission's failed attempt to mandate DVB-H as the region's mobile TV standard. In March 2007 the Information Society Commissioner Viviane Reding said if industry could not agree on a common mobile TV standard by the end of the summer she would impose one, and that would be DVB-H. The Commission had earlier set up a cross-sector body to push forward the development of mobile TV, but the European Mobile Broadcasting Council (EMBC) had concluded that technology neutrality was the best approach. Ms Reding was scornful of the EMBC's efforts, saying she 'would have expected more in terms of proposed solutions and strategic vision.' (SIMS, April 2007b).

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However, by June 2007 the strength of opposition had forced the Commission to backtrack (NEWLANDS, July 2007). 'Flabbergasted', 'baffled', 'bemused', 'unbelievable' were some of the words used by senior industry figures to describe the Commissioner's intervention (SIMS, April 2007b). 'This idea that there is a huge untapped demand out there only constrained by the shambolic nature of the industry is laughable,' said one mobile operator (SIMS, April 2007b). Within a few weeks the incoming EU Presidency had added their voice to the opposition. In a conference address the Portuguese made it plain that they favoured technology neutrality, not a mandated standard. (SIMS, July 2007b). The Commission recanted and now offered only the 'strongest encouragement' to member states to adopt DVB-H, while promising to monitor market developments over the coming year (European Commission, July 2007a, July 2007b).

The Commission made several reasonable arguments in support of mandating DVB-H. It was the best technology and was developed in Europe and so would bring the greatest advantages to the EU's economy, giving it a lead in mobile-TV in the same way that the GSM Directive had made Europe a world leader in mobile in the 1990s. These are valid points, and although the counter arguments are also very robust 6, expounding them is not the purpose of this paper. The point it seeks to make is that it is now very difficult to get the necessary cross-industry support for technology specificity as a policy option. Mandating DVB-H did not get the support of the mobile operators, the mobile manufacturers, or of national administrations. It did not even win the support of the body which was instrumental in developing the DVB-H standard – the European Broadcasting Union. Among other things the EBU did not want to harm the interests of its members who had invested in another EU-developed technology which can be used for mobile TV, the digital radio standard, DAB.

WIMAX/IMT-2000

A further example of the international and cross-industry support for technology choice can be found in the progress made in including WiMAX in the IMT-2000 standard. WiMAX is widely seen as a disruptive technology with the ability to revolutionize the wireless industry by giving WiFi-type broadband wireless access technology with coverage areas of up to fifty square kilometers. Including it within IMT-2000 would give it potentially the

6 For a detailed analysis of these arguments, see NEWLANDS (April 2007).

M. SIMS 19

same spectrum access as 3G mobile technologies. Some see this as a way of opening up the mobile industry to greater competition; others see it as a way for mobile operators to reduce costs by using WiMAX for some services.

Whether or not WiMAX will revolutionize existing business structures the point this paper seeks to make is that the majority of administrations and sector players are keen to give it spectrum access. The process of getting WiMAX accepted into IMT-2000 only began in November 2006 (NEWLANDS, December 2006), but has been proceeding with remarkable speed, considering this is the first time an attempt has been made to add a new air interface to the standard. The relatively smooth progress (NEWLANDS, July 2007) is indicative of the broad range of support for the measure. Roger Marks, chair of the IEEE 802.16 working group which has overseen the development of WiMAX, reported that ITU-R Working Party 8F which monitors the development of the IMT-2000 standard was very open to including WiMAX. "Every delegate encouraged me to submit [a proposal] for consideration and requested that I do so as soon as possible" he said in a report 7 written after attending an 8F meeting.

The only administrations to make significant objections to the inclusion of WiMAX were China and Germany, and these were largely procedural in nature. There was also broad support from industry, with one of the isolated protests coming from Qualcomm, which has developed a potential WiMAX competitor: Flash-OFDM. At the time of writing the final approval for WiMAX to be accepted into IMT-2000 was expected to be given at the Radiocommunications Assembly immediately before WRC-07.

This represents a remarkable change of heart for the mobile industry, which only a few months earlier had argued against WiMAX access to 3G expansion bands like 2.5-2.69GHz (NEWLANDS, December 2006; GSMA, 2006). The volte-face reflected a growing acknowledgement that in the long term WiMAX may develop as a significant new technology no matter what the mobile community does and it was better to prepare for and manage the change .

The overwhelming support for opening up spectrum reserved for the most economically valuable of applications – advanced mobile services like IMT-2000 – is an important indicator of opinion shifting away from the

7 http://grouper.ieee.org/groups/802/16/liaison/docs/L80216-06_020.pdf

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'regulator decides which technology' model of spectrum management. While WiMAX entry into the IMT-2000 family does not guarantee the technology spectrum access in every country, it sets a tested international framework for the IMT-2000 technologies to co-exist and makes access much harder to refuse. The level of support for making the standard more inclusive is also more evidence of technology neutrality as the only policy option which can command international and cross-sector support.

Updating the ITU Radio Regulations

A further example of how the development of technology is undermining the stricter forms of command and control can be found in ITU Resolution 951, which is being considered under WRC-07 agenda item 7.1. Resolution 951, agreed at WRC-03, asked the ITU to carry out studies to consider whether the Radio Regulations are still effective and appropriate considering the evolution and convergence of technologies. Speaking at a recent conference 8 the chairman of the WRC-07 preparatory meeting, Kavouss Arasteh, said "Unfortunately we are still working on definitions [drawn up] 50 years ago. We have a classical separation of services: we call this fixed; this mobile; the other broadcasting; whereas in practice convergence means fixed [can be] mobile, mobile [can be] fixed and broadcasting is all of them." The European regulators organisation, CEPT, has pointed out that some administrations are unsure under which categorisation convergent services should fall (CEPT, 2007, p. 7).

Three options (CEPT, 2007, pp. 5-6) have been proposed to meet the requirements of the resolution. The first is to continue addressing convergence issues through the existing regulations and schedule of WRC meetings. The second is to revise some of the existing service definitions and the third is to introduce a provision in the regulations which would allow services to be substituted for each other e.g. fixed for mobile or vice versa.

Neither of the proposals to change the current system would be easy to implement. Kavouss Arasteh argues that changing current service definitions is impractical: "Regulators and lawyers will sit down and talk about a single vote for days and days without any result," he said 9. CEPT believes that

8 Second European Spectrum Management Conference, Brussels, 5-6 June 2007. 9 Ibid.

M. SIMS 21

implementing substitutability would require considerable additional work on defining technical parameters (CEPT, 2007, pp. 4-5), so the most likely result is that no final decision will be taken on this resolution until WRC-11.

Adapting the Radio Regulations to deal with convergence seems troublesome in practice but the fact that many countries think it is necessary shows how technological developments are pushing administrations towards recognising the need for flexibility.

Mobile in UHF: the limits of liberalisation

The developments examined so far point to an erosion of the command and control approach under the influence of technological change and changing user demand. However, the limits of this policy shift are shown by the debate over a mobile allocation in UHF. As discussed earlier in this paper using either all or part of the UHF band (470-862 MHz) is one of the options proposed for accommodating the additional spectrum needed for mobile services. This has been strongly advocated by liberalizers like the UK and the European Commission 10 as well as industry giants Nokia. The company says a mobile allocation in UHF at WRC-07 is essential to the creation of innovative wireless services:

"Non allocation would leave our industry in total uncertainty […] and is likely to lead to fragmented band plans as several countries go on with their national decisions." 11

However, this approach has encountered much opposition, revealing a division between regional and international approaches, between early and later adopters of digital terrestrial television and between developed and developing countries.

From a European perspective the paradox is that although the regional regulators' organisation, CEPT, has agreed a voluntary harmonised sub band for mobile in UHF, most CEPT members are opposed a similar mobile

10 Both describe a failure to do so as a ‘missed opportunity’: see Ofcom (2007) and RSPG (2007). 11 See Letter from Nokia Siemens Networks and Nokia to RSPG: available on the ERO website (http://www.ero.dk) by selecting ECC activities/ meeting documents; entering the user name rrc and password rrc and choosing ECC TG4 Digital Dividend.

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allocation at WRC-07. 17 out of 29 CEPT administrations are currently opposed to allocating the UHF band for mobile services at WRC-07; only 6 are in favour. The majority view is that any decision should be delayed until WRC-11 (CEPT Electronic Communications Committee, 2007, p. 12).

The Commission has described the WRC-07 allocation as a "test case on the commitment of administrations to move ahead with flexibility of spectrum use" saying "the digital dividend should not be frozen, or limited to pre-determined applications […] giving mobile services the same allocation status as broadcasting and other possible services [would] keep all options open." The Commission said those opposing the WRC-07 allocation were acting "to the detriment of those member states with early switch-off dates." (RSPG, 2007, pp. 5 and 6).

The contrary view, held by the majority of European administrations, is that RRC-06 already gives sufficient flexibility to deploy mobile services and there is no urgency to provide additional mobile frequencies because there is plenty of unused capacity still available. Some member states say they wouldn't be able to deploy mobile services anyway because of interference with neighbouring countries.

From an international perspective Kavouss Arasteh has argued that using UHF for mobile is a difficult proposition:

'The lower bands are almost totally occupied by broadcasting. Delegates don't want to compromise the result of last years international treaty on broadcasting [RRC-06] and there is no need for an immediate decision - we will have to wait to see what emerges as a digital dividend [frequencies released by analogue TV switch-off]. This is also a political issue.' (SIMS, April 2007a)

In those countries where plans for digital switch off are already well advanced, like the UK, which will be releasing 112MHz in the 470-862MHz band after switch off, using this spare capacity for new mobile services makes sense. But in less developed countries where dispensing with analogue TV is not an immediate prospect, opening up a broadcasting band to mobile is unattractive. As 470-862 MHz is often occupied identifying this band would do little to speed one of the key advanced mobile applications - the introduction of badly needed wireless broadband services in rural areas. Furthermore, from a political perspective, why create insecurity among the broadcasters who are not only an equally vital development partner, but also in some cases closely connected with the state?

M. SIMS 23

In the case of mobile services in UHF the gap between early and later adopters of digital TV is acting to inhibit the opening up of the band. Many developing nations and several European countries like Russia and Turkey (SIMS, July 2007a) have yet to plan out digital TV so are understandably reluctant to jump a stage and consider the next step in spectrum planning – what to do with the frequencies released by switchover. Furthermore RRC-06 has already made it clear that most Arab countries are not thinking in terms of a digital dividend and see UHF primarily as a TV band (SIMS, July 2007a).

Developing countries' resistance to a mobile allocation in UHF is in one sense a paradox because the superior propagation characteristics of this band would make it ideal for the establishment of low cost wireless broadband networks. A network at higher frequencies would require more base stations and so cost more.

Another reason for favouring the higher bands rather than UHF for new mobile services is the amount of spectrum available. IMT-advanced services typically require 100 MHz of spectrum and most countries would want four competing operators. To ensure a level playing field they would need spectrum with similar propagation characteristics. This requires 400MHz of contiguous spectrum and 3-5GHz is the only range where this is currently available (SIMS, July 2007a).

Satellite

A further restriction on the opening up of bands to a variety of technologies is the needs of satellite operators. By nature a global industry, satellite relies on spectrum access which is harmonised worldwide. Satellite is therefore particularly concerned about the erosion of this harmonisation by the proposed creation of mobile allocations in two of these globally harmonised frequencies, 3400-4200MHz and 4400-4990MHz.

Satellite operators have been particularly vocal about the use of C-band (3400-4200MHz) as a potential candidate for future IMT-2000 use. '[Mobile] operators are using language that goes beyond national coverage, which is quite a new strategy for them,' said Cecil Ameil, head of regulatory affairs for satellite company SES Global. 'They are openly claiming that they want European coordination for their aspirations and they hope they will be able to expand throughout Europe and beyond.' (WATSON, March 2007).

24 No. 67, 3rd Q. 2007

SES Global argues that the proposal faces two key problems. The first is that satellite operators use C-band for space-to-earth transmissions. As these transmissions do not need to be authorised, most of them are not recorded. 'This means we do not know the location of those who receive the signals,' said Ameil. 'That makes any coordination very difficult, if not impossible.' The second problem in sharing this band would be the need to coordinate in some areas of national territory. According to Ameil, this means either that terrestrial operators would not be able to operate in a certain geographical zone or that they would only be able to operate under such constraints that their services would not be feasible at all. 'The terrestrial operators are saying that they need to access radio spectrum which they cannot use efficiently,' said Ameil. 12

Another candidate band, 4.500-4.800MHz, has been allocated for fixed satellite service (FSS) on a primary basis for many years. FSS operators will want to see convincing evidence of the feasibility of IMT-2000 sharing this band too. 'Everything exclusive to FSS (and broadcast satellite service, BSS) is something that secures our business. As soon as you start talking about flexibility and letting other services into these bands, that is a concern,' said Ameil.

The satellite industry would like the ITU not to make any prescriptive decisions on these two bands at WRC-07, pointing out that many countries and regions oppose the introduction of terrestrial operators in this band. They will be arguing that this decision should be made at a regional rather than international level (WATSON, March 2007).

12 See ITU (2007) p. 32 "…sharing is feasible only when the receiving earth station is at a specified location and under the condition that the minimum required separation distance together with the criteria mutually agreed between the concerned administrations are observed. If FSS is deployed in a ubiquitous manner and/or with no individual licensing of earth stations, sharing is not feasible in the same geographical area since no minimum separation can be guaranteed."

M. SIMS 25

Conclusion

This paper has endeavoured to demonstrate by reference to recent developments in spectrum policy how market and technological developments are combining to encourage a more liberalised approach to frequency usage. There are ample examples of the problem identified by CAVE, DOYLE & WEBB: namely the difficulty of managing an ever expanding range of applications through the command and control approach 13. The development of mobile into 3G and beyond has created an international drive to find more spectrum, and this means placing mobile services in bands previously identified for other services, principally satellite, broadcasting and radar. Balancing conflicting industry needs also mitigates against any international or regional tendency towards favouring particular technologies. Examples of this can be found in the moves towards including WiMAX in the IMT-2000 family and in the overwhelming opposition to mandating DVB-H as the EU mobile TV standard.

On the other hand there are countervailing pressures which restrict this tendency towards flexibility in spectrum access. Satellite's need for harmonised global access is one of these, as is the international variation in adoption of digital terrestrial TV. The argument of this paper is that while these pressures exist, they are not as strong as the drive towards greater flexibility.

Changing spectrum policy is often seen as a matter of convincing regulators to look at things in a different way. What this paper has tried to practically demonstrate is that consumer demand; technological developments; and the necessity of formulating policy which can command international and cross-industry support are in themselves powerful forces pushing towards a more liberalised approach to spectrum management. 14

13 See footnote 2. 14 Martin Sims is grateful for the research carried by his PolicyTracker colleagues, Jonathan Watson and Michael Newlands which provides the factual basis for many of the arguments in this paper.

26 No. 67, 3rd Q. 2007

Bibliography

CAVE M., DOYLE C. & WEBB W: - (Sept 2007): "Applying market principles to spectrum management", PolicyTracker . - (2007): Essentials of modern spectrum management, Cambridge.

CEPT (2007): Draft CEPT Brief on Agenda Item 7.1 (Resolution 951 (WRC-03), May 2007 document no. CPG07(2007)096 Annex VIII 27.

CEPT Electronic Communications Committee (2007): CEPT Progress Report on WRC-07 Preparation http://rspg.ec.europa.eu/doc/documents/meeting/rspg13/rspg07_182.pdf

European Commission: - (July 2007a): Communication: "Strengthening the internal market for mobile TV" http://ec.europa.eu/information_society/policy/ecomm/info_centre/documentation/communic_reports/index_en.htm - (July 2007b): News Release: "Commission opens Europe's Single Market for Mobile TV services". http://www.europa.eu/rapid/pressReleasesAction.do?reference=IP/07/1118&format=HTML&aged=0&language=EN&guiLanguage=en

European Radiocommunications Office TG4 Working Group (2007): "Report B: technical feasibility of harmonising a sub-band of bands IV and V for fixed/mobile applications (including uplinks), minimising the impact on GE06". http://www.ero.dk/

GSM Association (GSMA) (2006): "Optimising spectrum for future mobile service needs", a report from the GSMA to the European Commission http://www.gsmworld.com/documents/extensionbands_s1_e1.pdf

ITU (2007): "CPM Report on technical, operational and regulatory/procedural matters to be considered by the 2007 World Radiocommunication Conference" http://www.itu.int/md/dologin_md.asp?lang=en&id=R07-CPM-R-0001!R1!PDF-E

POGOREL G. (2007): "Nine Regimes of Radio Spectrum Management: A 4-Step Decision Guide", COMMUNICATIONS & STRATEGIES, no. 65, April 2007. http://www.idate.fr/fic/revue_telech/623/CS65_POGOREL.pdf

NEWLANDS M. - (December 2006): "Formal application made to include WiMAX in 3G standard", PolicyTracker. http://www.policytracker.com/alerts.php?tact=463 - (July 2007): "ITU clears the way for WiMAX recognition", PolicyTracker. http://www.policytracker.com/alerts.php?tact=566

Ofcom (2007): "Consultation on candidate bands under consideration at WRC-07 for IMT". http://www.ofcom.org.uk/consult/condocs/wrc07/

Radio Spectrum Policy Group (RSPG) (2007): Chairman's report for meeting 13. http://rspg.ec.europa.eu/meeting_documents/index_en.htm

M. SIMS 27

SIMS M.: - (April 2007a): "Mobile services in UHF proving a tricky proposition", PolicyTracker. http://www.policytracker.com/alerts.php?tact=524 - (April 2007b): "Industry condemns Commissioner's call to mandate DVB-H", PolicyTracker. http://www.policytracker.com/alerts.php?tact=532 - (July 2007a): "Breakthrough on mobile services in digital dividend", PolicyTracker. http://www.policytracker.com/alerts.php?tact=571 - (July 2007b): "Incoming presidency rebuffs Commission's radical spectrum proposals", PolicyTracker. http://www.policytracker.com/alerts.php?tact=567

WATSON J, (March 2007): "Preparations for WRC-07 get underway", PolicyTracker, http://www.policytracker.com/alerts.php?tact=508

Opinion

Interviews with

Rüdiger HAHN Director, Head of Department, Bundesnetzagentur, Germany

Richard FEASEY Public Policy Director, Vodafone

Interview with Rüdiger HAHN Director, Head of Department

Legal telecommunications regulation issues Frequency regulation

Bundesnetzagentur, Germany

Interview notes by Gérard POGOREL

Considerations on WRC 07 and beyond: a German and European perspective

There are two main commercial issues on the WRC 07 agenda:

1/ additional spectrum for mobile communications,

2/ additional spectrum for aeronautical applications (telemetry and air safety).

Of course also the other agenda items of RWC-07 are important to a number of new applications, like HF-broadcasting, satellite or scientific, and BNetzA is following very closely all agenda items and participated in the development of all European positions for WRC-07. The prime objective is always to enable easy and fast access of the user and the consumer to innovative services and technologies.

The first question refers of course to the evaluation and provision of 3rd and 4th mobile generation spectrum needs. The focus is on spectrum for higher data rate systems between 3-6 GHz but the provision of better services to rural areas is also to be considered. For the higher data rate systems the time frame for introduction is around the year 2015 in accordance with ITU studies. BNetzA fully supports the European proposal to WRC-07 for a primary allocation to mobile in the band 3.4 – 3.8 GHz.

The two issues also are to be considered as against the background of the growing concern about the Digital divide: More and more people in Germany see frequencies as a way to expand broadband applications into white spots. For this BNetzA already auctioned the frequency band 3.4-3.6 GHz in


32 No. 67, 3rd Q. 2007

December 2006 for BWA and first systems are already being implemented. With a primary allocation to mobile at the WRC-07 in this band the BWA operators can be easily provided with full flexibility to offer mobile services in accordance with the WAPECS concept.

BNetzA is tailoring the procedure for the award of Digital cellular mobile communication. This includes parts of the 1800 MHz, 2 GHz 3G core band and the so called "extension band" at 2.6 GHz. The planned auction will be technology neutral based on a spectrum mask and every technology fitting the mask is allowed to be used, this includes also WiMax. The Flexibility in general has to compromise with the efficiency of spectrum use and aside interference issues economical, competitive and regulatory issues have to be considered thoroughly. BNetzA is fully supportive in this regard to the WAPECS concept and is implementing it step by step. The auction is planned for 2008 pending procedural clearance.

Another question is the possibility of using part of digital Broadcasting dividend to bridge the digital divide. In the beginning of 2006 BNetzA issued a public consultation about the provision of capacity for multimedia services in the broadcasting bands.

In Germany, the implementation of digital broadcasting started on October 31st 2002 in Berlin. Since then, the switch-over from analogue TV to DVB-T has brought the reception capability of at least fixed reception to about three quarters of the German population, starting individually from several densely populated "islands". Up to now, 35 % of the German population is even offered portable indoor reception. It is expected that by the end of 2008 the public providers will have completed their roll-out for three nationwide multiplexes. The private providers also use at least three multiplexes in the present coverage areas, in some cities even more. From the formal point of view, the duration of each frequency assignment will terminate by the end of 2025. However, there is a need to bring about one third of the transmitters in line with the results of GE-06 by switching their frequencies. Therefore, amendments of existing networks are inevitable.

In addition to that, the tender procedure for one DVB-H network has been started. Its implementation is expected soon, using the spectrum under channel 55 in order to ensure compatibility between DVB-H reception and mobile transmission in the 900 MHz band.

For the time being, channels 61 – 63 and 67 – 69 are used by the MoD. In a mid-term timeframe, it is expected that these channels may be used by civilian applications. In order to save investments, Germany is interested in keeping the need for changes on a very low level. This approach includes, that any intended different use of any part of the UHF-band (e. g. the harmonization of a sub-band for mobile communication applications) should be taken into account at the earliest convenience possible.

Interview with R. HAHN 33

In Germany the Länder are in charge of media law: They define the coverage constraints on their behalf. Plus, UHF is covered by existing rights of broadcasters. 2025 might seem very late, but hurrying would lead to disputes, which might last years and years.

What broad conclusions do we make: in Germany we have to speed up the process to reach a consensus between the various interests, and facilitate the transition to a new ecosystem, in its technical, radio spectrum, industry, actors, and policy perspective.

An experiment is presently being conducted in Berlin Brandenburg to highlight and technically explore the potentialities of extending the use of broadcasting bands to broadband access on channels not used by broadcasting. If this seems technically appealing, it raises however delicate policy and industry issues as the actors involved are diverse: broadcasters are considered as in charge of "cultural" imperatives, whereas mobile operators are seen as business entities guided by business purposes.

The present configuration of the broadcasting (media) industry gives the Länder and licensed broadcasters a sense of control in implementing public interest goals. Having TV channels integrated as just another service bundled with telephony and Internet-based content provision and communications, enlarges the sector definition. There are also more and different actors, like phone and cable companies. The interactions become more complex, and those entities that presently manage and monitor the broadcasting sector fear a loss of control of public interest goals in the broadcasting sector.

A step-by-step evolution is necessary to reach a consensus. Economic considerations, like the actual implementation of the possibilities of trading, that already exist in the German law, could also be part of the evolution path.

Anyway this debate will only be initiated at WRC 07. It would be an error to rush the debate at this stage. Present trends actually go in the right direction and issues will mature and actor's awareness will increase with time. An enlightened debate could then take place efficiently at WRC 2011. Of course this timing on the global level should not hinder European discussions to progress as fast as possible.

The second prime interest is the provision of additional spectrum for aeronautical applications. The aviation industry is heavily relying on sufficient spectrum for telemetry for flight testing and new wideband systems need relevant resources, also for the evolution to unmanned aeronautical vehicles. In addition the flight safety organisations (e.g. ICAO) are looking for extended possibilities to introduce advanced systems to increase the safety of flights. BNetzA is backing these developments by supporting the additional allocations at the WRC-07.

Interview with Richard FEASEY Public Policy Director, Vodafone

Conducted by Martin CAVE & Gérard POGOREL

C&S: Does Vodafone support proposals for change in spectrum management?

RF: I think Vodafone has been in the vanguard of the reform movement for some years now. My experience in spectrum reform is that there is so much inertia, so many reasons why change is difficult or should be deferred, that it is necessary to take quite a radical position in order to achieve even modest changes. We have consciously done that. I think modest but important changes are what we have achieved so far in Europe. I see this as a 10-15 year project, not a 3 year one.

I also think that it is necessary for the political and economic arguments to get to a point where they force the radio engineers to think again about what is really possible. Big changes are very difficult in engineering terms, but they might still be worth doing if they generate enormous economic and social benefits. My experience is that spectrum policy debates involve people who are very risk averse and that the spectre of interference hangs over every discussion. I do not believe that technological innovation will solve all the difficult questions but I do think we need to be more ambitious than we have been in the past. That first requires some serious political leadership and some top down pressure on institutions which are not accustomed to it.

C&S: What changes do you see so far and what would you like to see?

RF: I regard spectrum reform as the unfinished business from the old 1999 review in Europe. During that review we addressed economic regulation in the telecoms sector – SMP, Universal Service and licensing – but we did not really make any serious inroads into spectrum reform, which remained a


36 No. 67, 3rd Q. 2007

Member State responsibility. Since then I have been impressed by the work undertaken by the European Commission, and by the Radio Spectrum Policy Group. Perhaps I am too optimistic, but there seems to be broad agreement about where Europe wants to go in spectrum reform (towards a more flexible, more devolved model of allocating resources). There are just a lot of different views about how we get there! Thankfully, Europe has managed to avoid the rather theological debate which the United States has been having between the advocates of 'commons' and 'exclusive' usage rights and which, so far as I can see, has consumed a lot of energy for little real purpose.

The hard work in Europe begins now, because we have to make some specific short term decisions rather than agreeing on longer term visions. Spectrum reform is bound to be piecemeal. Hopefully this year we can repeal the GSM Directive and allow companies like Vodafone to use their best spectrum (at 900 and 1800 MHz) with their best 3G technology. Nothing better illustrates the need for reform than the fact that we could not do this before, whilst the Americans have been doing it for years. I suspect the GSM Directive will be repealed without much comment later this year, but this is actually a step of some symbolic significance for Europe because the success of GSM engendered a sort of complacency that made some of the necessary reforms more difficult than they might otherwise have been.

Looking forward, there are probably three spectrum decisions that really matter and which will allow us to judge whether reform is really underway. The easiest is probably the auctioning of the so-called 3G extension band spectrum (at 2.6GHz) on a reasonably technology neutral basis, allowing technologies like WIMAX as well as WCDMA or successor technologies. I think we must get away from the situation in which particular vendors (or operators) use the spectrum licensing process as a proxy for competition - instead of competing in the marketplace for the core technologies themselves. It looks as if the 3G extension band auctions will be as neutral as we can make them.

The second decision that really matters is what to do with the digital dividend. This is the most important spectrum decision we are likely to make in the next 20 years. I am very worried that Europe could squander the opportunity this presents. This could happen either because no spectrum is released for non-broadcasting purposes at all, as appears possible in some Member States; or because it is released in Europe 7 or 8 years after the US and other markets, as appears possible from the European position going into the World Radiocommunications Conference in October this year; or because it is released early to a couple of European markets, perhaps the UK and Sweden, but not in enough markets to generate any kind of meaningful scale for new technology. We are working hard on this issue at Vodafone at the moment. The next year or so will be critical.

Interview with R. FEASEY 37

The third area which will have major significance in the long term is the reallocation of spectrum from the public to the private sector. There is plenty of evidence to suggest that the public sector has been a relatively inefficient user of spectrum but there is also plenty of evidence to suggest that unlocking this spectrum is very difficult to do in practice. In fact some of the difficulties with the digital dividend arise from the same issue. I do not have a simple answer for this, but it should be a clear objective for the reformers.

C&S: You mentioned 'political leadership' – what does this mean?

RF: It means that spectrum has not been at the top of the political agenda and yet the implications of spectrum policy decisions like whether or not we squander the digital dividend means that it ought to be. In part this is because those engaged in spectrum policy have not spoken a language which politicians find easy to understand. The committees of the CEPT are impenetrable and the technical jargon is pretty formidable. Running meetings over days or weeks guarantees that the time poor do not attend. None of this helps with political engagement at the highest level.

Some people might argue that politicians are the last people we want making decisions about how to allocate spectrum. I think politicians need to be well advised, but it is their job to make decisions about the use of scarce public resources. I don't see any incompatibility between the use of market mechanisms and the need for political leadership in spectrum policy.

Let me provide one example of the lack of political leadership which I see in spectrum policy today. In July the representatives of the European Governments agreed Europe's position ahead of the World Radiocommunications Conference in October, and they agreed that Europe would not propose change on the UHF spectrum and that further studies are required. That means no serious commitment to using this spectrum for anything other than broadcasting until 2011 or later. That may be the prudent technical decision, but it is absolutely the wrong political decision. Almost the entire European mobile industry – including Vodafone – was opposed to this outcome. We believe it could put Europe 5 years behind the rest of the world in the next generation of wireless communications. Yet how many Ministers were aware of the meeting, or what it meant? How many newspapers wrote articles about it?

The Ministers themselves will discuss Europe's position at the World Radiocommunications Conference when they meet at the Telecoms Council to be held in early October. This is 10 days before the meeting itself, and almost 3 months after their officials have already determined what Europe's position will be. Even if they realize that we have made a mistake and that Europe should support change in the conference it is not clear that they can do anything at this stage. The existing spectrum policy machinery ensures

38 No. 67, 3rd Q. 2007

that Ministers have no real influence. This has got to change if we are to get the kind of political engagement I am talking about.

C&S: Don't Governments still have an important role on harmonization? How does that get handled?

RF: I think this is one of the most difficult issues in spectrum policy. I have looked for good research on how we best capture the economies of scale from global technology platforms – since these gains undoubtedly exist – but the work I have seen is pretty partisan and unconvincing. Somebody should do more work on this.

There is clearly some relationship between the harmonisation of spectrum and the standardization of technology, but it is clearly a very complex one. There is a very complex debate about how standardisation itself works, and how many competing technologies we want. What we know is that a certain minimum scale is required for mobile platforms like GSM or WCMDA and that this is probably continental in terms of dimensions – but not necessarily global. We also know that a lot of the spectrum we now hold in the mobile industry is already harmonised in the sense that it is available under similar conditions across many markets. I think a key aspect of 'harmonisation' is also ensuring that the spectrum is released in similar timeframes or windows across a large number of markets. Having a similar amount of spectrum at similar frequencies released in a similar window is the kind of 'meta- harmonisation' which I think Governments should undertake. This is the real challenge for Europe on the UHF spectrum I mentioned earlier. But I am not sure the Government's responsibilities on harmonisation need to go beyond this – or that, in practice, they often do today. When you look at the ITU Allocation Tables closely you see that rather less harmonization occurs in practice than in theory. The legacy issues are so formidable. I suspect the general trends in globalization are as likely to drive further harmonization as specific measures taken by spectrum regulators.

I am also clear that this is an area where we should either allow the marketplace to undertake the necessary co-ordination or we should allow Governments to do the 'meta harmonisation', but that the two will not easily co-exist. My nightmare is a situation in which Vodafone can co-ordinate freely in some markets because we have freedom in terms of technology choices, but that individual Governments retain control in some others. A single entity has to do the co-ordination.

Overall, we do need to protect a form of 'meta harmonisation' in spectrum, but the claims sometimes made on behalf of harmonization are overplayed and the implications of those claims are often not well understood. It is not an argument against reform, it is just an argument against anarchy.

Interview with R. FEASEY 39

C&S: Sounds like an argument for a European spectrum regulator?

RFI do not think that the reforms I have in mind require any particular institutional arrangements and I could see them being accomplished without any significant reform of the institutional arrangements in Europe. I always worry that arguments about institutional arrangements displace the real debate about policy direction. In this case, I also worry that spectrum gets caught up in a much broader debate about the relative roles of the Commission and national regulators in telecoms regulation generally. That would be a mistake.

I do however support the Commission's approach in terms of long term objectives and I do believe that some national regulators are too conservative or too constrained by political constraints to do the job that is needed. I can also see the case for some spectrum decisions and some licensing being done on a pan-European basis. I suspect some form of pan-European regulation in this area is inevitable and is likely to command widespread support.

However, my main institutional demand would be always to incorporate spectrum responsibilities into the main sectoral regulator for telecoms and broadcasting (assuming you have one of those) rather than having spectrum managed by a separate agency. Ofcom and the FCC are the right models here. In my experience this puts the economists in the driving seat and gives the agency real political weight which it often otherwise lacks in Government (but it needs for example, to unlock spectrum held by the public sector). It also tends to give the agency some space from the long-standing constituents whom it has served over the decades. Spectrum reform means doing some things which are unpopular to some groups – something that spectrum managers have sometimes sought to avoid in the past. Telecoms and anti-trust regulators adopt a slightly different – and in my view more appropriate – approach to the task of regulation. This is what spectrum management needs today. This could be achieved by reforms at national level or by transferring powers to the European Commission or some other body.

Papers

Spectrum policy: what next?

Regulatory and Policy Implications of Emerging Technologies to Spectrum Management

Spectrum Allocation, Spectrum Commons and Public Goods: the Role of the Market

The Role of Licence-Exemption in Spectrum Reform

Emerging Technologies and Access to Spectrum Resources: the Case of Short-Range Systems

Regulatory and Policy Implications of Emerging Technologies to Spectrum Management

Frédéric PUJOL et al. (*)IDATE, Montpellier

Abstract: This paper provides an overview of the policy implications of technological developments, and how these technologies can accommodate an increased level of market competition. It is based on the work carried out in the SPORT VIEWS (Spectrum Policies and Radio Technologies Viable In Emerging Wireless Societies) research project for the European Commission (FP6) Key words: spectrum, new radio technologies, UWB, SDR, cognitive radio.

his paper surveys new and emerging radio technologies and their relevant characteristics with regard to spectrum management and the economics of spectrum, an analysis of the challenges facing existing

radio technologies, spectrum usage, management and existing mechanisms for spectrum allocation. It also assesses the possible consequences of these technical evolutions for spectrum management from different perspectives and the way spectrum management can support innovation and economic efficiency.

T

Scope

Within the survey made in this study the focus will be on technology innovations in fixed, mobile (including nomadic) and broadcasting systems. At certain points connections and dependencies with other forms of spectrum use may be observed (such as radars, navigations systems, astronomy etc). Only the effect on the technology developments in radio communications of these other forms of spectrum use will be mentioned.

(*) This paper is extracted from the task 1 of the SPORT VIEWS project written by: B.J. BUSROPAN (TNO), A.H. van den ENDE (TNO), T. JANSSEN (TNO), P.H. TROMMELEN (TNO), P. CARBONNE (IDATE) and F. PUJOL (IDATE).


44 No. 67, 3rd Q. 2007

The focus is on frequencies below 6 GHz that is considered the prime frequency range for fixed, mobile and broadcast services.

Spread spectrum technologies

In this chapter we discuss the group of radio technologies with spread spectrum properties, but not just in the classical sense. The classical spread spectrum technologies such as Direct Sequence and Frequency Hopping are shortly described but only for tutorial reasons. Recent and emerging technologies like OFDM and Ultra Wide Band and corresponding standards are of more interest.

The spread spectrum class of signals as we define it here is confined to those technologies which generate a (ultra) wide spectral profile, either instantaneously or within a longer period of time. This property makes this class suitable for spectrum underlay and/or overlay techniques 1.

Legacy spread spectrum technologies

Classical spread spectrum technology is based on the concept that the narrowband and modulated RF signal is manipulated (scrambled) prior to transmission in such a way that its profile in the frequency domain changes significantly, i.e. the signal occupies a much larger part of the RF spectrum, either instantaneously or over a certain time. Nowadays, 3G mobile communication systems use spread-spectrum mainly to improve system efficiency and flexibility within licensed bands, but the technique is even more powerful when used for underlay or in unlicensed bands. Ultra Wide Band (UWB) can also be regarded as a spread spectrum technique.

Direct Sequence Spread Spectrum (DSSS)

The direct sequence approach (DSSS) is based on multiplication of the original signal with a wideband pseudo noise spreading code, which results

1 Spectrum underlay technique is a spectrum management principle by which signals with very low spectral power densities can coexist as secondary users in channels with primary users deploying systems with higher power density levels. Spectrum overlay technique is based on ‘intrude and avoid’ where a secondary user uses a primary channel only when it is not occupied.

F. PUJOL et al. 45

in a wideband time continuous scrambled signal. DSSS significantly improves protection against interfering signals, especially narrowband. It also provides a multiple access capability, when the several different (orthogonal) spreading codes are being used simultaneously. It can provide transmission security if the spreading codes are not published (in case of 802.11 they are). Direct Sequence is also used as a technique to generate UWB signals.

Frequency Hopping Spread Spectrum (FHSS)

In case of frequency hopping spread spectrum (FHSS) the time continuous scrambling code is used to quickly change the RF frequency of the narrowband transmission within a certain range. Hence, a hopping pattern can be observed in the spectrum. Like DSSS, FHSS also provides a multiple access capability by using orthogonal hopping codes for different (logical) communication channels. It can also provide transmission security if the hopping codes are not published (in case of 802.11 they are).

Time Hopping Spread Spectrum

In case of time hopping a train of short duration pulses is transmitted which is derived from the narrowband information carrying signal through scrambling with a pseudo random modulated impulse train. The short pulse duration generates the spread spectrum profile. Time Hopping is used as a technique to generate UWB signals.

OFDM

Description and characteristics

OFDM stands for Orthogonal Frequency Division Multiplexing. Nowadays it is often the modulation type of choice in systems for mobile and short range wireless (WLAN) communications, digital audio/video broadcasting and fixed wireless access (particularly non-Line Of Sight). Hence OFDM is a legacy technology, but none-the-less it deserves treatment in this report for two reasons. There are some interesting spectrum management aspects related to its use.

46 No. 67, 3rd Q. 2007

The principle of OFDM is that a data symbol is transmitted using a certain number N modulated sub-carriers which form a comb in the spectrum. The key advantage is that the symbol transmission is made resilient to frequency dependent propagation effects (outages, multi-path) because an array of (sub-) carrier frequencies is used for its transmission rather than a single frequency. The sub-carriers should be chosen orthogonal to prevent adjacent channel interference.

Spectrum Management issues

The principle spectral shaping capability of OFDM raises the issue as to what this means from a spectrum management perspective. Should wideband OFDM be considered as a serious candidate for spectrum overlay arrangements?

Ultra Wide Band Technology


Ultra-Wide Band (UWB) is a technology developed to transfer large amounts of data wirelessly over short distances, typically less than ten metres. Unlike other wireless systems, which use spectrum in discrete narrow frequency bands, UWB operates by transmitting signals over wide portions of spectrum (up to several GHz). For example, the US regulator FCC has defined a radio system to be a UWB system if it has a spectrum that occupies a bandwidth greater than 20% of the central frequency or an absolute bandwidth greater than 500 MHz. Under FCC rules, UWB devices are subject to certain power, frequency and operational limitations including being limited to the 3.1 to 10.6GHz frequency band. The main characteristics of UWB and other short range wireless standards are presented in table 1.

UWB has a variety of possible applications. Those that are estimated to bring most economic benefits to consumers are likely to be in the PAN 2 environment, which includes homes and offices. Other potential applications for UWB include ground probing radar, positioning location systems, wireless sensors, asset tracking and automotive systems. It is generally

2 PAN: Personal Area Network

F. PUJOL et al. 47

assumed that the majority of UWB applications will fall into the category of consumer communications and high speed networking within PAN environments.

Table 1 - Comparison between UWB and other short range wireless standards (data)

Technology Data rate Range Cost Power Spectrum Issues

UWB 50-100 Mbps 150 m Low Low 3.1-10.7

GHz High data rate for short range only

Bluetooth 0.8-1.0 Mbps 10 m Low Low 2.4 GHz Speed and interference

issues

802.11a 54 Mbps 30 m High High 5 GHz High power consumption, high costs, bulky chipset

802.11b 11 Mbps 100 m Medium Medium 2.4 GHz Speed and signal strength issues for more range

802.11g 54 Mbps 30 m High High 2.4 GHz Connectivity and range problems. High cost

HIPERLAN 25 Mbps 30 m High High 2.4 GHz Only European standard. High cost

Home RF 11 Mbps 50 m Medium Medium 2.4 GHz Speed issues

Zigbee 0.02-0.2 Mbps 10 m Low Low 2.4 GHz

Standard still under consideration, very low communication range, low data-rate

UWB is a potential alternative to other local area wireless technologies, such as Bluetooth, WiFi and other WLAN technologies. The principal advantage of UWB over existing wireless alternatives is that it should offer much faster data transfer rates (100 Mbps up to 1Gbit/s) over short distances thereby using frequency spectrum in stealthy fashion (hardly noticeable).

Spectrum usage and regulatory aspects

One of the important issues of UWB communication deployment is the protection of incumbent and future spectrum users. Due to the implicit use of a very wide spectrum range, UWB systems are not planned to operate under any specific allocation but there are lots of existing and planned wireless systems operating under allocated bands within the UWB signal band. The figure below shows how UWB uses already allocated radio spectrum.

48 No. 67, 3rd Q. 2007

Figure 1 - underlay-example of the UWB band in the USA

1.6 1.9 2.4

Bluetooth,802.11b WLANCordless PhonesMicrowave Ovens

PCS

5

802.11a WLANCordless Phones

Very Low

Frequency (Ghz)

ReceivedSignalPower

10.63.1Note: not to scale

UWB Spectrum

U-N

II ba

nd

ISM

ban

d

GPS

1.6 1.9 2.4

Bluetooth,802.11b WLANCordless PhonesMicrowave Ovens

PCS

5

802.11a WLANCordless Phones

Very Low

Frequency (Ghz)

ReceivedSignalPower

10.63.1Note: not to scale

UWB Spectrum

U-N

II ba

nd

ISM

ban

d

GPS

Source: Intel

If UWB can be deployed without undue interference to other allocated services then it effectively increases the availability of spectrum. It would not do this in the conventional sense of making more frequencies available, but by more efficiently using spectrum already allocated.


Today, Ultra Wideband systems represent an opportunity for the development of consumer and PAN (Personal Area Network) applications. The different spectrum masks adopted by the USA and Western Europe are likely to slow down the penetration of UWB equipment.

The main question surrounding the introduction of UWB systems is the question of interference caused to existing spectrum users. Mobile operators generally warn regulatory bodies about the potential consequences of introduction of UWB in Europe. CEPT is carrying out studies in order to precisely evaluate the potential interferences generated by UWB systems.

In order to prevent interference over the wide frequency range that UWB utilizes their application will probably be limited to short range. Therefore, they are not seen as potential candidates for mobile applications offered today by cellular systems.

They will probably be used in the framework of unlicensed systems in "commons" type frequency bands in Europe.

F. PUJOL et al. 49

Dynamic spectrum access technologies

In this chapter we will describe various radio technologies that provide ways of dynamic spectrum access. "Dynamic Spectrum Access" (DSA) is any form of spectrum usage that is flexible, which implies that the set of transmission parameters is not fixed beforehand, but can be chosen and changed dynamically. This involves the selection of the appropriate band, channel, bandwidth, transmission power, modulation and coding scheme, and access method. The added value of this type of adaptivity is to be able to operate and maintain system or network performance under different and dynamic (spectrum) environmental conditions.

The technology that allows flexibility in the transmitted waveform exists today and is continuously improved and extended. A key research topic is the concept of smart or cognitive radio systems. These systems must be able to sense and interpret their (spectral) environment, make decisions on how to adapt their own spectral behaviour and evaluate the effect of their decisions (learning aspect).

Legacy dynamic spectrum access mechanisms

Automatic frequency selection mechanisms can be seen as early forms of flexible spectrum access. Several examples can be given:

• The automatic frequency selection principle can be found in modern car radio sets.

• DECT 3 cordless communication systems for use in residential and business environments apply the dynamic channel allocation mechanism (DCA).

• Dynamic Frequency Selection is a (mandatory) feature incorporated in IEEE 802.11h compliant WLAN devices operating in the 5 GHz frequency band where these devices have a secondary status. The DFS mechanism facilitates the avoidance of radio channels already in use by primary users (e.g. radar systems) or by other WLAN systems.

The listed examples have in common that:

3 DECT stands for Digital Enhanced cordless telecommunications.

50 No. 67, 3rd Q. 2007

• The systems' behaviour is based on predefined pre-programmed algorithms and thresholds and is therefore predictable and reproducible;

• They are examples of unilateral coordination: the decisions and actions of a radio system are not based on information provided by systems with peer or higher status that coexist in the band.

Software Defined Radio


The essence of a Software Defined Radio (SDR) is that the functionality of the radio physical transmission level (physical layer) is almost completely implemented in software. This is a major technological advancement away from traditional radios, which operate with a predetermined built-in waveform, which is produced at the time of manufacture and cannot subsequently be modified. In a fully SDR based radio system, nearly all (except for the antenna) physical layer functions are implemented in software which creates the possibility for the radio to generate a wide variety of possible waveforms and associated settings. The radio architecture will be layered where the bottom layer comprises generic (but powerful) digital signal processing hardware and the top level the parameterised waveform applications. A middleware layer takes care of the abstraction of the hardware into software objects evocable from the application layer.

SDR technology is a logical step in the evolution of wireless systems. The following benefits of SDR can be identified:

• Cost reduction: "Every new IC process generation has higher initial costs, so the minimal production volume to be cost-effective becomes higher and higher.

• Patchable devices: design flaws can be repaired.

• Prolonged lifetime: support of new technology standards can be implemented in a radio through software updates.

• User convenience: several radio services are provided by a single device.

• Adaptability: through its software a SDR can be made to operate on multiple channels and communication standards, using multiple modulation

F. PUJOL et al. 51

schemes and access methods. Thus, it is able to adapt to its spectral environment.

The specific benefits as well as the SDR design choices are very much application domain specific. In the 3G/4G domain, there is an interest in network reconfigurability.


The spectrum management related recommendations produced by E²R, based on the E²R regulatory questionnaire are summarized here because they cover quite well the set of issues that SDR raises in terms of spectrum management:

- harmonisation of standards (standards for reconfigurable hardware), - certification of reconfigurable equipment, - global circulation of reconfigurable equipment, - development of new harmonised standards for reconfigurable equipment (i.e. pre-condition for the applicability of R&TTE directive).

To this list of issues, the question can be added how the regulator can exploit the existence of SDR technology, i.e. new instruments to regulate frequency bands.

Cognitive Radio


A Cognitive Radio (CR), as its name readily implies, is a radio that is capable of cognitive behaviour. In the description of CR-pioneer Mitola, a CR's cognitive abilities form a six-phase cognition cycle "Observe, Orient, Plan, Learn, Decide, Act".

We describe a CR as a radio that is aware of its environment (with characteristics such as vacant frequencies, user preferences, prevailing spectrum rules, and operator tariffs), and employs this acquired information in a reasoning process, that leads it to decide on its transmission behaviour. Additionally, it is capable of learning, through an evaluation of its own behaviour and experiences.

52 No. 67, 3rd Q. 2007

An important consequence of a CR's cognition is that, unlike other forms of "thinking radios"4, the radio's behaviour may become unpredictable.

Generally, a radio system's cognitive behaviour is not strictly limited to its spectrum usage; it may show cognitive features in a multitude of other functions. However, given our focus on spectrum policy, we will primarily address the consequences of cognition for a radio's spectrum usage, and not take cognitive behaviour at higher system levels 5 into account. Software Defined Radio is widely regarded as an important enabler for Cognitive Radio.

Main obstacles

In the evolution of Cognitive Radio, numerous technical challenges still remain. Related to a CR's awareness of its spectral environment, the main issues are the following: Wideband sensing, Opportunity identification, Interference prevention, Dynamic coordination, Spectrum policy compliance, Software challenges and Hardware challenges.

In addition to these technical issues, the same authorization-issue that was discussed in the context of SDR plays a role for CR: how to prevent an unauthorized system modification that could harm radio communication by other spectrum users?


We have described the working principles of Cognitive Radio, and its relevance for spectrum usage. In summary, Cognitive Radio has the potential to improve spectrum utilization as follows:

- dynamic Spectrum Allocation, - allow multiple, independent communications devices to coexist within shared spectrum, - enable secondary markets and spectrum leasing, - multi-mode terminals: overcome incompatibilities among communication services.

4 These include adaptive and aware radios, i.e. radios that are aware of their spectral environment and are able to adjust their behaviour in a pre-determined manner. 5 An application of higher level cognitive behavior would be the CR as a member of an ad hoc Network. It communicates with another radio by, for every specific situation, creating its own transmission path involving several hops of other radios. Such advanced forms of information networks are discussed in section 2.5.2.

F. PUJOL et al. 53

Like SDR, CR offer flexibility in their use of spectrum. SDR delivers this through its re-programmability: it makes it possible to modify the transmission parameters dynamically. Still, such modifications would require a lot of user intervention. CR – probably built on SDR-technology - takes re-programmability a step further by bringing intelligence to the radio, so that it is able to decide on its transmission parameters autonomously.

Given the advances in SDR-technology (enabler for CR), and the many initiatives in CR-research, CR-technology may develop rapidly over the coming years. Even though it will take several years at least, within the span of ten years the major technical obstacles may be removed. Spectrum regulators will then play a big role in shaping the eventual use of CR-technology.

On one hand the flexibility in spectrum utilization by these new technologies poses a challenge to the spectrum regulator: a significant amount of control over the spectrum use is lost. The amount of parties to divide the spectrum over increases drastically: whereas first there were only network managers to divide spectrum among, now in principle each individual radio-terminal forms a party of its own as it is free to determine its own spectrum use. Also, the flexibility of hardware renders certification difficult (certification issue).

Yet, on the other hand the flexibility has the potential to induce a much more efficient use of spectrum. The emerging CR/SDR-technology may deliver flexible forms of spectrum sharing, allow negotiation of frequency use between users, access of unlicensed users when the spectrum is not in use, and it may overcome incompatibilities among existing communication services.

Intersystem control

Description and general characteristics

Multiple radios making use of the same frequency band requires some form of coordination. Within a single radio system this is relatively easy to implement. For instance, in the GSM-system, there is a pilot channel through which radios can announce their intention to access the spectrum, and through which the GSM-network allocates a sufficient share of the available spectrum. Coordination between different radio systems is a more

54 No. 67, 3rd Q. 2007

challenging task, since a network "administrator" – in the GSM-case: the operator – is not naturally present.

As radio designs and systems attain higher levels of intelligence, it becomes possible to fill holes in the spectrum, through spectrum sharing. Therefore, in the context of the perceived brimming of spectrum, and the progress in radio technology, inter-system coordination becomes ever more relevant.

The coordination process may involve the negotiation of many parameters: technical (frequency, location, time, transmission power, modulation, etc.), financial (price, payment options, etc.), and service quality (interference protection, signal-to-noise ratio, etc.).

The various forms of coordination that have been suggested in recent years fall into two categories: one in which the coordination is provided by some central controller or database, and one in which coordination is delivered by the radio systems themselves, without such a central entity.


The clear benefit of intersystem control for spectrum management is that under-utilized spectrum can be taken into use while interference can be prevented.

Central coordination provides a way for the regulator to remain in control over the spectrum access, also when there are multiple licensees of varying status and a wide range of transmission equipment. Thus, through implementing central coordination the regulator can safeguard against interfering spectrum use.

Distributed coordination has other advantages. Not only does it provide a more lightweight form of spectrum management, it also stimulates innovation incentive to coordinate their spectrum access. An example of this is the creation of IEEE 802.16's task group "h" following the FCC's decision to open a piece of spectrum under the condition of implementation of a coordination protocol.

F. PUJOL et al. 55

Mesh and ad hoc networks


Mesh networks are radio communication networks in which radio nodes provide retransmission capabilities to neighbouring nodes, allowing end-to-end connectivity in the network based on multi-hop routes. There are two main categories of mesh networks:

- 'structured mesh networks': in which the radio nodes have fixed positions; - 'ad hoc mesh networks': in which the radio nodes act as mobile terminals.

Structured mesh networks

The term 'mesh network' (in the meaning of structured mesh network) is often used in relation to Fixed Wireless Access (FWA) systems which are applied to provide access services to small and medium enterprises, home offices and residential users.

Common FWA systems are based on a Point-to-MultiPoint (P-MP) architecture, in which a base station serves several fixed terminal stations within its service area. Each base station can be equipped with a single omni-directional antenna or, more usual, multiple antennas each serving a separate sector (e.g. 90º or 60º wide). To each base station one or more frequency channels are assigned (depending on the number of sectors). By installing multiple base stations a larger area can be covered, in a similar way as is done with cellular networks for mobile communications.

Ad hoc mesh networks

Ad hoc mesh networking is based on mobile terminals and/or devices which form an autonomous network as they come into each others vicinity. Ad hoc networking functionality pursues a high level of self management and self healing functionalities and minimal requirement for intervention of the users or a network operator. Within the ad hoc networking framework several network management protocols are defined e.g. to admit additional terminals which come in range of the other network nodes protocols, to optimise transmission power levels, and update route selection algorithms to

56 No. 67, 3rd Q. 2007

improve the overall transmission efficiency. A schematic example of ad hoc mesh networking is schematically represented.

Figure 2 - Schematic representation of an ad hoc network (Nortel Networks)

The self organising and automatic network management features make ad hoc networks easy to use and convenient in many applications:

- personal area networks (PAN): interconnection of devices in the home environment such as TV, PC, organiser, mobile phone, video recorder; - (temporary) local area networks: for instance at conferences, exhibitions or business meetings; - mobile communications; - sensor networks: communication between intelligent sensor devices; - robotics: swarms of wirelessly interconnected robots or similar 'mobile autonomous systems'; - communications for military and public safety operations: fast connection establishment in areas where no communication infrastructure is present or communication means are damaged; - communication between vehicles: for intelligent transport systems, safety increasing applications or to provide road-side information.

Benefits of mesh networks

Mesh networking can offer benefits compared to the more commonly applied cellular network topologies based on the deployment of base stations en central network management. The most important benefits of mesh networks are listed below.

Benefits of mesh networks: - no single point of failure, - robustness due to alternative routing possibilities in the network, - range extension and coverage enhancement;

F. PUJOL et al. 57

Benefits specifically related to ad hoc mesh networks: - no fixed relay for installed infrastructure, - networks are self organising, - there is no need for network planning.

Technical challenges in mesh networking

The dynamic network topology (terminals moving within, joining and leaving the network) and realising efficient and reliable multi-hop communication are the basic challenges for mesh ad hoc networking. An additional complicating factor is the distributed nature of mesh ad hoc networks, where there is no central management entity controlling the network, but networking functionalities are distributed among the nodes. Nowadays research is aimed at solving these challenges for mesh ad hoc networking and optimising communication possibilities offered by these networks.

Besides the benefits that can be offered by (ad hoc) mesh networking there are also a number of issues to be resolved. The most important issues are:

- transmission delay in the network when in case of routing along multiple hops, - optimisation of routing protocols, - scalability, - security, - information security, - increased terminal costs, - willingness to relay.

Spectrum management implications

Contrary to what is often claimed, mesh networks do not provide improvement of spectrum efficiency compared to cellular network topologies. Pure mesh networks do not scale well, since in mesh networks with large numbers of nodes the relaying of transmissions will significantly reduce efficiency. For the reason of spectrum efficiency the mesh networking concept does not have any important implications for spectrum management.

58 No. 67, 3rd Q. 2007

Ad hoc meshed networks are in general operating autonomously with little or no intervention of users or a network operator. To enable this autonomous operation generally low power devices or cognitive functionalities are used to avoid interference. Ad hoc and mesh networking is an implementation of these technology developments that does not introduce spectrum management implications other than those that are treated in the specific chapters.

Ad hoc and mesh networking however provides some practical benefits over cellular networks and also offers new communication possibilities and services. Therefore (ad hoc) mesh networking finds employment in various applications e.g.: mobile communications, local area networking, sensor networks, machine-to-machine communications. The new possibilities that ad hoc and mesh networking offer may lead to an increase in wireless communications which could result in a corresponding spectrum requirement.

Low power devices and advanced antenna technologies

Low Power Devices (also indicated with the term Short Range Devices) and advanced antenna technologies are not covered in this paper. For more details, please refer to the SPORT VIEWS project (www.sportviews.org).

Spectrum management implications overview - Conclusion

Findings regarding spectrum management implications of recent and coming technological developments are gathered in the table on the following pages.

In this report the most important innovations in radio technology have been surveyed. It is concluded that many new radio technology developments attribute to increased spectrum efficiency and system performance. Also these innovations form the enabling technology for better frequency utilization or flexible access to the spectrum.

F. PUJOL et al. 59

Technology Characterisation Implications for Spectrum Management OFDM Multi Carrier - CDMA

Modern efficient transmission technologies Robust / Adaptable Improvement of radio performance

Opportunities Spectrum Shaping Adaptive to local temporal environment characteristics (regulations) Enhanced Spectrum Efficiency Clever multiple-access schemes Throughput optimization E

nabl

ing

tech

nolo

gy

Ultra Wide Band

Spreading signal power over ultra wide bandwidth Low power / short range New application possibilities high data rates radar applications indoor location determination

Opportunities New applications Enhanced spectrum utilization through 'underlay' Issues UWB does not fit in current spectrum allocation regime Doubts about 'underlay' use interference aggregation effect Discussion about spectral masks for UWB transmission

Dis

rupt

ive

tech

nolo

gy

Software Defined Radio

Radio functionality implemented in software Flexibility in: radio signals radio transmission standard frequency utilization

Opportunities Adaptability to spectral environment. Adaptability to new transmission standards. Re-configurability. Enhanced flexibility of spectrum use. Basis for dynamic spectrum allocation systems. Might help solving interoperability difficulties and legacy issues. Issues Risk of unintended behavior. Equipment certification / standardization. Distributions of responsibilities.

Ena

blin

g te

chno

logy

Cognitive Radio

Flexibility of SDR Awareness of the environment (sensing) Autonomous decisions on its radio transmission behavior Ability to learn from its behavior, observations and feedback

Opportunities Dynamic spectrum allocation / access Opportunity based spectrum use Autonomous coexistence in shared spectrum Issues Guaranteeing interference free coexistence sensing capabilities preventing undesirable behavior Declining control of the regulator Similar issues as SDR

Dis

rupt

ive

tech

nolo

gy

60 No. 67, 3rd Q. 2007

Intersystem Control Note: Intersystem control is in some cases seen as a variant of cognitive radio

Central spectrum coordination over: multiple networks multiple radio technologies multiple operators multiple spectrum users Central automated spectrum resource controller (Spectrum Policy Server) Transmission protocols to share spectrum control information (Common Spectrum Coordination Information Exchange)

Opportunities Dynamic spectrum allocation / access Optimize overall spectrum resource allocation Enhance spectrum utilization Enable economic mechanisms on a 'real-time' basis Issues Implementation of the new concept Forming a regulatory framework Establishing policies and rules for dynamic spectrum allocation Acceptance by operators

Dis

rupt

ive

tech

nolo

gy

Mesh / Ad hoc networks

Terminals have relay functionality Capabilities to autonomously form a network of relaying nodes Independence of infrastructure (no base stations) Regulation / extension of unlicensed frequency bands Most of the available radio link capacity is used to relay data transmission Different applications of meshed and ad hoc networks may require separate spectrum allocations Low power devices or cognitive radio technology challenges

Opportunities Enhanced capabilities Optimization of transmission power levels Enhanced coverage (overcome line of sight issues) Robustness due to alternative routing possibilities in the network Autonomous operation with no or very little operator intervention Independence of infrastructure Robustness New application opportunities Issues Pure mesh networks do not provide enhanced spectrum efficiency (mesh networks do not scale) Manageability of autonomous radio nodes License free (low power or cognitive radio) implementations of autonomous operating radio nodes in mesh networks Willingness of nodes to relay Large variety of applications may result in additional (exclusive) spectrum requirements

Ena

blin

g te

chno

logy

There are three innovations in radio technology identified that are disruptive in the sense that the current spectrum management frame work requires amendments to enable further development and introduction of these technologies. These innovations in radio technology are:

- ultra Wide Band, - cognitive radio (with SDR as important enabling technology), - intersystem control.

F. PUJOL et al. 61

The estimated technology roadmap for these technology innovations is shown in the next figure. Here it can be seen that UWB is a development currently coming up and resolving the spectrum management issues for this technology is urgent at this time. For cognitive radio and intersystem control the time line is longer and the urgency is not so high yet. Implementing possibilities for these last technological innovations is a process that can be started now to keep up with the developments that are expected.

Figure 3 - Technology roadmap estimation

62 No. 67, 3rd Q. 2007

References

AEGIS (2000): (In a contract for the Radiocommunications Agency UK), "Examination of issues related to spectrum efficiency of point-to-multipoint and mesh multimedia wireless system architectures proposed for 40.5 – 43.5 GHz", April 13.

ARKESTEIJN V.J., KLUMPERINK E.A.M. & NAUTA B. (2002): "An Analogue Front-End Architecture for Software Defined Radio", 13th proRISC workshop, November.

BONIN J.P. & EVCI C. (2006): "L'evolution du cadre reglementaire - problematiques et solutions pour futur", CNRS Scientific Day on SDR an Spectrum, March 28-29, Paris, France.

BURNS J.W. (2002): " Measuring Spectrum Efficiency- the art of spectrum utilization metrics", IEE Conference on getting the most out of Radio Spectrum, 25 October, London, UK.

CEC, COM (2005): "Market-based approach to spectrum management in the European Union", 400 Final Report, September.

CEPT, European Communications Committee (ECC), Working Group Spectrum Engineering, Joint Project Team Broadband Wireless Access (JPT BWA), http://www.ero.dk/

ECC (2005): Report 064, "The Protection Requirements of Radiocommunications Systems below 10.6 GHz from Generic UWB Applications", February.

ERC Recommendation 70-04 (2005): "Relating to the use of short range devices (SRD)", Version 17 November.

European Commission (1997): "Green paper on convergence of the telecommunications, media and information technology sectors and the implications for regulations", COM(97)623, December.

EVCI C. (2005): "Technology Developments Impacting on Radio Spectrum Management", Conf. on Spectrum Policy, March, London, UK.

FCC on UWB (2002): First Report and Order, FCC 02-48, ET-Docket 98-153, 22 April.

HAYKIN S. (2005): "Cognitive Radio: Brain-Empowered Wireless Communications", IEEE Journal on Selected areas in communications, Vol. 23, no. 2, pp. 201-220, February.

ITU-R Recommendation (2003): SM.1538-1, Technical and operating parameters and spectrum requirements for short-range radiocommunication devices.

MÄHÖNEN Petri et al. (2004): "Co-operative and ad hoc networks", WWRF Working Group 3, April 13.

MANGOLD Stefan, Zhun ZHONG, Guido R. HIERTZ & Bernhard WALKE (2004): "IEEE 802.11e/802.11k wireless LAN: spectrum awareness for distributed resource

F. PUJOL et al. 63

sharing", Wireless Communications and Mobile Computing, Vol. 4, Issue 8 , pp. 881-902, December.

Plextek (2006): (In a contract for Ofcom UK), "Final Report – Study of efficient mobile mesh networks", January.

MITOLA J. III (1999): "Cognitive Radio for Flexible Mobile Multimedia Communications", IEEE International Workshop on Mobile Multimedia Communications, pp. 3-10.

OFCOM (UK) (2005): "Impact Assessment: Technology and Application Neutrality in the 2.6GHz Band", September 15.

OJANEN Pekka et al., (2004): "Spectrum for Future Mobile and Wireless Communications", WWRF SIG1 on Spectrum Topics, White paper, November 5.

Radio Spectrum Policy Group (2005): Opinion on Wireless Access Policy for Electronic Communications Services (WAPECS) "A more flexible spectrum management approach", Final, November 23.

REED Jeffrey & Charles BOSTIAN (2005): "Understanding the Issues in Software Defined Cognitive Radio", presentation at Virginia Tech. http://www.mprg.org/publications/presentations/CognitiveRadioIssues.pdf

SCHIPHORST R. (2004): "Software Defined Radio for Wireless Local Area Networks", Enschede, ISBN 90-365-2071-1.

SWALES S.C., BEACH M.A., EDWARDS D.J. & McGEEHAN J.P.: "The performance enhancement of Multi-beam adaptive base station antennas for cellular land mobile radio systems", IEEE Trans Veh. Technol, Vol. 39, pp. 5667 I 990

TNO & IDATE (2006): SPORT VIEWS WP3 Task 1 'Future radio technologies and their impact on spectrum management', www.sportviews.org

TONMUKAYAKUL Arnon & Martin B.H. WEISS (2004): "Secondary Use of Radio Spectrum: A Feasibility Analysis", 25 August.

"Value of UWB Personal Area Networking Services to the United Kingdom" (2004): Report for OFCOM, November.

WWRF SIG1 White Paper (2005): "Methods for Flexible Spectrum Use", Version 0.2 November.www.ist-oban.org

1st IEEE International Symposium on New Frontiers in Dynamic Spectrum Access Networks (DySPAN) (2005): Baltimore, November 8-11.

Spectrum Allocation, Spectrum Commons and Public Goods: the Role of the Market

Phillipa MARKS & Brian WILLIAMSON Independent consultants, London

Abstract: The reallocation of radio spectrum to valuable new and emerging technologies and services is essential to achieving the next wave of productivity and consumer benefits driven by ICT. Currently spectrum is not allocated to the most valuable uses, particularly the large amount of spectrum held for government use, and command and control management cannot respond fully or quickly in reallocating spectrum. To achieve a more economically efficient allocation and the greatest overall benefit market mechanisms including trading and spectrum pricing must be introduced. Complementary reforms in areas other than spectrum management will be required, and the appropriate boundary between market and non-market allocation mechanisms need to be established. Setting clear principles regarding the market/non-market boundary will help in resisting the inevitable rent seeking by incumbents and potential entrants during the transition to market mechanisms. Countries that do not face up to these challenges and move quickly will see their citizens disadvantaged as spectrum becomes a key economic resource. Key words: spectrum policy, auctions, trading, spectrum pricing, digital switchover, real options, public sector use and licence exempt use.

adio spectrum is an increasingly valuable resource for wireless and mobile applications, yet historical allocations of spectrum and methods of allocation and reallocation are both inefficient and slow

to adapt. Substantial spectrum resources are in effect hoarded by government, aviation and military users with little consideration of the opportunity cost to the wider economy. In considering how to reform spectrum management to ensure that spectrum is allocated to the most valuable uses market mechanisms such as auctions, trading and spectrum pricing should play a central role.

R

Yet progress internationally in moving from command and control to spectrum markets has been slow and partial, with limited application to government use including the military for example. The cost to welfare in terms of foregone services and productivity growth is likely to be very large, with ICT currently contributing around half of overall productivity growth in


66 No. 67, 3rd Q. 2007

the US and Europe, and growing scope for wireless to contribute to the networked economy.

This paper focuses on the potential role of spectrum markets, barriers to introducing market mechanisms and the optimal boundary between market and other allocation mechanisms. False arguments are often made for the continued use of administrative allocation processes and we distinguish between these and legitimate arguments. These issues have arisen, or are arising, in a number of countries in relation to the allocation of spectrum released by digital switchover in particular.

Digital switchover also illustrates path dependence between decisions, with early decisions resulting in irreversible commitments which can reduce flexibility to respond to future technological developments, particularly where early decisions involve public service broadcasting. We conclude that introducing market mechanisms on their own is not enough to deliver optimal outcomes. There needs to be parallel reform of other institutional arrangements including government funding of public sector users of spectrum in moving to markets. Where administrative decisions are required irreversibility needs to be explicitly taken into account.

Benefits of applying markets to radio spectrum

Radio spectrum is a scarce and essential input to the networked economy. It is therefore important to ensure that spectrum assignment and allocation adapt to changing demand and reflect the value of alternative uses and users. Radio spectrum policy should be seen in the broader context of Information and Communications Technology (ICT) which has made a substantial contribution to increased productivity growth in some regions, but not others, since the mid-1990s as can be seen in Figure 1 (WILLIAMSON, 2007).

Part of the explanation for these differences in the impact of ICT lies in the flexibility with which business and government processes can be adapted to make effective use of ICT. Labour and product market flexibility appear particularly important to facilitating the "creative destruction" required to utilise ICT effectively and efficiently, and to get a large payoff from investment in ICT (McMORROW & VEUGELERS, 2005).

P. MARKS & B. WILLIAMSON 67

Figure1 - ICT contribution to productivity growth

The capabilities of existing fixed and mobile access infrastructure may increasingly prove to be a constraint on the networked economy as distributed data access grows, and particularly if existing regulatory arrangements act as a constraint and/or provide investors with insufficient confidence to invest. Spectrum markets and pricing could therefore play a significant role in facilitating the reallocation of spectrum to meet such new demands.

The proponents of a market approach generally argue their position from first principles. It seems self evident to an economist that if users (and regulators) do not face any cost for the use of a resource such as spectrum then they have little, if any, incentive to adopt the economically efficient technology or to allocate spectrum to the highest value uses (FAULHABER, 2006).

An illustrative example of existing spectrum use that appears very inefficient when the value of spectrum in alternative uses is considered is aeronautical radar. Aeronautical radar in the UK involves a relatively old technology (magnetron radars), and more efficient alternative technologies are available such as the use of filter technology, different waveform techniques or a combination of the two 1.

There is evidence (INDEPEN & AEGIS, 2007) that over 270 MHz of spectrum – more than twice the amount released by digital switchover in the UK – could be released for mobile and WiMAX applications whilst maintaining aeronautical radar services. It appears this could be done at very modest cost relative to estimates of the value of such spectrum which is

1 Whilst the use of ultra narrow band (continuous wave) transmissions would reduce requirements to only 10% of the amount of spectrum required by pulsed radars, this technology is not likely to be available for another 15 years.

68 No. 67, 3rd Q. 2007

estimated to be around £0.84m/MHz for the UK. Table 1 summarises the calculations.

Table 1 - Costs of reducing spectrum requirements for aeronautical radar by applying new waveforms and filters

L Band

(1.24-1.35 GHz)

S-Band

(2.7-3.1 GHz)

Ku-Band

(15.4-15.7 GHz)

Cost £11.7m £43.2-128.2m (*) £0.8m

Spectrum released 70 MHz 200 MHz 200 MHz

Maximum annualised cost/MHz (assuming 10% discount rate & 15 year discount period)

£0.02m/MHz £0.03-0.08m/MHz £0.0005m/MHz

(*) The low end of the range is the cost for civil radars only. The high end includes military radars assuming the cost per radar is the same as for civil radars. Some NATS radars may already have this capability and so costs are overstated. Also costs of military radar conversion may be less than those for conversion of civil radars if there is less cost of downtime.

Source: INDEPEN & AEGIS (2007), based on analysis of radar technologies by QINETIQ et al (2004)

If these results apply in a relatively densely populated country with a sizeable aeronautical industry like the UK, we suspect similar gains could also be made elsewhere. Achieving such gains across countries would be necessary if the spectrum is to be released for services on an international basis.

However, in the absence of incentives to economise on spectrum in the aeronautical sector the status quo will tend to dominate administrative decisions, particularly in Europe where air traffic control is fragmented between national administrations. An illustration of the tendency to support the status quo is European opposition to proposals to allow the allocation of the 2.7-2.9 GHz band to advanced mobile services (OFCOM, 2007a).

A shift to greater reliance on market mechanisms including spectrum trading and/or spectrum fees reflecting the opportunity cost of spectrum in relation to aeronautical radar could result the reallocation of spectrum to a range of mobile applications with substantial benefits.


The implementation of spectrum markets is limited

The extent of application of market mechanisms to spectrum in practice is generally limited despite the potential benefits. While numerous countries have used auctions to assign licences for mobile and wireless access services, relatively few countries have gone beyond this to implement reforms to create spectrum access rights that can be freely traded and that allow change of use or technology (i.e. that are liberalised).

Trading and liberalisation policies have been implemented for some time and/or in numerous frequency bands in Australia, El Salvador, Guatemala, New Zealand, Norway, the UK and the US (ANALYSYS et al., 2004; WIK, 2005; OVUM, INDEPEN & AEGIS, 2006). In most cases implementation has been partial and limited to newly auctioned spectrum (e.g. New Zealand) or a limited number of frequency bands (e.g. New Zealand, Norway, the UK and the US), and to commercial users (e.g. the UK, US, New Zealand).

In the US by 2002 only 7% of the spectrum in the 300 MHz to 3 GHz range (i.e. the most valuable spectrum) was available for market allocation. In those countries where government users may enter markets they have generally not done so (e.g. Australia, El Salvador, Guatemala, and Norway). A possible reason for the lack of participation may be the way in which gains from spectrum sales would be treated in the overall budget process. Alternatively, resources that have an opportunity cost may receive less scrutiny than actual cash expenditure on spectrum. If the latter is the case spectrum pricing may be an important substitute or complement to trading, particularly in relation to government use.

Of course, to the extent that there is trading in proxies for spectrum, such as network capacity (for example, broadcast multiplex capacity) or buying and selling of companies to obtain access to spectrum, the extent of trading may be more extensive than it first appears.

However, if we take the example of the UK, where there has been a clear policy direction, changes have taken at least a decade to be implemented. Arguably the move towards market approaches started in 1994 with the release of a consultation paper by the government titled "The Future Management of Radio Spectrum" and this lead to new legislation (the Wireless Telegraphy Act 1998) allowing spectrum pricing and auctions in 1998.

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In 2001 the Treasury and the Department of Trade and Industry commissioned an independent review of spectrum policy which advocated the broad application of market approaches to spectrum management (CAVE 2002). Spectrum trading was first introduced in December 2004 and is being incrementally extended each year, starting with bands used for private mobile communications and fixed wireless access. However, the OFCOM (2004) announcement did not propose the introduction of trading for 2G and 3G mobile spectrum until 2007. In 2004 the Treasury commissioned an independent audit of spectrum use by the public sector which has resulted in numerous specific actions, including the use of market mechanisms, aimed at improving the efficiency of spectrum use by the public sector (CAVE, 2005).

Why has it taken so long to achieve these changes? Is it just resistance by powerful incumbent interests or is developing new rights more complex than it first appears? In the remainder of this paper we seek to identify some of the real problems in moving to markets and the wider policy and institutional implications.

Distinguishing real versus false problems in moving to a market based approach

From a public policy perspective some of the claimed problems in developing market based approaches are real, and some are imagined or simply self serving. It is essential to distinguish between the two.

False arguments

Arguments that are sometimes made against the introduction of market based policies but that are not persuasive concern the claimed benefits from the services provided justifying "free" access to spectrum, and concerns about monopolisation and under use of spectrum if markets are applied (CAVE, 2006).

Contribution of spectrum using services to the economy

A frequent argument is that a particular sector makes a large contribution to GDP and employment, including indirect impacts on the economy, and


therefore deserves special access to spectrum such as spectrum reservations and access at low or no cost. An illustrative general example is the discussion of potential positive market externalities in relation to aviation in a report by the ATAG (2005).

Arguments regarding indirect economic or employment benefits, unless they relate to genuine (so called non-pecuniary) externalities such as pollution, are almost always spurious. Macroeconomic or second round effects normally represent a re-distribution of resources within the economy, without any net overall economic effect (BAUMOL & OATES, 1998; and BOARDMAN et al, 2006). In other words, the private valuation of spectrum expressed at auction, in trading and in response to spectrum pricing will reflect the social value.

External costs and benefits

Economic activity may also have negative or positive impacts on welfare and production that are not mediated by the market, for example, impacts via congestion, acoustic noise, radio interference and public service broadcasting, which is considered to have wider benefits in many countries. These are legitimate public policy concerns. However, the fact that an externality arises in relation to the production of outputs utilising spectrum as an input is not an argument for not relying on (or modifying) market instruments to manage spectrum inputs.

DIAMOND & MIRRLEES (1971) developed the general argument that in setting policy to maximise welfare in a second-best situation it is not desirable to tax (or subsidise) the use of inputs. Whilst it is in principle possible to address an externality by modifying the price of all inputs in an appropriate way, this is in practice infeasible given the information and practical constraints on achieving efficient outcomes via the modification of input prices (HOLTERMANN, 1976; HELFAND, 1999).

So what should be done? In sectors such as aviation that produce greenhouse gas emissions taxes or permits targeted directly at these emissions would be the appropriate response (INDEPEN & AEGIS, 2007). In such instances measures to address the externality need not accompany the introduction of spectrum markets or pricing, and should be separately considered on their merits. In the broadcasting sector a range of interventions targeted at the desired output (namely public service

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broadcasting) are available, including direct funding (INDEPEN & AEGIS, 2005).

Monopolisation

Another strand of argument for intervention in the allocation of spectrum is that a market based approach would result in excessive market power in either the spectrum market or the final service market via monopolisation of the scarce spectrum input. A scarce input can lead to market power, but this problem is not unique to spectrum, for example, holdings of land by supermarkets in the UK have been investigated using general competition powers. Further, potential concerns over competition need not be a barrier to the introduction of market based approaches to spectrum allocation, provided they are explicitly addressed in policy design.

General competition law provisions might be judged adequate in addressing such concerns. If not, other interventions such as limitations on the amount of spectrum individual firms can acquire might be introduced at the time spectrum is auctioned. The availability of additional spectrum in future acquired via trading or auctions, or new technologies such as WiMAX and WiFi, may also disrupt any market power in, for example, the mobile market. Rather than concerns over market power impeding the introduction of spectrum markets, spectrum markets should be seen as reducing the potential for market abuse. For example, HAZLETT, IBARGUEN & LEIGHTON (2007) found that in Guatemala spectrum markets contributed to increased competition and lower prices.

Under-used spectrum

A further concern sometimes raised is that spectrum will be purchased and remain unused for speculative reasons, or to prevent access to spectrum by others. It is not uncommon for "use it or lose it" provisions to be advocated but they are rarely applied because of the problems in defining legitimate use. Though we note that in New Zealand the government has determined (based on a consultant's reports) that some of the cellular rights in the 800 and 900 MHz bands are underused by incumbents and that these underused rights should be sold at auction when the existing licences expire (Ministry of Economic Development, 2006).

Current non-use of at least part of a scarce resource is often optimal, either to allow for future growth, or because the optimal use is uncertain and


commitment to a particular use may involve the irreversible commitment of capital and other resources. An analogous example is the opportunity to develop vacant land, where valuable land can remain unused when real estate prices and the payoff from alternatives is uncertain (TITMAN, 1985). Less than full utilisation of a frequency band also makes spectrum re-planning easier. Use it or lose it provisions may therefore reduce the social value of spectrum. Fixed capital build out commitments or timing constraints with respect to usage in relation to spectrum allocations may also reduce the social value of spectrum, since flexibility itself has value (TRIGEORGIS, 1996).

A special case, however, are the legacy holdings of spectrum by government users including the military. There is no reason to presume that under use (or use) is optimal in this instance, and in the absence of opportunities to profit from trade or an explicit charge for spectrum government agencies could be expected to hold on to spectrum just in case, even where such holdings are inefficient.

Legitimate concerns

A number of legitimate public policy concerns arise in relation to moves to a more market based approach to spectrum allocation and reallocation, some of which may require complementary changes to institutional arrangements, whilst others may require a departure from a purely market based allocation of spectrum. We consider the question of whether spectrum should be reserved for "unlicensed" use as a public commons, the interaction with publicly funded outputs such as broadcasting and defence, and incumbency issues.

Spectrum commons

A number of economically valuable applications of spectrum involve use of a spectrum common, for example public WiFi, RFID and many consumer applications such as baby alarms and garage door openers. In these instances it may not be feasible for users to band together and pay for spectrum collectively due to the transaction costs involved. Given this, the reservation of spectrum for public commons must be decided administratively based on an assessment of the costs and benefits involved.

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Estimates of the net economic benefits of collective use for a number of applications have been produced in a study by INDEPEN, AEGIS & OVUM (2007) for the UK regulator Ofcom. The results indicate that the net present value of these benefits over the next 20 years for the EU could be considerable (estimated by multiplying UK estimates by the ratio of EU to UK GDP):

• Home data networking: €36bn (this includes avoided costs of using wired systems and the benefits arising from the stimulus to broadband take-up).

• Public WiFi: €590bn (this includes the cost savings from not using cellular services for mobile internet access and the benefits from greater use of mobility services).

• Automotive radar: €220bn (this includes the benefits arising from reductions in the number of accidents).

• RFIDs: €200 bn (this includes the efficiency benefits to the retail sector alone).

The main challenge in undertaking any assessment of costs and benefits is that they occur in the future and so are necessarily uncertain. This means the likelihood of possible outcomes occurring needs to be assessed. This might be done with reference to analogous past situations and gathering views from industry participants and potential consumers.

Irreversibility and path dependence

Allocations of spectrum, in particular those for licence exempt use or public service broadcasting, may in effect be irreversible – at least for a very long time. Once a commons is created and used there is no straightforward way to release the spectrum for another use since use is unlicensed. An allocation for public service broadcasting involves the irreversible commitment of capital by consumers and a subsequent public switch-over problem if equipment is not forward compatible, for example, moving from MPEG-2 to MPEG-4 coding.

Consideration of irreversibility introduces path dependence into decisions and complicates the analysis of costs and benefits. It also implies that there should be no presumption of a "first mover" advantage since, should an irreversible decision prove mistaken it will be particularly costly. The standard (or static) net present value rule, under which the net present value


of benefits less costs is maximised, may not provide the optimal outcome in these circumstances.

An expanded NPV decision rule incorporating "real options" is required that explicitly takes into account uncertainty, irreversibility and flexibility in the timing of decisions (DIXIT & PINDYCK, 1994). Whilst real options techniques have been applied to a range of investment problems including spectrum use (HARMANTZIS et al., 2006), to date there has been very limited application in the policy context of spectrum allocation.

We have applied these ideas to the decision whether to release spectrum for licence exempt applications or not (QUOTIENT & INDEPEN, 2007). In figure 2 the left hand figure shows the result of applying the standard NPV calculation and the right hand figure shows (in stylised form) the results if the expanded NPV rule is applied. What these figures show is that where there are large uncertainties in the benefits to be had or to be forgone, it can be economically advantageous to wait before releasing or using spectrum and the optimal allocation at a point in time is likely to be smaller than a conventional net present value calculation would suggest. Hence, smaller more frequent releases of spectrum will be more appropriate than a single large release.

Figure 2 - Implications of "real options" for spectrum release Net present value

Uncertainty

NPV rule

0

Delay decision

Release spectrum

Net present value

Uncertainty

Release spectrum Real

options rule

Delay decision

0

Net present value

Uncertainty

NPV rule

0

Delay decision

Release spectrum

Net present value

Uncertainty

Release spectrum Real

options rule

Delay decision

0

Public sector use

The public sector including defence is a large user of spectrum, in the UK accounting for over 40 per cent of the use of spectrum below 15GHz (OFCOM, 2007b). It is therefore important to introduce incentives for efficient use of spectrum in the public sector alongside a shift to market based incentives for private spectrum use. However, doing so may require additional measures since government users often face budgetary

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constraints on their interest in and ability to use the gains from more efficient spectrum use for other purposes. These budget processes may also mean that public sector users are more responsive to the direct cost of purchasing spectrum or paying an annual charge for their spectrum holdings than the incentive provided by the "opportunity cost" of holding spectrum if trading is permitted. In addition, public sector users of spectrum may not be licensed in which case their rights of spectrum will need to be defined more precisely if they are to engage in market transactions and/or they are to receive protection from changes to rights made by their commercial spectrum neighbours.

International experience of applying financial incentives to government users of spectrum is limited. In the US, a number of bands have been identified for potential reallocation from government to non-government use. The costs of moving government users from these to other (less highly desired) bands are identified and the bands are auctioned but are only released to private sector bidders if the revenues raised exceed 110% of the cost of moving the government users. This mechanism for paying for moving costs gives government users an incentive to move and ensures the benefit to the private sector exceeds the economic costs of the reallocation.

In the UK, government users pay the same administratively determined spectrum prices for their spectrum access as commercial users. The recent Independent Audit of public sector spectrum holdings concluded that AIP is likely to remain a fundamental element in encouraging improved spectrum efficiency for public sector spectrum holdings (CAVE, 2005). Pricing has been introduced for defence, emergency services, science and commercial fixed and mobile use; and is planned for broadcast use and under consideration in relation to aeronautical and maritime use (which account for the remaining half of spectrum below 1 GHz not currently subject to spectrum pricing). Prices are set with reference to estimates of opportunity cost utilising the Indepen-Aegis methodology whereby the costs of providing a service are calculated assuming that less spectrum is available via an alternative technology or greater use of network infrastructure (INDEPEN & AEGIS, 2005).

Provided public agencies can keep some of the savings from economising on spectrum use for a period of time incentives to economise are introduced by spectrum pricing whether or not the agency receives an initial compensating adjustment to its budget. Spectrum pricing also has the advantage that not all of the issues related to the definition of rights, which may be required to implement trading, need be resolved.


Removal of implicit support for activities such as public service broadcasting via the free availability of spectrum may also require adjustment to existing funding arrangements and/or regulatory requirements if existing levels of public service broadcasting are to be maintained. Arguably explicit consideration of these issues and the clarity it brings is beneficial.

Incumbency issues

The introduction of explicit rights, allowing trading and potentially applying pricing to spectrum must all be considered against a backdrop of existing spectrum use and expectations. Whilst the reallocation of economic rents associated with past availability of spectrum may be irrelevant from an overall economic efficiency perspective, proposed reforms need to be carefully considered having regard to reasonable investor expectations and, if they are to be successful, the politics of reallocations of economic surplus.

Investment could be deterred if companies are not confident in the future continuation of their rights and so there could be a consequence for overall economic efficiency. This means the conditions for licence revocation and renewal must be made explicit in advance if spectrum markets are to work well. In addition, incumbents will incur real costs in clearing spectrum for new uses and these costs may need to be factored into policy decisions.

The most direct way of doing this is for new users to compensate incumbents for moving though if incumbents do not have time limited rights problems of hold-up will occur. To avoid these problems either rights must be time limited (CRAMTON et al., 1998) or the sum paid for moving incumbents needs to be agreed by an independent third party.

A degree of tolerance of prospective "windfalls" if rights are vested with existing users and become tradable might in some instances be preferable to the administrative and legal problems involved in reassignment. In particular, with hindsight digital switchover for broadcasting might have been made more clearly the responsibility of broadcasters if they had been granted existing spectrum and allowed to use surplus spectrum for additional channels and/or high definition TV (HDTV), or to sell the spectrum themselves, at switchover. The transition from analogue to digital mobile services was, for example, managed by the mobile operators themselves.

Finally, pure rent seeking, by incumbents or entrants, should be distinguished from legitimate concerns relating to the allocation or

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reallocation of spectrum rights and resisted. HAHN & SINGER (2007) have argued that efforts to impose conditions on licences in the auction of 700MHz spectrum in the US amount to rent-seeking, and that giving the FCC discretion has inevitably resulted in rent seeking. Clarity over the limited range of legitimate grounds for intervention in a market allocation or inclusion of special conditions in spectrum licences will help in limiting the inevitable rent seeking associated with valuable rights and regulatory discretion.

Addressing all of these problems at once – allocating the Digital Dividend

All of the complexities discussed above arise in relation to the migration from analogue to digital TV and the associated release of spectrum for new users. We illustrate this using the UK as a case study. Here there are:

• Incumbent users whose interests need to be addressed, including existing broadcasters, programme making and special events users, radio astronomy and an aeronautical radar operated for commercial purposes.

• Potential new uses of the spectrum, including licence exempt as well as licensed use, that are argued to generate positive public benefits (e.g. public service broadcasting and rural broadband), uses that require a particular band plan (e.g. paired spectrum for two way mobile services) and publicly funded organisations (e.g. radio astronomy and the BBC).

• Spectrum reservations for six digital terrestrial TV mulitplexes, and the issue of whether these allocations should be made more flexible (e.g. tradable) arises.

• Complex migration issues. Current digital set top boxes use MPEG-2 compression, whereas other countries who waited have adopted MPEG-4 compression, allowing greater flexibility in the timing and allocation of spectrum for mobile TV and HDTV. Furthermore, a future switchover to MPEG-4 will be required in the UK.

A full market approach to reallocating this spectrum could involve either terminating all existing licences and then auctioning a clear block of spectrum (the big bang approach advocated by KWEREL & WILLIAMS, 2002, but not adopted so far by any government) or grandfathering tradable rights to the existing users and letting them manage the transition through


trading, private spectrum auctions and funding any consumer migration costs.

However, other policy measures that are beyond the scope of the regulator's activities may also be needed to ensure publicly funded bodies faced appropriate incentives to buy/sell spectrum and to address significant external costs/ benefits (e.g. funding or regulation targeted at these external effects). In addition the regulator must still decide whether licence exempt uses should be allocated spectrum administratively (i.e. using cost benefit analysis) or whether a private commons approach is preferable. If cost benefit analysis is applied then the benefits to all potential uses of spectrum need to be estimated - a considerable task.

What has happened so far in the UK is that the regulator, Ofcom, set out with the intention of using an auction (of technology and service neutral licences) to determine the allocation of the release spectrum recognising where there were material social benefits from particular uses that these might justify some sort of intervention in the market. The difficult question Ofcom has tried to answer is how big are the social benefits that derive from access to the UHF spectrum for each of the main potential uses of the spectrum?

Ofcom first estimated the private welfare benefits for each of the services (based on consumer market research and market modelling to estimate the sum of consumer and producer surplus) and then gave an indicative (judgemental) percentage for the uplift associated with wider social benefits. These benefits are judged to amount to 5-15% of the private benefits i.e. well within the range of errors on the private benefits. This might suggest that, with the possible exception of the licence exempt applications, an auction approach should be applied since private valuations will in a first approximation reflect the social value.

However, there is a further complication raised by the prospect of HDTV. Whilst HDTV may not have value per se in terms of public service broadcasting, the viability of the terrestrial public service broadcasting platform might be undermined over time if HDTV were not available on the platform (it is currently available on satellite and cable, and may in future be available over fibre access networks).

If provision of HDTV is important for the continued delivery of terrestrial public service broadcasting, then the question arises as to whether the main broadcasters could feasibly bid for it, given one broadcaster is publicly

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funded and another is publicly owned, and whether these bids would take account of the public benefits from continued popularity of the terrestrial platform, given the other two main broadcasters are purely commercial organisations. If an auction is held the cost of spectrum access is not known in advance and there is a risk that public service broadcasters would be unsuccessful at auction, an outcome that might prove irreversible and lead to regret.

As a general matter Ofcom argues that reserving spectrum for a particular purpose that generates social value is not appropriate - rather changes should be made to financial and institutional frameworks to ensure that social value is taken into account (OFCOM, 2006). While this may be correct in principle, there is a significant practical issue to be addressed, namely will such financial and institutional frameworks be put in place in advance of the UHF spectrum auction?

There is also a longer term issue to consider in terms of the relationship between the delivery of public service broadcasting and the terrestrial broadcast platform. With growth in the availability and use of alternative platforms, the opportunity to consider terrestrial switch off and a further release of prime spectrum for mobile applications may arise in future.

How should policy makers proceed?

Figure 3 summarises the decision process that is implied by the analysis given in this paper. To get to this stage, a process to achieve a degree of buy-in to application of a market based approach, as appropriate, is first required.

A key underlying decision is whether to rely on an administrative allocation supported by cost benefit analysis, or to rely on the market. In allocating spectrum released by digital switchover in the UK a combination of the two might ultimately be used, but the boundary between the two approaches must be clear. The extent of irreversibility involved in allocating spectrum for licence exempt or public service broadcasting use complicates decision making, since there is greater potential for regret in terms of the future scope to allocate spectrum in response to new applications (such as mobile TV). Clarity over the narrow range of circumstances in which departure from a market based approach to allocation, or imposition of


special license conditions would be justified, will also help in resisting rent seeking by incumbents and entrants.

Figure 3 - Decision process for deciding spectrum allocation policy

Are all uses commercial with no external effects?

Can uses be licensed?

Are there positive/negativeexternal effects?

Are private commons feasible? Use CBA

Use marketapproach

Focus policies on desired outputs

Are there public sector users?

Modify budgeting & possibly licensing arrangements

Yes

No

It is clear that the introduction of market approaches to spectrum management can be more complex than it first appears, requiring changes in policies aimed at specific spectrum uses and users. The simplest circumstances where market approaches can be applied are where current and expected future uses of spectrum are purely commercial and capable of being licensed. Even in these circumstances legacy issues need to be anticipated and managed.

Where users are in the public sector or uses generate significant external impacts it may also be necessary to adjust other policies that are outside the scope of the spectrum manager's remit. This emphasises the importance of wider government (and importantly Ministry of Finance) commitment to spectrum reform. If this commitment does not exist then continued intervention will be required such as spectrum reservations and/or the grant of "free" spectrum for public sector users and other uses generating wider public benefits. Judging the extent of these interventions is always problematic and means that over time these users have little incentive to change their spectrum use in response to technology and market changes. However, the potential prize in terms of productivity and new services is large, and considerable effort in addressing these more difficult policy areas is therefore likely to be justified.

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References

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BAUMOL W. & OATES W. (1988): The theory of environmental policy, Cambridge University Press.

BOARDMAN A., GREENBERG D., VINING A. & WEIMER D. (2006): Cost-benefit analysis – concepts and practice, Third Edition, Pearson Prentice Hall.

Cabinet Official Committee on UK Spectrum Strategy (UKSSC) in consultation with Ofcom( 2006): "Independent Audit of Spectrum Holdings - Government Response and Action Plan", March. http://www.spectrumaudit.org.uk/220306.htm

CAVE M.: - (2002): "Review of Radio Spectrum Management", March. http://www.ofcom.org.uk/static/archive/ra/spectrum-review/2002review/1_whole_job.pdf - (2005): "Independent Audit of Spectrum Holdings", December. http://www.spectrumaudit.org.uk/pdf/caveaudit.pdf - (2006): "New spectrum-using technologies and the future of spectrum management: a European policy perspective", in Ofcom, "Communications - the next decade", November. http://www.ofcom.org.uk/research/commsdecade/

CRAMTON P., KWEREL E. & WILLIAMS J. (1998): "Efficient Relocation of Incumbents", Journal of Law and Economics, 41, pp. 647-675. http://www.cramton.umd.edu/papers1995-1999/98jle-efficient-relocation.pdf

DIAMOND P. & MIRRLEES J. (1971): "Optimal taxation and public production 1: Production efficiency and 2: tax rules", American Economic Review, Volume 61.

DIXIT A. & PINDYCK R. (1994): Investment under uncertainty, Princeton.

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HAHN R. & SINGER H. (2007): "The political spectrum", AEI-Brookings Joint Centre Policy Matters June 07-19. http://www.aei-brookings.org/policy/page.php?id=292

HARMANTZIS F., TRIGEORGIS L. & TANGUTURI V. (2006): "Flexible investment decisions in the telecommunications industry; case applications using real options", September NET Institute Working Paper 06-06. http://www.netinst.org/Harmantzis-Trigeorgis.pdf


HAZLETT T., IBARGUEN G. & LEIGHTON W. (2007): "Property rights in radio spectrum in Guatemala and El Salvador: An experiment in liberalisation", Forthcoming in the Review of Law and Economics (Berkley). http://papers.ssrn.com/sol3/papers.cfm?abstract_id=889409

HELFAND G. (1999): "Controlling inputs to control pollution: when will it work?" Association of Environmental and Resource Economists Newsletter, November, Volume 19(2), p. 17. http://www.aere.org/newsletter/Newsletter_Nov99.pdf

HOLTERMANN S. (1976): "Alternative tax systems to correct for externalities, and the efficiency of paying compensation", Economica, February, Volume 43169.

INDEPEN & AEGIS (2005): "Study into the potential application of Administered Incentive Pricing to spectrum used for Terrestrial TV & Radio Broadcasting", October. http://www.ofcom.org.uk/consult/condocs/futurepricing/aipstudy.pdf

INDEPEN, AEGIS & OVUM (2007): "The economic value of licence exempt spectrum", January http://www.ofcom.org.uk/research/technology/overview/ese/econassess/value.pdf

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Qinetiq, University College London, University of Bath, & Rutherford Appleton Laboratory (2004): "Project AY4490 – A study into techniques for improving radar spectrum utilisation", April. http://www.ofcom.org.uk/research/technology/spectrum_efficiency_scheme/ses2003-04/ay4490/

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WIK (2005): "Towards more flexible spectrum regulation", Study for the Federal Network Agency, Germany. http://www.bundesnetzagentur.de/media/archive/4745.pdf

WILLIAMSON B. (2007): "ICT, connectivity and productivity", in The economic benefits of providing businesses with competitive electronic communications services, BT, June. http://www.btplc.com/Thegroup/Regulatoryinformation/Consultativeresponses/BTdiscussionpapers/Electronic/index.htm

The Role of Licence-Exemption in Spectrum Reform(*)

Gary TONGE Independent Consultant, London

Pierre de VRIES Economic Policy Research Center, University of Washington, Seattle

Abstract: Spectrum reform initiatives in the US and Europe have identified a need to move away from the traditional "command and control" approach towards flexible and tradable licences and licence-exemption. Current regulatory initiatives are tending to focus on the flexible licensing route, and there is a risk that licence-exemption will be sidelined during the important formative years of this major policy transition. This must not happen; licence-exemption supports innovation and entrepreneurship and is an important second leg of a market-based spectrum management regime. A current case in point is the transition in UHF frequency bands from analogue to digital TV, where licence exempt use of resulting gaps in the spectrum could yield enormous benefits for citizens and consumers. Key words: spectrum policy, spectrum management, wireless services, deregulation, digital dividend.

here is a growing global consensus that the traditional method of allocating spectrum is outdated and inefficient. In the United States, the FCC's Spectrum Policy Task Force (FCC, 2002) concluded that

current spectrum policies were in need of reform. It recognised three spectrum management models:

- "command and control," the traditional method of spectrum management, in which allowable spectrum uses and users are determined by regulatory judgment; - "exclusive use," where a licensee has exclusive, flexible, and transferable rights to use specified spectrum;

T

(*) Acknowledgements: The authors received support from Microsoft in preparing this document. The views expressed are theirs, and do not necessarily reflect the views of Microsoft Corporation. Pierre de Vries acknowledges support from the Annenberg Center for Communication at the University of Southern California. The authors thank Andrew Stirling for feedback on a draft of this paper.


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- "commons," where unlimited numbers of unlicensed users share frequencies.

The recommendation was that use of the latter two should be expanded throughout the radio spectrum, with use of the traditional method being kept to a minimum.

In the United Kingdom, Ofcom's Spectrum Framework Review (Ofcom, 2005) came to comparable conclusions, and in Europe both the Commission and Parliament (EC, 2005a; EP, 2007) have expressed similar aspirations. The same three spectrum management models and the same direction of reform have been identified in each case, although the detailed language differs, as summarised in Table 1.

Table 1 - The three spectrum management models and the direction of regulatory reform

FCC (2002) Ofcom (2005) EC (2005a) Command and control, the traditional method of spectrum management in the US, in which allowable spectrum uses and users are determined by regulatory judgment.

Command & control, the historical approach where the regulator decides how much spectrum each application should have and allocates and assigns the spectrum accordingly.

Detailed ex-ante administrative decisions. This approach has come under increasing pressure, due to the high technological turnover and the strong demand for wireless applications.

Exclusive use, where a licensee has exclusive, flexible, and transferable rights to use specified spectrum.

Market mechanisms, broadly the use of auctions and trading with liberalisation, to allow the market to modify historical allocations towards those more likely to maximise economic efficiency.

Spectrum markets can improve the efficiency of use of spectrum, since industry is better suited than regulators to identify the highest-value applications.

Commons, where unlimited numbers of unlicensed users share frequencies.

Licence-exempt use. The regulator allows free access to the spectrum, although normally with restrictions on power levels, making it most suitable for short-range devices.

Licence-exempt use, where equipment (typically low-power consumer goods) that fulfils certain technical conditions is used without a licence.

"Existing spectrum that is subject to command-and-control regulation should be transitioned to the more flexible exclusive use and commons models to the greatest extent possible"

"As a light-touch regulator our preference is to move away from central management, allowing market forces to prevail and increasing the use of licence-exemption"

"An EU-wide balanced approach should be sought between all spectrum models. The optimal "mix" between them will depend on various criteria, such as speed to market, protection from harmful interference, quality of service and fostering the internal market and innovation"

G. TONGE & P. de VRIES 87

However, converting these policy aspirations into practical decisions is very challenging. For example, the packaging of lots has had a strong influence on the outcome of spectrum auctions and hence regulatory judgment is still very much present in a "market-based" approach. Also, existing operators have tended to resist service neutrality. This is usually on technical grounds, although commercial considerations may also play a part. This has made any practical benefits from spectrum trading and liberalisation patchy so far.

In this paper, we are concerned with a different and possibly even more significant challenge: how to determine the right balance between "flexible licensed" 1 and licence-exempt use of spectrum in future.

In its Spectrum Framework Review, Ofcom (2005) offered some illustrative numbers for the balance between spectrum management models that might be aimed for over the next few years. From a position in 2000 where 96% of spectrum below 60GHz was allocated by Command & Control (CC) and 4% licence-exempt, a potential outcome for 2010 was set out which would reduce CC to 22% by dramatically increasing the use of market mechanisms (flexible licensing) from zero to 71% and marginally increasing licence-exempt allocation to 7% 2.

The CC figures are based on an assessment of practicability, given a policy of moving away from this model where possible to a regime of flexible licensing with market allocation (by auction). The licence-exempt figures are approached in a different way, and are derived from a combination of two approaches - a theoretical calculation of what the demand for short-range communication might be assuming that each person might use up to 100Mbit/s of capacity, and a pragmatic assessment of the occupancy trends of current licence-exempt bands. The illustrative numbers are based on an assumption that by 2010 an extra 200MHz or so of spectrum for licence-exempt applications might be allocated adjacent to the current 5GHz bands.

1 In this paper we use the phrase "flexible licensing" to refer to the exclusive use / market mechanisms approach. 2 Percentages were calculated on a weighted basis, so that 100MHz of bandwidth with a centre frequency of 1GHz would score the same as 1GHz of bandwidth with a centre frequency of 10GHz etc.

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Licence-exemption risks being sidelined

It is not surprising against this background that the current practical focus for spectrum reform in the UK and elsewhere in Europe is on flexible licensing employing market mechanisms rather than on licence-exemption.

For example, the European Commission has made a detailed communication to the Council and Parliament on "a market based approach to spectrum management", while licence-exempt studies are relegated to "future work" (EC, 2005b).

Another example is Ofcom's Digital Dividend Review, which presents the choice on future spectrum allocation as a binary one between a "market-led" approach and an "interventionist" approach (Ofcom, 2006). In this review, licence exemption is considered not as market-led but as a regulatory intervention, and hence subject to a very high burden of proof. However, licence auctions require significant regulatory intervention themselves, particularly in defining the bundles of goods to be traded. It is therefore not appropriate to caricature licence-exemption as interventionist, and auctions as purely market based. Indeed, licensing itself is a regulatory intervention 3.

There is a significant risk that licence-exemption will be sidelined during these formative initial years of spectrum reform for reasons which include:

• Flexible licensing is where the majority of the changes are expected.

• Flexible licensing requires a lot of detailed ground work from the regulators on defining spectrum usage rights.

• The potential economic benefits of flexible licensing can be modelled more readily than those of licence-exemption.

• There are fewer advocates for licence-exemption than for flexible licensing (or even for the status quo), for reasons explained below.

Marginalising licence-exemption will harm consumers and hobble innovation. We show below that there is significant demand for applications based on licence-exempt allocations, and that innovation flourishes in these

3 The European Authorisation Directive states that "rights of use should not be restricted except where this is unavoidable in view of the scarcity of radio frequencies and the need to ensure the efficient use thereof." It could be argued therefore that licensing is the exception that must be justified by need, not licence-exemption.


bands. A delay, let alone a foreclosure, of these benefits will reduce the total value that can be derived from spectrum use.

Auctions are not the only way of allowing the market to determine the best use of the spectrum; a licence-exempt spectrum commons is also "market-led", since the market decides which applications succeed, not the regulator.

Further, licence-exempt allocations are collective goods, and therefore likely to be underprovided assuming rational actors working in their own self-interest. The regulator therefore needs to take a pro-active approach to achieve the greatest social welfare.

Level of demand for licence-exempt spectrum

A presumption underlying the current relatively low priority given to licence-exemption is that current licence-exempt bands are lightly used and that demand for new spectrum is not high (Ofcom, 2007b).

However, the 2.4GHz band is intensively used, with 250 million Wi-Fi devices sold in 2006 alone and over 1 billion Bluetooth devices in the market. Demand is increasing rapidly, with the 802.11n standard being developed using MIMO and beam forming technology to enable yet more intensive use of this precious spectrum. Any Wi-Fi user will be able to testify to the high number of SSIDs detected in many urban areas. There is very little licensed spectrum as intensively used as the 2.4GHz licence-exempt band.

Expansion into 5GHz, the growth route envisaged in Ofcom's Spectrum Framework Review (Ofcom, 2005), is suitable for some applications but not all. Lower frequencies with better propagation characteristics are better suited for creating cost-effective, robust wireless broadband in rural areas, and self-forming mesh networks in cities and suburbs capable of routing traffic at broadband speeds 4. Mesh technology creates networks that can cover substantial areas using multiple short-range links.

4 This becomes increasingly significant as the concept of universal service obligation disappears in a broadband future.

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Demand for licence-exempt spectrum is often under-estimated simply because it has fewer and less vocal advocates than the licensed alternative. Some goods and services produce essentially only a consumer surplus, with no producer surplus. The absence of direct producer surplus for individual companies removes the normal impetus for aggressive advocacy. The consumer surplus itself is diffusely allocated since all citizens benefit rather than a specific interest group. Thus, those likely to recognise the true demand for licence-exempt applications are either citizen activists, public interest groups, or a few companies interested in "raising the level of the lake for everyone" and building on top of that innovation platform.

Innovation flourishes in licence-exempt bands

Experience in the 2.4 GHz ISM band - frequencies once known as the "junk bands" - proves the benefits of a licence-exempt allocation. Almost every laptop computer on sale today includes Wi-Fi technology that uses this band, and most mobile devices include Bluetooth.

Technology innovation has been dramatic. Maximum network throughput speed has increased almost fivefold 5. The 802.11e standard that facilitates multimedia applications has contributed to the rapid growth and positive outlook for networks that support voice and video streams. The draft 802.11n standard promises data throughput rates up to 540 Mbit/s, ten times faster than today's best devices.

This has all happened very quickly: the first 802.11 standards underlying Wi-Fi were ratified in 1999 and 2000 6. The worldwide market for wireless local area networks had grown to $2.5 billion by 2005. By 2009, only a decade after its inception, overall Wi-Fi market revenues are forecast to reach $4.8 billion 7.

Licence-exempt allocations encourage entrepreneurs to enter the market, leading to innovation and competition. Usage scenarios are decentralised,

5 From a maximum of 11 Mbps for 802.11b to 54 Mbps for 802.11g and 80.2.11a. 6 The Economist (2004): The basic 802.11 standard was published in 1997. 802.11b was ratified in December 1999, and 802.11a in January 2000. Apple introduced Wi-Fi as an option on its new iBook computers in July 1999. 7 Dell'Oro Group Inc, reported in "Dell'Oro: faster gear to drive Wi-Fi market," Infoworld, January 24, 2006. Figures do not include Wi-Fi capabilities embedded in DSL and cable modems.


leading to rapid industry growth. Start-up companies can develop new business models in licence-exempt spectrum where the idea is the primary capital required, rather than a spectrum licence.

Flexible licensing and Licence-exemption compared

Flexible licensed and licence-exempt allocations have complementary strengths and weaknesses:

Flexible licensing Licence-exemption Licensee controls behaviour of all transmitters in the band

Control is decentralised, and users have to co-exist with transmitters they do not control

Statutory protections from interference from other users

Licence-exempt users have to accept interference from other users, and (in the case of a secondary use) may not interfere with primary users

Spectrum use coordinated by the licensee Spectrum use coordinated through regulation on devices, and industry standards

Relatively high transaction costs for gaining ‘first party' access to spectrum through licensing auction or transfer

Relatively low transaction costs in obtaining ‘first party' spectrum access

High cost of entry for service providers and equipment manufacturers

Low cost of entry for service providers and equipment manufacturers

Market in spectrum licenses and devices Market in devices

To date, capital expenditure in licensed bands has focused on substantial, centralised network infrastructure investments by the licensee. Bands which support licence-exempt use have necessarily seen a more decentralised investment model where equipment is purchased by end users.

Both regulatory models have transaction and administrative costs (BENKLER, 2002; FAULHABER & FABER, 2003): Property-based flexible

licensed allocation Licence-exempt allocation

Transaction costs Need to negotiate permission to transmit in a specified band

Minimal direct cost, but some overhead in equipment cost and spectrum usage for coordinating communications

Administrative costs Definition and adjudication of property rights

Definition and enforcement of the rights to access spectrum

Administrative costs in the flexible licensing model are borne by government, whether as regulator or through the courts: the costs of defining

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property rights, running auctions 8, and resolving disputes regarding interference. Industry may also bear costs in standard-setting processes. The transaction cost of spectrum coordination is borne by licensees and sub-licensees.

The costs for licence-exemption arise both in the administrative process of defining and enforcing technical standards to manage congestion and harmful interference, and in the "cost" of bandwidth devoted to negotiating access among receivers rather than to transferring data. Some costs are embedded in the cost of equipment, and reduced efficiency of communications. Administrative costs are borne by government in the regulatory process, and by industry in the standard-setting process. There is an opportunity cost if the spectrum use entailed by regulation is not the most efficient one. If there is little spectrum scarcity, transaction costs decrease; administrative costs remain, but may be reduced since standard-setting and compliance may be less onerous.

The two models imply different industry economics. The flexible licensing approach favours a network-centric service provider model, while licence-exemption favours an equipment-centric end-user model. The former implies more centralised spectrum management while the latter is more distributed and decentralised.

Current mobile communication and broadcasting services employ a service-provider model which facilitates co-ordinated decisions about network management. Emerging intelligent radio systems, however, will make it increasingly feasible to decouple frequencies and radio networks, and to ensure coordination in a decentralised way. With licence-exempt spectrum, it is possible to build up a network from end-user equipment that can be linked in an ad hoc, wireless mesh. This supports viral, edge-based growth and offers an alternative for the future to the service-provider-based model.

The end-user model is unlikely ever to replace completely the service provider one, but it is more consistent with the way new technologies are developing, and with many market trends in the information society 9. It is

8 These costs are set off against the (hopefully larger) revenue gained through auctions. 9 This decentralised model for access can be compared with the innovative network models for content distribution and telephony, based on peer-to-peer technology, developed by BitTorrent, Skype and others.


therefore short-sighted to focus only on flexible licensing in the current spectrum reform debate.

Two models are better than one

The choice between flexible licensing and licence-exemption is a choice between regulatory models. Any regime choice will bias outcomes. In a flexible licensing regime, the pace of innovation and development will be controlled by licence holders rather than end-users or equipment suppliers. In a licence-exempt regime, on the other hand, end-users and device manufacturers drive innovation. Neither model is intrinsically better than the other, nor is the choice between them straightforward; diversity in regulatory models is therefore the best bet.

Either licensed or licence-exempt allocations can result in increased social welfare, but the combination of the two will result in a greater citizen benefit than each individually. For example, a public park enhances the value of surrounding owned and leased properties, and the use by residents in those properties increases the utility of the park.

The licence-exempt band at 2.4GHz sits right next to licensed services and huge benefits have been created. In the United States, some wireless Internet services have been provided around 2.5GHz using licensed bands, and others have successfully used licence-exempt technology around 2.4GHz. Cellular service providers like T-Mobile USA have created services that combine licensed cellular and licence-exempt operation 10, demonstrating the value of a blend of licensed and licence-exempt allocations.

The right approach to spectrum management is a judicious mix of licensed and licence-exempt uses in all major frequency bands (e.g. below 1 GHz, between 1 and 3 GHz, 3-10 GHz, 10-60 GHz, above 60 GHz).

10 The HotSpot @Home service.

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The limitations of projections of economic value

The flexible licensing and licence-exemption models are sufficiently different that economic analysis is of very limited help in picking between them. Licensed spectrum has few operators, and well-defined prices; licence-exempt has huge numbers of operators, and no market prices for spectrum services.

Despite the difficulties of long-term prediction, forecasting of economic value has been proposed as a key tool for regulators to employ, alongside public consultation and analysis of likely congestion, in choosing between the flexible licensing and licence-exemption models for new spectrum allocations (CAVE & WEBB, 2004). This approach has been used by Ofcom (2007a) in its Licence-Exemption Framework Review, and supported by an in-depth study to develop methods to estimate the future economic value of licence-exempt applications through to 2026 (Indepen et al., 2006).

The Indepen et al. study models the expected benefits of a few wireless communications applications on a socio-economic basis rather than from a supply-side, techno-centric view. This is useful since it attempts to capture the true consumer benefits of licence-exempt applications. Nevertheless, the framework and methodology proposed are likely to under-estimate these: the approach is rooted in the current situation and tends to use conservative measures of economic benefits.

Only ten known applications are taken into account and novel applications that might well emerge in the future (even the near future) are not valued. Also, innovation brings more benefits than originally imagined by pioneers: innovation is likely to create positive externalities. However, it is impossible to predict when and how these benefits will be realized – particularly over a span as long as twenty years. CAVE & WEBB (2004) summed it up very well: "It is necessary but impossibly difficult to look ahead."

A further difficulty arises when valuations of putative licensed and licence-exempt allocations are compared. The assumptions and methods used are likely to be very different for valuing the two allocation types, and comparison will be fraught with difficulty. In sum, a test for licence-exemption which is based on comparing estimates of the economic value derived from licensed and licence-exempt approaches looks rational, but is largely arbitrary.


Given such uncertainties in calculating the prospective value of competing allocation types, setting aside spectrum for licence-exempt applications only when the economic value of these applications strictly exceeds the value of a licensed allocation (Ofcom, 2005) is not a well-founded basis for regulatory choice. If regulatory expediency demands such comparisons, then licensed and licence-exempt should be considered equally viable as long as their putative values are of the same order of magnitude.

Despite these limitations, the Indepen et al. study reaches a positive conclusion on the value of licence-exempt applications, noting:

"Certain LE applications, such as short range radars, RFIDs in retail and public access Wi-Fi could generate economic benefits for the UK which are substantially greater per MHz of use than the highest value licensed applications."

Still, there is a risk that once numbers are available from an economic model such as this, they will be compared superficially with numbers derived in a completely different way for licensed applications. Indeed Ofcom (2007a) uses figures from the Indepen et al. study to suggest that even Wi-Fi at 2.4 GHz may have a lower economic value than a licensed cellular alternative. This could be taken to imply that if the 2.4 GHz band had not already been made licence-exempt, it would not be made so today. Given the phenomenal success and user benefits of Wi-Fi, Bluetooth and so on (not to mention microwave ovens), this cannot be right.

Rather than relying on largely meaningless 20-year estimates of revenues and benefits, we suggest that regulators compare the nearer-term costs of creating and operating under licensed and licence-exempt regimes in a particular band. Both BENKLER (2002) and FAULHABER & FABER (2003) discussed differences in transaction and administrative costs between the two allocation types, though without providing numerical examples.

While also uncertain since they pertain to putative allocations, set-up and overhead costs are front-loaded and less likely to be sensitive to the imprecision of long-run analysis, and administrative costs are less sensitive to the vagaries of innovation. In many cases, licensed allocations of compact bands may have lower costs than licence-exemption; conversely, licence-exemption may have lower costs when spectrum is to be used in an opportunistic way with evolving rules in "messy" bands where transferable

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property rights may be difficult to define up front, expensive to trade, and costly to rationalize in negotiation with many other licensed band occupants.

Difficulties with congestion criteria

Congestion has been proposed as a criterion for deciding between licensed and licence-exempt use (CAVE & WEBB, 2004; Ofcom, 2007a). In some cases, such as very high frequencies with very short range propagation, this approach yields common sense results: licensing is not necessary. While congestion has a relatively well-defined meaning in network management, it is difficult to define for spectrum policy purposes, particularly in bands where the frequency is neither very high nor very low. Congestion is sometimes defined as the situation in which spectrum demand exceeds available supply, and sometimes it is used interchangeably with harmful interference.

Since congestion is typically used in licence-exemption analyses, there is an implication that licensed allocations do not suffer from congestion. That might be correct as a matter of definition, since a spectrum licensee can increase the price of access (or, in the case of cellular networks, drop calls) until demand matches supply. Since spectrum access is not priced in licence-exempt bands, this mechanism is not available. However, spectrum demand is managed in this case by declines in quality of service rather than by increases in price. The number of users grows until interference deters additional access. Further, congestion, defined as harmful inter-user interference, is only a problem if there's an expectation of guaranteed quality of service – and there is no such expectation in licence-exempt bands 11.

The amount of coordination required for many concurrent users of a spectrum band is an alternative criterion to congestion tests for allocation decisions. If little or no coordination is required, license-exemption is indicated. Such an approach would yield the same result as Ofcom's congestion analysis for very high frequencies where there is a large amount of capacity (Ofcom, 2007a, Section 6), but would also allow regulators to consider bands such as UHF where capacity is scarce. It also provides a

11 Licence-exempt allocations suffer from a Catch-22: if there are so few users that there is no mutual interference, then the band is adjudged to be under-used, and a wasteful allocation; on the other hand, if there are so many users that there is mutual interference, it's deemed to be congested, unusable, and a wasteful allocation.


framework for incorporating band rules like power control and politeness that improve coordination.

Criteria for selecting Licence-exempt vs Licensed

Choosing between licensed and licence-exempt allocations is difficult. It requires a judicious combination of economic, technical, and regulatory judgments.

• Where little or no coordination among independent band users is required to prevent harmful interference, licence-exempt (with appropriate rules) is an appropriate allocation.

• Choose between licensed and licence-exempt allocations on the basis of estimates of set-up and operating costs rather than forward-looking estimates of speculative long-term consumer benefits.

• Licence-exempt applications result in consumer benefit, rather than producer surplus. Measures of consumer benefit should be sophisticated enough to recognise the time spent on activities as well as the money spent on them 12. Licensed valuations should explicitly separate out the values attributed to producer surplus and to consumer surplus, so that consumer-surplus-only comparisons can also be made.

• Comparisons with licensed valuations, if used, should carefully consider any differing underlying assumptions, since the effects of these can easily dwarf differences between the applications themselves.

• Take into account the value of having a combination of licensed and licence-exempt applications in the same "spectrum neighbourhood", and of a combination of licence-exempt applications in different bands.

• Recognize the innovation value and social benefit of licence-exempt applications.

Economic projections can never replace the need for strategic policy judgments by the regulator. The benefits of licence-exemption are enjoyed today in many cases because of historical decisions made to allow experimentation in Industrial, Scientific and Medical (ISM) bands such as

12 Only about 0.2% of consumer spending in the U.S., for example, went for Internet access in 2004 yet time use data indicates that people spent around 10% of their entire leisure time going online (GOOLSBEE & KLENOW, 2006). This suggests that conventional consumer surplus calculations significantly understate the value of internet assets.

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that at 2.4GHz. However, a real danger with the current focus on flexible licensing is that a system is established under which forward-looking allocations like this might never be made again.

Case Study - The UHF Digital Dividend

The transition from analogue to digital television which is taking place around the world provides an opportunity to re-allocate some of the UHF spectrum which is currently employed for broadcasting. Once the analogue services are switched off at the end of the transition, the spectrum allocations used by the remaining digital broadcasts can if necessary be reconfigured so as to clear some spectrum (the "Digital Dividend") for other uses.

This is an area of very active work in the US, with two main threads. First, in April 2007, the FCC released a Report and Order and Further Notice of Proposed Rulemaking which addresses rules governing wireless licences in the 698-806 MHz Band (more commonly referred to as the "700 MHz Band") (FCC 2007). This spectrum currently is occupied by television broadcasters in TV channels 52-69 and is being made available for wireless services, including public safety and commercial services, as a result of the digital television ("DTV") transition. The DTV transition is due to end in February 2009, releasing the clear spectrum for other applications from that date at the latest.

Second, in October 2006 the FCC issued its First Report and Order and Further Notice of Proposed Rulemaking concerning Unlicensed Operation in the TV Broadcast Bands (FCC, 2006). This is commonly referred to as the "white space" issue, and concerns unused localised spectrum within the bands still to be employed for broadcasting. This notice indicated the FCC's intention to allow licence-exempt operation, and sets out a schedule with laboratory and field test results to be published in summer 2007; a second Report and Order specifying final requirements for devices operating in the TV bands in the autumn of 2007; and equipment to be permitted for retail sale from the planned end of the DTV transition in February 2009.

Broadly speaking, the intention is to use service and technology neutral auctions to allocate most of the cleared spectrum in the 700MHz band, with some being reserved for public safety, and for licence-exempt operation to be allowed in the white space.


In the United Kingdom, Ofcom issued its "Digital Dividend Review" consultation in December 2006 (Ofcom, 2006). This sets out proposals for the equivalent DTV transition in the UK, referred to as the "digital switchover", which is due to be completed in 2012. In this case there are fifteen 8 MHz channels to be cleared for other uses (channels 31-37, 39-40 and 63-68), as well as "interleaved channels" usable on a localised basis within the spectrum to be retained for broadcasting (equivalent to the white space).

Broadly speaking, Ofcom's proposals are for service and technology neutral auctions both for the cleared channels and also for interleaved channel capacity.

In Europe as a whole, the Radio Spectrum Policy Group (RSPG) published an opinion on the digital TV transition in February 2007 (RSPG 2007). It encourages all European administrations to take actions to enable the development of "new services fostering growth and innovation" in the Digital Dividend, but also sounds a note of caution warning that they must not "conflict with national and European content legislation aiming at promoting cultural diversity and media pluralism".

Also a mandate has been given by the EC to the CEPT for technical studies to be completed before the end of 2007 in three important areas for the Digital Dividend (ERO, 2007):

- compatibility issues between "cellular / low-power transmitter" networks and "larger coverage / high power tower" type of networks; - the technical feasibility of harmonising a sub-band of UHF bands IV and V for mobile applications (including uplinks); - a preliminary assessment of the feasibility of fitting new/future applications/services into non-harmonised spectrum of the digital dividend (namely to so-called "white spots" between allotments).

In spite of these technical studies on new possibilities, in most of mainland Europe there is currently a greater emphasis on continued broadcasting use of the Digital Dividend, rather than on flexible licensing or licence-exemption.

The Digital Dividend is a prime example of a situation where licence-exemption risks being sidelined, especially in Europe. Doing so would miss a once in a lifetime opportunity for reconsideration of an important spectrum resource.

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The potential for licence-exempt operation in UHF frequencies below 1 GHz

Providing licence-exempt devices with access to spectrum below 1 GHz will allow the manufacture and sale of devices featuring lower power, lower cost, more reliable, and relatively longer-range communication capability. These devices would take advantage of the favourable physical propagation characteristics of this spectrum by, for example, easily going through walls to enable inter-home mesh networking and better in-home coverage in municipal wireless networks.

The potential for a market at least equivalent to Wi-Fi and Bluetooth at 2.4 GHz would exist for the licence-exempt use of UHF spectrum. Possible applications include:

- self organising, mesh connected community and campus networks, - in-home multi-media distribution, - local coverage extension for digital broadcast networks – e.g. DTT and DAB 13, - remote patient monitoring and elderly care, - game play, - people, animal and asset tracking, - industrial automation and control, - home automation and control, - security covering whole homes, larger properties, communities and campuses, - public safety.

Most of these applications would require much less infrastructure when compared to the existing shorter range ISM band solutions at 2.4Ghz or 5GHz, thus creating a significant benefit to the user.

Mesh networks

Neighbourhood mesh networks can increase choice and extend internet access to lower income groups by enabling shared network access. They grow organically; they do not require any infrastructure; they are robust and

13 The coverage of new digital broadcast networks, such as DAB and DTT is often constrained by lack of capital or a need to avoid interference. Enabling the use of low cost, home-area fillers on a licence-exempt basis may provide an economically viable means of extending coverage, for example, by allowing portables and second sets to be used conveniently.


fault tolerant; no centralised management is necessary. Thus they empower the individual by facilitating choice and competition at the edge of networks, features which are often absent in rural and some suburban areas. However there are important challenges in being able to provide the necessary range, scale, and capacity using existing 2.4 GHz and 5 GHz licence-exempt spectrum, as illustrated in this example 14.

Figure 1 - 5 GHz: Bandwidth is good but measured range (circle) is poor. Range is not sufficient to bootstrap mesh until installed percentage is quite high

(in this diagram ~50%)

Figure 2 - 700 MHz: Much better range. Three 2 MHz channels can bootstrap a neighbourhood with ~3-5 Mbps

14 The diagrams in this section are based on those used by Jawad Khaki, Microsoft, in his keynote speech to the IEEE DySPAN conference in Dublin on 19 April 2007.

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Figure 3 - Dual Frequency Network: As more clients come online, links form in high-frequency range and more of the mesh is connected with high-bandwidth

A combination of higher and lower frequency licence-exempt bands maximises spectrum utilization, and reduces the need for coordination by minimising the number of longer-range 15 links.

Licence-exempt use of the Digital TV "White Spaces"

A particular feature of the digital TV transition is that even within the spectrum nominally to be retained for broadcasting, there are many vacant "white spaces" or "interleaved channels". In most areas, this capacity is in fact greater than the amount of spectrum that will be cleared completely. For example, in the UK, fifteen 8 MHz channels are to be cleared, and thirty-two 8 MHz channels are to be retained for broadcasting. At any one transmitter site, only six of these channels will be used for broadcasting, leaving up to 26 potentially vacant. Clearly there are overlap areas where 12 of the 32 channels will be in use, and there are also professional radio microphone and talk-back systems which are currently allowed to use these vacant channels on a very localised basis. But the reality is that no matter where the reader happens to be, a scan of the UHF TV band with a spectrum analyser would reveal many unused channels.

15 Note that even the longer-range links are still quite short, of the order of 100m.


The criteria outlined above for choosing between licensed and licence-exempt indicates that a license-exempt allocation would be suitable in the UHF TV band:

• Low transmission power limits (for example, 100 mW) would limit range and require minimal coordination that can be easily handled by current licence-exempt technology.

• Allocating the interleaved channels to licensed use would entail significant costs in setting up auctions with limited proceeds, given that available white space varies by geography, and that new licensees would have to coexist not only with broadcasters but also licensed radio microphone systems. Overhead costs are likely to be lower for a licence-exempt allocation.

• There will be licensed allocations in the adjacent cleared broadcast channels, which when combined with a licence-exempt allocation will create a whole greater than the parts.

• The mesh example above demonstrated the value of combined operation in longer- and shorter-range licence-exempt bands.

• In the United States, a consortium has submitted proposals 16 to the FCC for licence-exempt use of these white spaces using portable devices that will detect and avoid broadcasts and radio-microphones, providing the consumer benefits and potential applications discussed above. Microsoft (NARLANKA, 2007) and Philips (CHALLAPALI, 2007) have both submitted to the FCC prototype devices which demonstrate the effectiveness of the detect-and-avoid techniques. Similar proposals have also been submitted by Microsoft, Philips and Intel to Ofcom in response to its Digital Dividend Review 17. Innovation in this band is just beginning. Indeed, as would be expected with licence-exempt applications, the best use has probably not been invented yet.

16 Comments in proceeding 04-186 of Dell, Microsoft, Google, HP, Intel and Philips, submitted on 31 January 2007, and Reply Comments submitted on 2 March 2007, available online from the FCC at http://gullfoss2.fcc.gov/prod/ecfs/comsrch_v2.cgi 17 Available online via Ofcom's website.

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Conclusions

The flexible licensing and licence-exempt regulatory models complement each other, and a combination is more valuable than either individually. Licenses are just one kind of spectrum-related market; a licence-exempt allocation creates a market in device technologies in which manufacturers compete with each other to provide affordable innovation directly to end-users.

There are vacant channels between broadcast television stations. This spectrum can be used by licence-exempt devices without harming television viewing.

A licence exempt allocation of these bands would be the most productive way to use this spectrum because licence-exempt spectrum:

- it is a proven way to generate technical and commercial innovation; - it promotes healthy diversity in markets and regulatory models; - it complements the work regulators are already doing to introduce market mechanisms through flexible licensing.

A broad cross-section of society would benefit, including rural and inner-city residents seeking affordable Internet access, entrepreneurs starting up digital communication businesses, cities and companies seeking to foster growth and productivity, and citizens who want to create community networks.


References

BENKLER Y. (2002): "Some Economics of Wireless Communications", 16, Harvard Journal of Law & Technology, 25 (Fall 2002).

CAVE M. & WEBB W. (2004): "Spectrum licensing and spectrum commons - where to draw the line", A research report prepared for the International Workshop on Wireless Communication Policies and Prospects: A Global Perspective, held at the Annenberg School for Communication, University of Southern California, Los Angeles, October 8th and 9th 2004.

CHALLAPALI K. (2007): "Philips sensing Prototype", submission to FCC TV White Spaces Proceeding, ET Docket Nos. 04-186, 02-380 made on 21 May 2007.

EC - European Commission: - (2005a): Communication from the Commission to the Council and the European Parliament entitled 'A forward-looking radio spectrum policy for the European Union: Second annual report' (COM (2005) 0411). - (2005b): Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions entitled 'A market-based approach to spectrum management in the European Union' (COM(2005)0400).

EP - European Parliamant (2007): European Parliament resolution Towards a European policy on the radio spectrum, "Texts adopted by the European Parliament at the sitting of Wednesday 14 February 2007", (P6_TA-PROV(2007)0041).

ERO - European Radiocommunications Office (2007): terms of reference for ECC TG4: Implications of Digital Dividend.

FAULHABER G.R. & FARBER D.J. (2003): "Spectrum Management: Property Rights, Markets, and the Commons", Telecommunications Policy Research Conference Proceedings.

FCC: - (2002): Spectrum Policy Task Force Report, Federal Communications Commission, ET Docket No. 02- 135, November. - (2006): Unlicensed Operation in the TV Broadcast Bands; Additional Spectrum for Unlicensed Devices Below 900 MHz and in the 3 GHz Band, First Report and Order and Further Notice of Proposed Rule Making, 21 FCC Rcd. 12266. - (2007): Report and Order and Further Notice of Proposed Rulemaking, FCC 07-72, 700 MHz Band Report and Order and Further Notice.

FITZGERALD M. (2004): "A brief history of Wi-Fi", The Economist, 10 June.

GOOLSBEE A. & KLENOW P.J. (2006): "Valuing Consumer Products by the Time Spent Using Them: An Application to the Internet", AEA Session on "The Roots of Innovation," Boston, Mass, January 8, 2006.

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Indepen, Aegis & Ovum (2006): The economic value of licence exempt spectrum, report to Ofcom, December.

NARLANKA S. (2007): "Microsoft TV White Spaces Development Platform Version 2", submission to FCC TV White Spaces Proceeding, ET Docket Nos. 04-186, 02-380 made on 3 May 2007.

Ofcom: - (2005): Spectrum Framework Review, Statement, June 2005. - (2006): Digital Dividend Review, December 2006. - (2007a): Licence-exemption Framework Review, April. - (2007b): Licence-exemption Framework Review, Presentation to Stakeholders, May.

RSPG - Radio Spectrum Policy Group (2007): Document RSPG07-161final, RSPG Opinion # 7, RSPG Opinion On EU Spectrum Policy Implications Of The Digital Dividend.

Emerging Technologies and Access to Spectrum Resources: the Case of Short-Range Systems (*)

Fulvio MINERVINI University of Warwick and University of Macerata

Abstract: Traditional regulatory arrangements have constrained access to radio frequency spectrum. This has resulted in artificial scarcity of spectrum. The paper addresses the issue of whether technological developments in short-range systems (e.g. cognitive radios and ultra wideband) might promote access to spectrum - possibly using market mechanisms such as trading - and reduce spectrum shortages. Key words: spectrum policy, spectrum access, emerging spectrum-using technology, short-range systems

Innovative technology and spectrum management reform

In recent years, booming demand for wireless services has uncovered inefficiencies in spectrum management by the traditional framework of command-and-control, which, for decades, has put the bulk of decisions on how to use spectrum in the hands of regulators.

Regulators have been prescribing what services can be offered across the spectrum (which has been allocated accordingly) and have usually set detailed and narrow limits on the technologies to be used in order to deliver wireless services. Indeed, spectrum has been managed by regulatory fiat with a few relevant dimensions in mind - namely frequency, polarization,

(*) This paper draws on work undertaken for the European Commission's FP6 Project "Spectrum POlicies and Radio Technologies Viable In Emerging Wireless Societies"(Sportviews). Sportviews partners are: IDATE, GET-ENST, the University of Warwick, TNO, WIK Consult, Alcatel CIT, Bouygues Telecom, Orange France and Poznan University of Technology. Discussions with partners as well as participants in the workshops and conference are gratefully acknowledged. The views expressed in this paper do not necessarily reflect those of other parties.


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space, time - and strict rules on transmission power. In addition, regulators have designed generous guard bands between swaths of the spectrum devoted to different services and technologies (FCC, 2004; TONMUKAYAKUL & WEISS, 2004). The aim of these arrangements was to avoid harmful interference among wireless communications. This regulatory approach - which was particularly suited for broadcasting - has worked quite well until recently (Ofcom, 2004). In a Communication of September 2005, the European Commission wrote:

"Spectrum has historically been distributed via detailed ex-ante administrative decisions. This approach has come under increasing pressure, due to the high technological turnover and the strong demand for wireless applications. The requirement for prior regulatory approval can severely delay or even prevent the introduction of new products" (EC, 2005, p. 5).

Cellular technologies (crucial for the rapid development of wireless mobile telephony), digitisation of signals, successful applications such as Wi-Fi and other developments have caused a huge increase in the demand for access to spectrum, but the supply of spectrum - governed by an administrative approach - has been adjusted slowly to the dynamics on the demand side.

A debate on the most appropriate framework for spectrum management has emerged - the "property rights vs. commons" debate, which is evolving into the question of the appropriate mix of approaches, i.e. regulation, market-based mechanisms and open access (MINERVINI & PIACENTINO, 2007; POGOREL, 2007) 1 - and this debate is becoming increasingly familiar with a few new and emerging technologies, some of which enable novel methods for spectrum management, or even require more radical changes in the approach to spectrum usage.

Generally speaking, technology experts welcome innovations such as cognitive radios and ultra wideband with enthusiasm and set forth the argument that these innovations will contribute significantly in reducing the barriers to access the radio frequency spectrum (possibly enabling an open access spectrum commons in the future). However, service providers and - though to a lesser degree - manufacturers seem sceptical about the

1 See GOODMAN (2004) and FAULHABER (2005) for summaries of the "property rights vs. commons" debate (which has been shaping the discussion on spectrum allocation reform) and references to the literature. See also BAUMOL & ROBYN (2006), FAULHABER (2006) and HAZLETT (2006) for an account of the latest spectrum policy trends.

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advantages of the new technologies. On the one hand, service providers' concerns regard, above all, harmful interferences that their customers might suffer if these emerging technologies end up being used. Also, they might fear increased competition from new entrants, who might as well develop innovative services and erode incumbents' market. On the other hand, manufacturers are in favour of steps towards harmonisation of spectrum usage (Booz Allen Hamilton, 2006 2), in order to reach a critical mass market for their devices more easily. Therefore, they are concerned with the potential of these technologies to become (rapidly) popular among consumers, as well as with the foreseeable commercial cycle of new devices.

The cost of using emerging technologies might be too high and reduce expected economic benefits (Qinetiq, 2006). In a recent study for Ofcom (2005b), Masons Communications and DotEcon estimated the negative and positive impacts on social welfare associated with ultra wideband deployment for personal area networks in the United Kingdom. They found that ultra wideband might generate about £ 4 bn (discounted) in value over the next 15 years, but further work is needed to assess net benefits 3. Moreover, in HARRINGTON et al. (2004, p. 42), the authors claim that "the adaptation of SDR into networks faces challenges in the economics of its rollout. Until units can be produced in mass, prices will be high. The value for operators is that SDR systems provide flexibility and versatility that can outweigh costs".

This paper attempts to make a contribution in the debate on the potential of innovative technology to promote (dynamic) spectrum access in the area of short-range wireless systems. Therefore, an overview of expected costs and benefits associated to their development is also provided. The paper discusses, in particular, the role that technologies enabling first and second generation flexibility (CAVE, 2006) might play to make spectrum usage more

2 The results of the economic analysis in Booz Allen Hamilton (2006), regarding wide area wireless communications, suggest that "15 years after deploying a liberalised spectrum use proposition the industry would see 3% less usage per subscriber, 5% less end-user service penetration with a 7% higher ARPU, and an overall loss in consumer surplus of € 244 bn compared with the harmonised case" (p. 6). Their results are very different from those in Analysys et al. (2004). In the latter, trading and liberalisation are expected to bring significant benefits to consumers. See also Red-M & partners (2006): the variable complexity of the spectrum sharing schemes studied leads to different implementation costs and profitability dependent on the assumptions made. 3 The study attempted to consider all external costs, but, in some cases, insufficient data existed to enable the consultants to accurately estimate the impact. Also, there are large variations in value between different scenarios (Ofcom, 2005b, pp. 17-18).

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intensive. Some key features of emerging technologies will be presented in order to support arguments about their foreseeable impact on two specific themes of spectrum management and regulation: spectrum sharing and frequency trading. However, some emerging technologies - especially in their most advanced concepts (e.g. cognitive radios) - will not reach the market before 2015 and some of them might be unable to leave R&D laboratories.

Although the paper will not deal with the issue of whether market-based mechanisms or open access to a spectrum commons are better suited to address the challenges involved (compared with command-and-control), there is an assumption that the highly uncertain scenarios, which might be envisaged, suggest that regulation should not take immediate steps to accommodate (the expectations associated to) specific emerging technologies. Nevertheless, regulation should remove unnecessary constraints on frequency usage, in order to enable access to spectrum on a technology and service neutral bases as much as possible. Notably, in its recent Communication of February 8, 2007, the European Commission argues that:

"The deployment of innovative wireless services and technologies is increasingly hampered by the reservation of certain spectrum bands for narrowly defined services coupled with rigid usage conditions that are unduly constraining spectrum use. Making spectrum use more flexible empowers the spectrum user to make timely commercial choices close to the market" (EC, 2007, p. 3).

The paper is structured as follows. After a brief overview of the problem of access to the resources of the radio spectrum, which are often under-used, the following Section is concerned with opportunities and challenges brought by a few emerging technologies, e.g. mesh networks, software defined radio (SDR), cognitive radio and ultra wideband 4. Such technologies are discussed according to their level of disruptiveness with regard to the traditional spectrum management framework. Sub-sections provide a short introduction to key aspects of these innovations and address issues of spectrum sharing in the first place, and then of spectrum trading, as the latter is regarded as a form of spectrum sharing based on negotiated access among users. Then we conclude.

4 The selected technologies are those more often discussed in fora on spectrum policy reform. Some technical details about them can be found in RICHARDS et al. (2006).

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Access to spectrum and the role of emerging technologies for band sharing and trading

There is an apparent paradox in the debate on spectrum management reform. On the one hand, the discussion highlights problems of spectrum shortages - compared to an unprecedented increase in the demand for wireless communication services. On the other hand, several contributions argue that spectrum per se is not scarce - rather, it is badly managed, in ways that artificially restrict users' options to exploit this resource efficiently.

According to the Spectrum efficiency working group of the FCC:

"There is some evidence indicating that the shortage of spectrum is often a spectrum access problem. That is, the spectrum resource is available, but its use is compartmented by traditional policies based on traditional technologies. New radio technologies may enable new techniques for access of spectrum and sharing of the spectrum resources that may create quantum increases in achievable utilization" (FCC, 2002a, p. 9).

In fact, measurements of spectrum usage have demonstrated that, even in urban areas, the allocated radio frequencies are often under-used 5. For instance, Shared Spectrum Company (2005) performed spectrum occupancy measurements from January 2004 until August 2005 at six locations in the US. The study goal was to determine the spectrum occupancy in each band (30 MHz - 3,000 MHz) and measurements showed, in particular, that (a) the average occupancy over all of the locations was 5.2%; (b) the maximum total spectrum occupancy was 13.1% (New York City) and (c) the minimum total spectrum occupancy was 1% (National Radio Astronomy Observatory).

A few studies explore ways to promote spectrum access using legacy technology (Ofcom, 2005a; Qinetiq, 2005; CEPT, 2006; Red-M & partners, 2006). Innovative technology brings opportunities - as well as problems - for spectrum usage and some technologies are closer than others to come onto the market 6. For instance, advanced antenna technologies consist of an

5 Measurements of spectrum use were carried out also in the UK and Belgium. It should be noted that the reuse pattern that was necessary for cellular systems was not considered in the measurements by the FCC. See also Analysys and Mason (2005) and Qinetiq (2006), with different predictions for cellular spectrum runs out in the UK. 6 Initial research and development of innovative wireless technologies usually takes place in military laboratories.

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evolution of traditional antennas and, if their cost can be kept sufficiently low to be implemented on popular devices (e.g. mobile phones), spectrum-based services might soon rely on them.

The perturbing dimension of various emerging technologies on spectrum usage is different. While some of them do not require or favour major changes in spectrum management (e.g. smart antennas and mobile mesh networks), others might be highly disruptive (e.g. ultra wideband and cognitive radios).

Technologies in the latter group might significantly enhance access to the resources of the radio frequency spectrum. However, compared with those in the first group, they are also (relatively) ill-defined, because R&D about them (i.e. about their potential for harmful interference as well as their useful development in novel spectrum-based services) is only in the early stages.

In the following sections, a few emerging technologies will be ideally located along a continuum, according to their degree of disruptiveness with regard to current spectrum management methods, and their relevance for issues of spectrum sharing and secondary spectrum trading will be discussed.

Spectrum-using technologies that fit the traditional framework: advanced antennas and mesh networks

Advanced antennas and mesh networks are two examples of first-generation technologies. They have features that can improve spectrum-based services and enable access to spectrum in a better or different way. However, their deployment does not impinge on the traditional approach to spectrum usage.

Smart antennas perform better legacy functions. Thereby, they can ease spectrum sharing by many devices and users, in particular if they are coupled with better filters that will control for interference. A development in smart antennas is multiple-input-multiple-output (MIMO) wireless technology, which uses multiple antennas at the transmitter and receiver to produce

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significant capacity gains over systems using the same bandwidth and transmit power 7.

Mesh networks are usually divided in (fixed) mesh networks and mobile (ad hoc) mesh networks. Fixed mesh networks are already in use (e.g. in fixed radio access services), while the development of mobile mesh networks is more challenging. However, under appropriate network design and where spectrum is available, mobile mesh networks might be deployed for wireless communications and enable some kind of spectrum sharing, in particular exploiting the higher (and less congested) frequencies up to 6 GHz (WEBB, 2006). According to the FCC (2003, par. 78), "mesh networks function by 'whispering' at low power to a neighbour rather than 'yelling' at a high-power to a node far away. This approach may be spectrally more efficient than simply transmitting directly to a desired receiver at some distance and provide for better sharing scenarios".

Mesh networking is a novel way to access spectrum and to enhance its usage. However, spectrum sharing by mesh systems has limits. Indeed, if shared spectrum is used, the quality of service that can be offered depends on the choice of sharing mechanisms (CCLRC/RCRU, 2006).

Fixed mesh networks might be developed in managed spectrum, hence a reduction in the potential for harmful interference, compared with uncontrolled access to spectrum. Nevertheless, the protocols employed by the users over the networks that share the same spectrum are a crucial feature (CCLRC/RCRU, 2006; Plextek et al., 2006): if some users employ impolite protocols - which do not check for frequency occupancy before transmitting (e.g. IEEE 802.16) - while others rely on polite protocols (e.g. IEEE 802.11), the former may gain an inequitable share of the available spectrum.

Spectrum sharing by mobile (ad hoc) mesh networks may bring further difficulties (Plextek et al., 2006 8). Firstly, these networks might operate in unlicensed spectrum, thus enabling fewer ways to protect against harmful

7 MIMO systems will ensure that the signals at the antennas in the array are sufficiently uncorrelated with each other. Correlation can be reduced by exploiting various forms of diversity that arise due to the presence of multiple antennas: space diversity (locating antennas far apart), pattern diversity (using antennas with different or orthogonal radiation patterns), polarization diversity, etc. See http://users.ece.utexas.edu. 8 The report by Plextek et al. (2006) deals with mobile meshes at frequencies below 3.5 GHz. In the study by CCLRC/RCRU (2006), the authors found that the spectral efficiency of fixed service mesh networks is strongly influenced by the design choices of the system.

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interference and to safeguard quality of service. Secondly, mesh architectures are based on spectrum re-use along traffic routes that can be flexibly designed, but only to a limited degree, due to interference zones generated while routing traffic. Also, if all available capacity is used up at some point along a desired route, such additional wanted route will be likely to be blocked (Figure 1).

Figure 1 – A mobile mesh network

I n t e r f e r e n c e z o n e s

R o u t e u t i l is in g a l l a v a i la b le c a p a c i t y

A d d i t io n a l w a n t e d r o u t e - b lo c k e d

Source: W. WEBB (2006)

While such technologies are likely to contribute to make more intensive use of spectrum by delivering present services in a new way or using less precious spectrum (i.e. up to 6 GHz) by means of mesh type network architectures, they do not seem to have any specific impact on spectrum trading.

Mesh networking might be used to connect networks that use spectrum of independent spectrum holders: therefore, with exclusive access to spectrum, a spectrum holder might want to negotiate access to (part of) the spectrum held by someone else in order to connect and expand his network, or trunks of it (AKYILDIZ et al., 2005). Nevertheless, there are at least two circumstances that might raise transaction costs significantly and impede such trades: firstly, the deployment of a (mobile) mesh network might involve negotiations with a number of spectrum holders; secondly, routes followed by mobile mesh networks might change (hence negotiations for occasional routes would be too expensive).

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Re-programmable devices, flexibility and interference: the case of software defined radios

Software defined radios (SDR) are a new generation of agile radios that rely very heavily on software in order to operate key radio parameters (i.e. frequency range, modulation type and output power), whereas traditional radio functionalities are mainly implemented at the level of hardware (FCC 2003, par. 82). Therefore SDR are more flexible, as operating parameters can be changed more quickly and conveniently.

The development of SDR can facilitate spectrum sharing in at least two different ways. Firstly, SDR enable carriers to run multiple standards on the same wireless network (hence a reduction in operational costs); secondly, SDR could be used to link networks of licensees authorised to operate their services at different frequencies. For instance SDR might be beneficial for public sector networks delivering safety services (e.g. emergency and police) that, historically, have been allocated various frequencies. SDR would help communicate across all networks 9.

SDR techniques have a potential to support spectrum trading. Indeed, changes in the communications environment, which are likely to follow a trade in spectrum, can be more easily taken into account in a network that deploys SDR by means of software modifications.

Two different scenarios can be envisaged: in the first one, SDR are implemented at the (higher) level of service provider; in the second one, SDR are implemented at the (lower) level of each subscriber device. There might be a trade-off between complexity and speed of adjustment in these two scenarios, following a trade to access spectrum. If SDR systems are implemented at service provider level, the bulk of software adjustments are likely to be necessary at base stations. This might require some time to fine-tune the communications network after the trade, but operations can be expected to be carried on without major disruptions, since adjustments to variations could be easily located and monitored (HARRINGTON et al., 2004).

On the other hand, with subscriber units capable of (and allowed to) determining their own requirements, spectrum trades (with a service provider) could take place almost on a real-time basis, but (very) quick

9 SDR could be used in (ad hoc) mesh networks. This kind of application might be useful, for instance, for emergency services in areas that are not reached by other networks.

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variations in a network might lead to failures in communications, in particular where systems to continuously monitor such changes are not in place, or are unable to cope with them.

Finally, swift and easy re-programmability of SDR bring a crucial challenge. Radio systems must comply with industry standards and spectrum regulations. Any software upgrade might result in a change of SDR systems such that they do not comply with regulations anymore. Moreover, harmful interference through illegitimate software modification could be either intentional (such as with computer hackers and viruses) or unintentional; either way, it would be exacerbated if the illegitimate modification is implemented into a great number of SDR devices simultaneously (FCC, 2003; MENNENGA, 2005).

Disruptive technologies: cognitive radios and spread spectrum technologies

The virtues - and limits - of SDRs will be incorporated in cognitive radios, which, in their more sophisticated designs, will be able to perform a lot of complex communications tasks in a 'cognitive' way, i.e. exploiting their capabilities to sense the spectrum environment and decide on their behaviour accordingly. In particular, high-level cognitive radios will choose frequencies, transmission power, timing and so forth (Qinetiq, 2006). Hence, they represent an innovative technology with a disruptive potential for spectrum management and regulation. Spread spectrum technology is also challenging the traditional framework of spectrum management, as they need a lot of bandwidth and use low power levels. They also entail a potential shift of spectrum regulation from frequency allocation to power limits, as suggested by the interference temperature concept put forth by the Spectrum policy task force in 2002 (FCC, 2002b) - a measure of the power generated by undesired emitters plus noise sources that are present in a receiver per unit of bandwidth 10.

10 In the new interference management paradigm, a spectrum-using device would measure the interference temperature at its location and make a transmit or not transmit decision based on this measurement plus the energy emitted by the device.

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Cognitive radios

Cognitive radios are a relatively large group of radios with different degrees of ‘intelligent' behaviour (SHUKLA, 2006). Devices with basic capabilities of cognitive behaviour are already on the market (e.g. wireless LAN devices and CDMA networks). Nevertheless, major challenges and opportunities are expected by the development of complex radios that are still in their technological infancy. All cognitive radios have the fundamental feature of being able to sense their environment (i.e. to monitor transmissions across a wide bandwidth) and, in particular, to exploit spectrum swaths - so-called white spaces - which appear to be (momentarily) unused (AKYILDIZ et al., 2006; Qinetiq, 2006). Hence, a cognitive radio's ability to define frequency, time, geographic location and power levels is crucial.

Opportunities to use spectrum more intensively might therefore flourish with cognitive radio access, subject to the design of an appropriate spectrum management framework that does not frustrate the development of such a new generation of devices (FCC, 2003; BRODERSEN et al., 2004). In particular, cognitive radios might enable the sharing of spectrum with licensed operations when the licensee is under-using the spectrum or if his operations do not suffer too much interference (Red-M & partners, 2006) - a form of sharing spectrum that is often referred to as overlay sharing 11.

Although cognitive radios might be deployed by a spectrum user to further exploit the resources he is already entitled to access, spectrum sharing by multiple users is a more relevant and challenging development of cognitive radios (Qinetiq, 2006).

The sharing of licensed spectrum between a licensed (primary) user and cognitive radios (secondary users) is also defined vertical spectrum sharing (PEHA, 2006): in fact, users are on different levels with regards to their rights to access shared spectrum (WWRF, 2005). If both users are licensed, co-ordination between primary and secondary users is likely to enable exclusive but interruptible access to spectrum by the secondary user (FCC, 2003) - e.g., the primary user offers public safety services, whereas the secondary user is a cellular operator whose services are not affected too heavily by occasional interruptions.

11 In contrast, spread spectrum technology is an underlay technique, as it operates under the noise floor established for licensed spectrum users.

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Horizontal sharing, i.e. the sharing of spectrum between peer users, is commonplace in unlicensed bands and, in general, identifies shared use of spectrum by cognitive radios with the same regulatory status, even though they are not designed to communicate with each other directly (WWRF, 2005).

To support an orderly access to shared spectrum by cognitive radios enjoying peer level, rules (such as protocols and etiquettes) to regulate horizontal sharing may be necessary. With vertical sharing, priorities in access to spectrum are defined and various approaches can regulate access to spectrum that is under-used by a primary user. The FCC (2004), for example, has put forward three options: a listen-before-talk approach, a location-based database of used frequencies and a system of dedicated beacon transmitters to identify temporarily vacant spectrum. In particular, beacon signals may be sent by a primary user to assist cognitive radios and reduce risk of harmful interference.

The interest of cognitive radio is limited when frequency bands are heavily used. If a cognitive radio cannot find vacant spectrum, it is unable to transmit; hence, in bands where the probability of cognitive access falls too low, cognitive radios would become of little value to users. This would also reduce incentives to trade with (or among) primary users.

Where spectrum is used on an exclusive basis, parties could negotiate ways to access frequencies any time a cognitive radio technology (deployed, for instance, in the radio systems of the lessee) senses white spaces available for transmissions. Thus, cognitive radios might also enable dynamic (real-time) spectrum management scenarios.

Negotiations between parties would be crucially based on the capabilities of cognitive radios to sense their surroundings and transmit accordingly (thus enabling frequency re-use, but without causing intolerable interference to the operations of other users). Thereby, parties would have to address the so called hidden terminal problem, i.e. interference problems arising from the failure of cognitive radio technology to spot a legitimate use of spectrum behind a physical obstacle - e.g. a building (CAVE & WEBB, 2003; HAARTSEN et al., no date) 12.

12 The hidden terminal problem might be crucial in future scenarios where cognitive radios are able to determine the most appropriate access to the spectrum without central control.

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At this stage of cognitive radio development, the hidden terminal problem suggests that cognitive radios might work best where the (primary) licensee provides approval of cognitive access by others and broadcasts some form of beacon signal to indicate whether the spectrum can be (temporarily) accessed. By providing license holders with the right to sub-lease their spectrum, this form of access would become possible (FCC, 2003). Indeed, sub-leasing is considered by many to be part of the package of rights needed for spectrum trading. In the absence of market failures 13, primary users should not be obliged to trade with secondary users, for only spontaneous trades between parties can bring about mutual benefits and efficiency gains.

Spread spectrum technologies

Spread spectrum technologies attempt to share spectrum with other users by arranging the trade-off between power and bandwidth in ways that allow the use of broad swaths of frequencies with low power transmissions (Figure 2). Indeed, electro-magnetic waves can be transmitted at different frequencies and the distance they propagate depends, on the one hand, on the frequency (the higher the frequency the lower the propagation distance) and, on the other hand, on the transmitter power (the higher the power the higher the propagation distance).

Shared spectrum can be either licensed or licence-exempt spectrum. If spread spectrum technologies are deployed in a number of devices that operate in the same spectrum (in particular, in unlicensed bands), then the crucial aspect for efficient and effective spectrum sharing will be the design of protocols, etiquettes or other rules that will enable these devices to simply co-exist, co-ordinate or, possibly, co-operate with each other 14. For spread spectrum technologies that can access licensed spectrum (used by operators who offer different services with a wide range of technologies) it is crucial to establish a noise-floor such that spread spectrum technologies will generate a tolerable level of interference to neighbouring applications 15.

13 For instance, a cognitive radio might be used in a scenario where a service provider must interrupt his or her operations within milliseconds upon reception of a signal by an emergency service device. 14 Short-range, high data rate consumer applications are the focus of present commercial attention, as expressed in the contentious 802.15.3a standard (see BRODERSEN et al., 2006). 15 This kind of issue has been discussed for quite a long time, for instance in ECC TG3 on UWB regulatory framework. See, e.g., Ofcom (2005b).

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Figure 2 - Comparison of power and bandwidth for a few systems

Source: B. BUSROPAN (2007)

As spread spectrum technologies transmit over a (very) wide part of the spectrum, at (very) low power, spectrum trading seems unviable: in order to minimise potential interference problems, users of such technologies should negotiate with a number of (licensed) users across the spectrum they need (Ofcom, 2005b). For instance, UWB transmissions require a minimum of around 500 MHz for a data rate of about 200 Mbits/s and it is very unlikely that someone (e.g. a private band manager) could acquire such a broad swath of spectrum, in particular in the most congested frequency bands 16. Therefore transaction costs would be prohibitive.

Concluding remarks and future research

Innovative technology offers opportunities to promote spectrum access and increase its usage. This will most likely happen in two ways: by enhancing the performance of traditional communications devices, or by enabling new methods to access the radio frequency spectrum. The latter seems the more relevant and challenging way to reduce artificial scarcity of

16 Moreover, the technical spectrum efficiency would be very low (less than 0.5 bit/Hz), whereas current HSDPA equipments are exceeding 1 bit/Hz.

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spectrum, which is the crux of the debate about the reform of its management framework.

Emerging technologies promise ways to make spectrum usage more intensive. However, with more systems able to access the spectrum, risks of harmful interference might be greater. In the absence of market mechanisms, uncertainty about net benefits, which the technology developments discussed might offer, are great. Nevertheless, disruptive technology should not be rejected because it might be harmful for current spectrum-using services.

Cost-benefits analyses that attempt to measure the impact of emerging technologies on existing services might be useful. However, this would entail a bias in favour of the latter. Therefore, future research should also evaluate net benefits in scenarios where various combinations of legacy and innovative technologies, applications and services take place. Last, but not least, such scenarios should adopt a spectrum management framework which is more complex and dynamic than the traditional administrative one.

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Foster R. & Kiedrowski T. (Eds.), Communications: The Next Decade, London, Ofcom, pp. 220-234.

CCLRC/RCRU-Radio Communications Research Unit - Spectrum Efficiency Scheme (2006): Efficient Fixed Mesh Networks, Chilton, Didcot, RCRU.

CEPT–Conférence Européenne des Administrations des Postes et des Télécommunications (2006): Enhancing Harmonisation and Introducing Flexibility in the Spectrum Regulatory Framework, Oulu, CEPT.

EC-European Commission: - (2005): A Forward-Looking Radio Spectrum Policy for the European Union: Second Annual Report, COM (2005) 411 final, Brussels, European Commission. - (2007): Rapid Access to Spectrum for Wireless Electronic Communications Services Through More Flexibility, COM (2007) 50 final, Brussels, European Commission.

FAULHABER G.R.: - (2005): "The Question of Spectrum: Technology, Management, and Regime Change", Journal on Telecommunications and High Technology Law, vol. 4 (1), pp. 123-182. - (2006): "Wireless Telecommunications: Spectrum as a Critical Resource", Southern California Law Review, vol. 79, pp. 537-559.

FCC-Federal Communications Commission: - (2002a): Report of the Spectrum Efficiency Working Group, Washington, D.C., FCC. - (2002b): Report of the Spectrum Policy Task Force, ET Docket no. 02-135, Washington, D.C., FCC. - (2003): "Facilitating Opportunities for Flexible, Efficient, and Reliable Spectrum Use Employing Cognitive Radio Technologies". Notice of Proposed Rule Making and Order, FCC 03-322, ET Docket no. 03-108, Washington, D.C., FCC. - (2004): "Unlicensed Operation in the TV Broadcast Bands". Notice of Proposed Rule Making, FCC 04-100, ET Docket no. 04-186, Washington, D.C., FCC.

GOODMAN E. (2004): "Spectrum Rights in the Telecosm to Come", San Diego Law Review, vol. 41, pp. 269-404.

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HARRINGTON A.S., HONG C.G. & PIAZZA A.L. (2004): Software Defined Radio: The Revolution of Wireless Communication, Ball State University, mimeo.

HAARTSEN J.C., WIEWEG L. & HUSCHKE J. (no date): Spectrum Management and Radio Resource Management Considering Cognitive Radio Systems, mimeo.

HAZLETT T.W. (2006): "An Economic Evaluation of Spectrum Allocation Policy", in Richards E., Foster R. & Kiedrowski T. (Eds.), Communications: The Next Decade, London, Ofcom, pp. 249-258.

MENNENGA H. (2005): "Regulatory Activity in the Area of SDR in Europe", presentation at the Global Regulatory Summit on SDR and Cognitive Radio, Washington, D.C., June 21-24, www.sdrforum.org.

MINERVINI F. & PIACENTINO D. (2007): "Spectrum Management and Regulation: Towards a Full-Fledged Market for Spectrum Bands?", University of Macerata, DiSSE, working paper no. 7.

Ofcom-Office of Communications: - (2004): Spectrum Framework Review, London, Ofcom. - (2005a): Technology Research Programme, London, Ofcom. - (2005b): Ultra Wideband: Summary and Reaction to Responses Received to the Consultation, London, Ofcom.

PEHA J.M. (2006): "Competing Models for Spectrum Sharing", presentation at the National Academy of Sciences, Washington, D.C., February 28, www.ece.cmu.edu.

Plextek, Spectrum Trading Associates & UCL Consultants (2006): Study on Efficient Mobile Mesh Networks, Great Chesterford, Plextek.

POGOREL G. (2007): "Regulation and Competition: Nine Regimes of Radio Spectrum Management: A 4-Step Decision Guide", COMMUNICATIONS AND STRATEGIES, no. 65, pp. 167-183.

Qinetiq: - (2005): Bandsharing Concepts, Farnborough, Qinetiq. - (2006): Cognitive Radio Technology: A Study for Ofcom, Farnborough, Qinetiq.

F. MINERVINI 125

Red-M & partners (2006): Improving the Sharing of the Radio Spectrum: Final Report, no place [but Horsham], Red-M.

RICHARDS E., FOSTER R. & KIEDROWSKI T. (Eds) (2006): Communications: The Next Decade, London, Ofcom.

Shared Spectrum Company (2005): NSF Spectrum Occupancy Measurements Project, http://www.sharedspectrum.com.

SHUKLA A. (2006): "Emerging Technologies: Definitions, Technological Trends and Timescales", presentation at the first Sportviews Workshop, Paris, June 22, www.sportviews.org.

TONMUKAYAKUL A. & Weiss M.B.H. (2004): "Secondary Use of Radio Spectrum: A Feasibility Analysis", University of Pittsburgh, School of Information Sciences, working paper.

WEBB W. (2006): "Innovative Technology and its Impact on Spectrum Management", presentation at the first Sportviews Workshop, Paris, June 22, www.sportviews.org.

WWRF-Wireless World Research Forum, WG6 (2005): "Cognitive Radios and Management of Spectrum and Radio Resources in Reconfigurable Networks", White paper, no place, WWRF.

Other papers

Bottom-up Cost Modelling for Bitstream Services in ATM Based Broadband Access Networks

Competition in International Mobile Roaming: Alternative Clusters

Bottom-up Cost Modelling for Bitstream Services in ATM Based Broadband Access Networks (*)

Klaus HACKBARTH & Laura RODRIGUEZ DE LOPE Telematics Engineering Group, Cantabria University, Spain

Dragan ILIC & Gabriele KULENKAMPFF WIK GmbH, Bad Honnef, Germany

Abstract: This contribution proposes a bottom-up model for determining the cost of bitstream access services. For this purpose a traffic model is developed and a network structure for the corresponding broadband access network (ATM) is determined. The cost model is designed against the regulatory background and respective requirements in cost allocation. In this paper the model is exposed and applied to a network example. Additionally some problems arising for quality of service differentiation in providing bitstream access services are shown and a first approach is indicated. Key words: bitstream access service, broadband access network, cost modelling, regulation

lthough most European telecommunication markets have been liberalised in 1998, incumbent operators still have significant market power in most wholesale markets. According to the European

regulatory framework the existence of significant market power requires regulations. With regard to the broadband market, which is under consideration in this contribution, European Regulators decided incumbents to have significant market power in imposed remedies. Among others some national regulatory authorities obliged the incumbent to provide bitstream

A

(*) Acknowledgement: The research and studies of this contribution are partially financed with funds of the national R+D project TIC 2003-05061 from the Spanish Ministry of Science and Technology, and the Network of Excellence EURO-NGI of the 6th framework program supported by the European Commission, IST-50/7613. Furthermore, the development of a reference specification of an analytical cost model for the broadband network and first software implementations resulted from a project for the German Regulatory Authority, BNetzA (Bundesnetzagentur Bonn, 2005).


130 No. 67, 3rd Q. 2007

access services at cost based rates 1. This generally implies the application of the forward looking long run incremental cost standard.

In order to determine the forward looking long run incremental cost of wholesale services bottom-up cost models are applied by national regulatory authorities (HACKBARTH, RODRIGUEZ DE LOPE, GONZALEZ & KULENKAMPF, 2002). Bottom-up modelling means that a network configuration is studied considering the corresponding services, and demand respectively (HACKBARTH, RODRIGUEZ DE LOPE & KULENCAMPFF, 2005).

Forward looking long run incremental cost means selecting the best network technology and an optimal network design without considering historical costs or an already existing network 2. As modern telecom networks integrate various services all of them must be considered for studying the cost increment of a certain service.

This contribution treats cost modelling for bitstream access services in broadband access networks because many national regulatory authorities are required to impose regulatory measures on this market and thus a detailed understanding of cost of efficient service provision is of utmost importance. The paper proposes a model for the bottom-up broadband access network configuration, a service classification for considering the service integration inside the network and a cost model for the forward looking long run incremental cost approach. This contribution resumes and actualizes a recent study from the same authors provided for the German regulator BNA-Bonn (Bundesnetzagentur, 2005).

Regulatory background

The implementation of bitstream access services is considered to be important for enhancing competition in the broadband market. In this context

1 Of course, not all national regulatory authorities impose cost based regulation on the incumbent operator. In a set of countries less restrictive measures are applied such as eviction tests, retail minus, etc. 2 Despite this clear requirement, most regulators accept a scorched node approach that means that the first location, where the user network interface connects with the network of the incumbent operator is considered.

K. HACKBARTH, L. RODRIGUEZ DE LOPE, D. ILIC & G. KULENKAMPFF 131

ERG 3 defines the main elements of bitstream access as follows (ERG, 2004) 4:

- "high speed access link to the customers' premises (end user part) provided by the incumbent; - transmission capacity for broadband data in both direction enabling new entrants to offer their own, value-added services to end users; - new entrants have the possibility to differentiate their services by altering (directly or indirectly) technical characteristics and/or the use of their own network; - bitstream access is a wholesale product consisting of the DSL part (access link) and "backhaul" services of (data) backbone network (ATM, IP backbone)" (MMR, 2003).

According to this definition it is important to note, that the bitstream access is not equitable with a combined wholesale product consisting of an unbundled or shared access and a conveyance service in the access network, respectively the backbone. This is because the ERG definition requires that alternative operators must be able to differentiate their services; and a simple resale of the access line does not allow the alternative operator to differentiate access speed 5. The ERG does not define the point of traffic handover, but outlines possible points of access which include access at the DSLAM, the ATM level (parent or distant point of presence) or at the IP level (parent or distant point of presence).

Although the ERG's common position is not binding on member states, many countries have already implemented bitstream access services or are about to introduce it. A survey reveals quite a few differences between the implemented services, not at least with regard to the possibility of competitors to differentiate their services. Since the ability for product differentiation is a particular characteristic of bitstream access services, special attention should be paid to the provision of different quality of service classes. It shall be noted, that currently bitstream access services are mainly defined as bandwidth tubes (tunnels) and do not consider the source traffic resulting from the different applications using this tunnel.

3 ERG: European Regulator Group composed of representatives of national regulators, see http://erg.eu.int/ 4 Please refer to the following http://erg.eu.int/documents/cons/index_en.htmn an ERG Consultation document (Draft Common Position) on bitstream access. 5 In its market decision on IP bitstream access the German regulatory authority stressed this issue (Bundesnetzagentur, 2007).

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Traffic and network architecture

The implementation of the forward looking long run incremental cost standard in a bottom-up model requires a detailed knowledge of an efficient network configuration and the traffic load on it. In the following we first outline details on the network architecture, and second on traffic patterns.

Network architecture

The network architecture for bitstream access services can (at most) be segmented into the following network segments:

- subscriber access network, - broadband access network, and - IP core network.

Figure 1 - xDSL reference architecture

The broadband access network is required because an IP core network does not connect all the DSLAM locations directly. Hence, the broadband access network covers the section between the DSLAMs and the IP core access provided by a corresponding broadband remote access server.

In most European countries this network section is implemented in the form of OSI layer 2 networks, currently with ATM technology. The implementation of broadband access networks under Ethernet technology already started in some countries, but, at the moment, its penetration is still low, (CRAWFORD & VRHEYE, 2003). The model outlined and applied in this paper is still based on ATM technology. Although ATM constitutes an outdated technology (which is about to be replaced by Ethernet) the model considers ATM equipment for the logical network since in European countries bitstream access services are still – to a large extent – based on


ATM. Regardless of the ATM based broadband access network assumed here, the model calculates the cost for an IP based interface.

Depending on the size of the country, the number of customers and their geographical distribution and respective demand, a large ATM based broadband network, at national level, can be composed of an up to four level structure, as shown in figure 2. The first level, or level 0, is composed of pure DSLAM locations, mainly at nodes with a low concentration of access lines. The next level has the objective to concentrate traffic that is streaming from the level 0 nodes. Of course, the assumption is made that there is collocation of level 0 and level 1 equipment in the level 1 nodes. Level 2 and 3 consist of ATM switches providing not only traffic concentration, but also traffic routing in terms of virtual paths switching. The highest level is close to a corresponding IP core location (or even collocated at the same place). At this IP core location the broadband remote access server is installed providing the point of presence functions for getting access to the IP network part. The determination of an optimal number of levels and locations for each one is an important parameter to be studied in regulatory cost studies for bitstream access services.

Figure 2 - Hierarchy of an ATM-based broadband network serving as an access network for IP services. BRAS stands for broadband remote access server

Under the four level hierarchy the network describes a three level star topology, shown in figure 2. This network structure can be subdivided into an ATM-access network (level 0 up to level 2) and an ATM-backbone network (level 2 up to level 3). It should be emphasized that the backbone of an ATM network not necessarily has to be part of a bitstream access service. This is

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only the case if (1) a nationwide ATM network is already in place, (2) the IP core network is just about to be established and has less core network locations then the ATM core network. In this case not only the ATM broadband access network but also the ATM core network serves as an access (backhaul) network for IP services.

Given a strict hierarchical routing, all IP traffic generated at the DSLAMs is routed up to the corresponding ATM switch at level 3, using different virtual paths for each service class.

Traffic pattern

The bottom-up modelling approach requires the knowledge of the traffic flow in the network elements based on the peak load traffic demand. For this purpose detailed description of the traffic resulting from the different services demanded by the subscribers is required for dimensioning the corresponding network elements correctly. The set of broadband access services provides a service class description in the form of a bandwidth tube for different types of users. The capacity of this tube depends on the bandwidth required from the users of the corresponding service class normally determined in the high load period (the high load period is similar to the busy hour in the telephone service). From this the following parameters for each service class can be derived:

- equivalent bandwidth in kbps (covering relevant aspects of quality of service, e.g. bit rate, packet loss, latency, jitter); - total number of users for each service; - number of parallel sessions in terms of number of users being active simultaneously in the high load period; - minimum bandwidth guaranteed per user.

The key parameter is the so called equivalent bandwidth required from each service in order to allow for an appropriate network dimensioning. The corresponding value must be determined by separate studies for each service because it depends on the maximum, minimum and mean bandwidth required from a service class and corresponding quality of service requirement (e.g. a service requiring a mean bandwidth of 1 Mbps under very small delay and jitter requirement values requires a higher equivalent bandwidth e.g. 1,25 Mbps than a service with the mean bandwidth requirement but allowing larger delay and jitter values e.g. 1,1 Mbps).


Most broadband access services currently offered are mainly grouped into four different service classes which are shown in table 1.

For quality of service provision each service class must be routed in separated virtual paths up to the point of presence of the interconnection to the corresponding core ATM or IP network, mostly at level 2 or 3.

The product categories outlined in the following table may provide a reasonable framework capturing the services available in the market and thus serve as a basic assumption in modelling traffic patterns.

Table 1 - Broadband access services and its characteristic parameters

DSL products Equivalent bandwidth Bandwidth guaranteed Number of subscribers

DSL mass market Low No High

DSL business Middle Yes Middle

IP-VPN enterprises High Yes Limited

ATM access High Yes Strongly limited

Network design model

The aim of the network design model is to provide an efficient network configuration providing all information on the traffic load and equipment required for its implementation. With this information the total network cost and the unit cost for each service class is calculated accordingly with the forward looking long run incremental cost model.

As long as the model follows a scorched node approach 6, the geographical locations of the main distribution frame 7 sites constitute the main input data. From these locations the BAN nodes for the different levels

6 Generally, two approaches are distinguished: scorched node and scorched earth. Scorched earth constitutes a green field approach i.e. all locations of network equipment are subject to optimization while scorched node makes concessions to the incumbent operator acknowledging its existing network locations. Regulatory cost models in general follow scorched node approaches. According to this the authorities take the main distribution frame locations for granted since within a conveyance network every network node hosts a main distribution frame. In our model we make the assumption that DSLAM are collocated at main distribution frame sites. 7 The main distribution frame is the location where the subscriber access network terminates on the network side.

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are selected. This selection is based on the traffic load resulting from the number of subscribers connected and the network design characteristics, such as the number of nodes at each level, network element capacities and the distance between nodes.

Figure 3 - Inputs and outputs of the model

Figure 3 resumes the different type of input data which influence the network design and the main figures resulting form the network design. The network design model is divided into five different stages which must be provided sequentially and are shown in figure 4.

Figure 4 - Logical structure design stages

The first stage, traffic calculation, evaluates the number of subscribers and traffic load at each node. This stage allows mainly identifying those main distribution frame locations which are not economically accessible for the broadband access network and thus should be discarded accordingly.

The second stage, node classification, represents an optimization process based on a p-median model and implemented by a deepest first


algorithm in relation with the hierarchy of PSTN/ISDN and by considering a minimal distance between nodes in higher hierarchical levels (2-3) to get an equilibrated geographical distribution of these nodes. The assignment of the lower level nodes to the higher ones is being provided by an algorithm based on the shortest geographical distance with a capacity constraint limiting the maximum number of assigned nodes.

To be in line with the forward looking approach, information on expected traffic growth and its spatial distribution is required. The third stage, traffic routing, starts from the traffic load at the DSLAMs grouped in virtual paths for the different service classes. This demand, due to the star architecture exposed above, is routed hierarchically to the upper levels.

The last two stages provide a complete list about the requirements for the physical transport currently provided by digital signal groups of the synchronous digital hierarchy in the form of corresponding transport modules (STM-N with N = 1,4,16) required on the links between nodes and the ATM network equipments required at each broadband access network location.

Cost model

The cost model applied here has the objective to calculate the cost for the provision of bitstream access services in an efficient network. The determination of the efficient network, however, presumes an endogenous optimisation of the network topology. To carry out this optimisation procedure the model refers to geographic information system (GIS) data 8.

Apart from this, other cost models do not base their calculation on geographical information, but use instead input parameters. The use of input parameters generally implies an intensive value discussion and provides transparency on parameter settings during the regulatory process. However, commonly these models do not make allowance for endogenous network optimisation and efficiency aspects. Only models which use geographical information system data can carry out these optimisation issues.

8 An other model is the one developed by the French regulatory authority ARCEP. ARCEP’s model is open to public and can be downloaded under www.arcep.fr.

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The cost model under consideration – as already outlined – is applying a total element forward looking long run average incremental cost approach. With regard to the bitstream access service the increment under consideration is defined by the total number of network elements required for service provision. Furthermore, this concept requires that costs of network elements jointly used by multiple services are shared by these services accordingly. In narrowband networks the subscriber access network and the conveyance network constitute regulatory increments. The broadband network service bitstream access considered here includes subscriber access and conveyance network. According to the total element forward looking long run average incremental cost approach in the conveyance network the cost for network elements jointly used by narrowband and broadband services (bitstream) are shared by these services. In the subscriber access network, however, we diverge from this approach and completely assign the cost for the copper line to the narrow band service. This method is reasonable since these costs are borne by the end user anyhow regardless of the cost sharing between the broadband and the narrowband access line service. This copper line is traditionally borne by the PSTN subscription. With the provision of naked DSL services, it becomes necessary to attribute the costs of the copper line to the broadband access service, here bitstream access.

Cost categories and cost drivers

Cost models for telecom network cost studies require the identification of corresponding cost categories and cost drivers. The main cost categories applied for cost models in telecom network are direct cost, indirect cost (CAPEX) and cost for operating the network and its services (OPEX).

The direct cost are the annualized investment in network units and derived under consideration of the unit's economic life time, its average rate of price change per year and the average interest rate per year which is based on the total change of the price respectively and the interest rate during the unit's economic life time. These variables are part of the capital cost factor which is a formula that considers the expected price change and interest rate development and calculates the annualized investment, i.e. the cost, which is required to keep the network in future.

The indirect costs are induced by expenditures that are needed in order to carry out the installation of the corresponding network equipment. The


indirect investment includes positions such as: motor and vehicles, office facilities, network support, network management and land and building.

A bottom-up modelling approach for indirect cost would require an activity based costing model. Because of the great difficulties in specifying such a model, which is supposed to calculate "cost of efficient service provision", bottom-up models generally apply a mark up on the direct investment in order to determine indirect cost. The mark-up can be interpreted as a percentage supplement that has to be added to the investment.

After the calculation of the indirect investment has been carried out the indirect cost are annualized by taking account of economic life time, rate of price change and interest rate. For more details on costing methods and their application on telecom networks and services see (COURCOUBETIS & WEBER, 2003; EURO-NGI, 2003).

Bottom-up cost modelling is based on a demand driven network dimensioning. Accordingly, cost driver analysis is most important and has to cover all major network elements. Depending on its individual function, the required number of each network element is driven either by the number of connected access lines or the bandwidth. Because an increase of these factors positively correlates with the number of network units and investment in the network, they are also declared as cost drivers. A cost model for bitstream access services has to carry out an analysis of the cost driver for each network element, where the cost driver is the technical parameter acting as a restrictive factor, i.e. that could be regarded as the technical bottleneck of a unit.

Table 2 - Cost drivers of network elements for bitstream product

Bandwidth Number of access lines

DSL modem

Splitter

DSLAM

ATM concentrator

ATM traffic selector

BRAS

Table 2 lists the cost drivers for the network elements considered in the network architecture.In general, each network element is assigned to a single cost driver, but in some cases, as for example given for the DSLAM,

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an assignation to more than one cost driver is required. Here, the number of (customer-sided) incoming line cards depends on the number of access lines, while the number of (network-sided) outgoing transmission systems depends on the user's bandwidth demand.

Regarding the infrastructure topology and density constitute important cost drivers. The model applied here, however, is based on GIS data for the main distribution frame locations and thus automatically accounts for topology and the respective geographic distribution of demand.

Service integration and the problem of cost allocation

The broadband access network provides service integration meaning all services are using the same network equipment. This method allows realizing economies of scope, which finally lead to reduced cost per service. The simultaneous use of the network unit by muliple services leads to the question how to allocate its cost. For this it makes sense to apply the principle of causation which states that the costs are allocated to each service by its proportionate use of the unit. This implies that the costs of a network unit are borne only by those services whose traffic is routed through them.

To apply the above explicted principle of cost causation the different services and their individual traffic routing must be known. The following services are using the broadband access network: DSL mass market products (IP-DSL), DSL business products (IP-other than ADSL), ATM xDSL leased lines and ATM leased lines.

The following example, outlined in figure 5, shall be used for illustration of the above mentioned cost causation principle: In this example the ATM leased lines do not bear any cost of the ATM access network because they only use the ATM backbone for traffic transmission. The cost of the ATM access network is allocated to the three remaining access services.

In the following the cost per service can be calculated by the fomula:

[5.1] CService i = AService_i + bandwidthService i*Bunit

where CService_i is the cost borne by service I and A is the cost driven by access lines (i.e. cost for DSLAM incoming cards, cabinet, hardware, software etc.) divided by the total number of access lines. B is the cost


driven by bandwidth divided by total bandwidth volume routed through the respective element leading to a cost per kbps-expression multiplied by the average bandwidth of service I bandwidthService I.

Figure 5 - Typical broadband services and their individual routing in the broadband access network

ATM Access NetworkATM Access Network

ATM BackboneATM Backbone

ATM-xDSLLeased Lines

IP-DSL384 kbps512 kbps1024 kbps

ATM Switch

ATM-LeasedLines

BRAS

Transit Switch

IP-DSL

IP-other than ADSL

In comparison to the ATM access network the ATM backbone considers leased lines as additional service for cost allocation, so that the cost for ATM parent and distant switch should be allocated to this service, too. Apart from this the broadband remote access server is exclusively used by IP-DSL traffic, so that this service is completely bearing the cost of this network element.

The total cost per service may be driven either by access lines or bandwidth or by a combination of both. Depending on the considered service thus the adequate base for cost determination may differ 9.

9 Moreover the network cost may depend on whether the costs of the unbundled local loop are borne by the broadband network or by the narrow-band network which is not uniformly arranged across the European Union and depends on the respective regulatory authority’s point of view. For example the German regulatory authority Bundesnetzagentur, completely assigns the cost of the unbundled local loop to the PSTN network while the incremental cost for broadband

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The broadband access network transmits the traffic of two main service categories: business services and mass services so that a network operator tends to realize economies of scale. In contrast to competitive Internet service providers having no proper broadband access network and asking for wholesale bitstream access services, the broadband access network operator mostly gains benefits from this, see figure 6. This is because of the following interdependencies:

In the case of an ATM based broadband access network, business traffic is routed as ATM CBR services, while mass services are routed as UBR services. ATM nodes give CBR services priority against UBR services, so that compared to mass services the transmission of business traffic tends to be faster. The current xDSL market indicates that UBR services relative to CBR services are mostly dominant.

Figure 6 - Typical connection of a DSL customer to its (competitor) Internet service provider server frame location over a broadband access

network operated by a different operator

equipment are accounted to the broadband services. This point of view is adopted in this paper and hence the incremental cost for broadband transport in the subscriber access network is assumed to be zero.


Accordingly, this provides an integration benefit for the CBR service class because of the service benefits from the higher system capacity required for the total traffic and the higher capacity usage resulting from the best effort character of UBR traffic.

To study the above mentioned aspects more systematically two schemes should be compared: (a) traffic segregation between CBR and UBR and (b) corresponding separate dimensioning and traffic integration under priority queuing, where CBR traffic compared to UBR is prioritised.

The study mentions that CBR traffic requires a larger overhead so that this reduces the effective capacity of an STM-1 link by 44/53, while UBR causes only a 48/53 reduction. A corresponding queuing model for ATM-based BAN results to a G/D/1 scheme, where the arrival process is in the case of an IP-Poisson arrival process modelled by an interrupted deterministic process, where the time interval between two ATM cell bursts caused by an IP-packet is exponentially distributed (ROBERTS, 1992).

Figure 7 - Packet delay on a STM-1 output interface with same arrival rate and packet length for CBR and UBR services considering separated tunnels

0,0000,5001,0001,5002,0002,5003,000

0,5 2 3,5 5 6,5 8 9,5

arrival rate kp/s

dela

y in

ms

CBRUBR

A M/G/1 for CBR and UBR in the separate scheme and two level M/G/1 non pre-empty queuing model in the case of integration is used for a first approximation (AKIMARU & KAWASHIMA, 1999). The case assumes the same IP-packet lengths for both traffic classes (L=1,5 koctets) and geometric packet length distribution. Figure 7 shows the system delay for CBR and UBR, where the CBR rate under normal load condition on a STM-1 link is at about 6500-7500 packets. This corresponds to an IP-layer load between 0,50 and 0,62. For the UBR rate results a value between 7,5 and 8,5 p/s corresponding to an IP-load between 0,6 - 0,68. Another inconvenience results from the small number of CBR users compared to UBR which implies mostly that in the ATM access network part a STM-1 link exclusively dedicated for CBR services can not be optimally filled. The

144 No. 67, 3rd Q. 2007

integration of UBR and CBR traffic in the "priority scenario" avoids the disadvantage for CBR mostly resulting from the separate dimensioning. Figure 8 shows the delay for both service classes in the case of a common traffic load at the STM-1 physical layer of 0,8. The figure indicates the advantage of integration for CBR without any significant deterioration of the UBR delay. The CBR traffic portion lies under 50% of the total traffic load.

Figure 8 - CBR and UBR delay in case of service integration and priority queuing for CBR traffic and a constant STM-1 use of 0,8

0.000500.000

1000.0001500.0002000.0002500.000

0.000

10.1

5 0.3 0.45 0.6 0.7

5

CBR use factor

dela

y in

us

CBR

UBR

This small study refrains from analysing additional integration benefits resulting from the fact that the high load periods for business traffic and mass market traffic differ. Here the dominant position of mass market services in the high load period is not considered.

The different aspects of an integration benefit for both traffic types are resumed in table 3.

Table 3 - Comparison of the integration benefit for CBR and UBR traffic classes

Type of integration benefit CBR UBR

Improved use of transport capacities yes no

Different high load period yes no

Delay reduction yes no

Temporal free capacities no yes

Under these circumstances a dominant broadband access network operator who transports mass service traffic for an Internet service provider gets a competitive advantage in cases where the integration benefit of the different traffic types into common STM-N links and node equipment is not considered or "not correctly distributed". An assessment of the integration cost benefit can be calculated by the difference between costs of separate


dimensioning and integrated dimensioning. With regard to cost allocation this benefit could be distributed according to the traffic shares of CBR and UBR. Of course, the dominant allocation rule for this integration benefit does not exist. The outlined 2 service approach can be extended to multiple traffic categories. A typical multi-traffic scheme may comprise of OAM and signalling traffic as highest class, a second level traffic class for virtual private networks, a third level traffic class for users with VoIP service and a standard traffic class for users requiring only traditional best effort traffic

Application of the model and first results

The following study illustrates the impact of relevant parameters for the bitstream access services' total cost by applying a ceteris paribus analysis 10. Starting from a base scenario a change in the number of DSL users, number of DSLAM sites, port card density and average bandwidth is gradually carried out allowing an analysis of each parameter's influence. The input parameters for the different scenarios are shown in table 4.

Table 4 - The scenarios and their parameter levels

No. Access lines

No. DSLAM sites (*)

Port density (**) per line card

Average bandwidth

Base scenario 47000 60 38 100

Scenario 1 107000 60 38 100

Scenario 2 107000 60 48 100

Scenario 3 107000 60 48 200

Scenario 4 107000 100 48 200

(*) The scenario assumes an alternative broadband access network operator that starts to implement a proper broadband access network limited to the main cities

(**)The port density specifies the maximum number of subscribers that can be connected to a line card and each DSLAM can accommodate up to 15 line cards.

The model calculations are based on a constructed network which emulates a Spanish broadband access network under a limited number of DSLAM sites (60 or 100 respectively) allowing DSL realization in high and

10 The following analysis addresses the impacts on the costs of the broadband access network only, and does not consider the costs of the subscriber access line which is also part of the bitstream access product.

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middle sized cities. The example is based on public geographical data and public information on the number of PSTN/ISDN access lines in Spanish cities. The figures 9 and 11 illustrate the total investment per acess line and resulting cost parts (Cost part A and B) per scenario.

Figure 9 - Total investment per access line (in €)

02 0004 0006 0008 000

Base S

cena

rio

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Figure 9 shows almost similar values for all scenarios except for scenario 4. The higher investment per access line results from the strong increase in the number of DSLAM sites leading to additional investment.

Figure 10 - Monthly cost per access line resulting from the fixed cost part A from formula [5.1] (in €)

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The monthly fixed costs per access line shown in figure 10 indicate two relevant level variations. The cost per access line increases significantly in the case of rising DSL access lines (Base Scenario -> Scenario 1) and in the case of a higher number of DSLAM sites (Scenario 3 -> Scenario 4). Regarding the first case, a higher number of access lines has to be accommodated by additional DSLAM units, so that relative to the base scenario the fixed cost per access line may rise if each DSLAM unit accommodates a lower number of lines. Scenario 4 shows a similar cost causation. In relation to the other scenarios here the number of DSLAM sites is set higher, so that the number of DSLAM units tends to rise. In


comparison to scenario 3 the number of access lines per DSLAM unit decreases while the total cost per DSLAM remains constant, so that the average cost per access line increases.

Figure 11 - Monthly cost per bandwidth unit (Kbps) (*) – Cost part B (in €)

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The total traffic transmission [in kbps] mostly results from the number of access lines multiplied by the average bandwidth per access line in the high load period. As the number of access lines and average bandwidth differ from scenario to scenario, the total traffic transmission rises from the base scenario to scenario 4. The growing traffic volume allows the realization of additional economies of scale and decreasing monthly cost per bandwidth unit. Figure 11 shows this effect. The value for scenario 4 is slightly higher than for scenario 3 due to the extension of the xDSL coverage.

The above listed results indicate that an increase of access lines per DSLAM side mostly leads to significant CAPEX cost reduction per subscriber, moreover in the case where a broadband access network operator limits its xDSL offer to sites with high access line concentration. In contrast, an expansion to sites with smaller population or rural zones increases the cost per access line so that, if the number of potential access lines is lying below a certain threshold, the usage of alternative broadband access solutions, e.g. SkyADSL, WIMAX, PLC etc, should be studied.

Increasing bandwidth per access line implies a cost reduction, too. This effect becomes even stronger when Ethernet technology substitutes the current ATM implementations 11.

11 Many European incumbent operators already started to or announced to implement Ethernet technology in the broadband access networks. This technology invention is mainly driven by lower price and increased capacity, which is expected to become of utmost importance with the introduction of multimedia services, especially IP TV.

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Conclusions and future work

This contribution addresses the regulatory challenges associated with the implementation of bitstream access services. The models and the corresponding implementation in form of a network design and cost analysis tool forms a framework for future applications for regulatory cost studies. For this purpose the models and tools can be extended and adapted to the national particularities.

The current implementation of the model 12 developed by WIK Consult and the Telematics Engineering Group of the University of Cantabria called TAROCA-BAN 13, allows to study a number of regulatory cost related issues. Among others these comprise of

- optimal design of the network structure and topology, - infrastructure sharing with the PSTN/ISDN, - outsourcing of parts of network, - tariff determination by element based cost analysis, and - break even point cost analysis.

Future work will consider with more details the modelling of the integration benefit under different broadband access networks quality of service management strategies and various service classes (GARCIA & HACKBARTH, 2006). Also the evolution path from a pure ATM broadband access network over a ATM, Ethernet hybrid broadband access network up to pure Ethernet broadband access network and its consequence to the network design and cost model have to be considered (ALCATEL, 2005).

12 This tool is specified and implemented under a complete modular concept using an object orientated approach. This allows a strong reuse of software parts in different tools and decreases significantly the time of the software design. Algorithms are completely separated from the graphical interface which allows an easy data exchange with the user. 13 TAROCA means Traffic Routing and Cost calculation. WIK-consult in collaboration with GIT-UC have already developed under this label a set of forward looking long run average incremental cost tools for regulation of interconnection prices in PSTN/ISDN and GSM mobile network (HACKBARTH, RODRIGUEZ, GONZALEZ & KULENKAMPFF, 2002; HACKBARTH, RODRIGUEZ & KULENCAMPFF, 2005).


References

AKIMARU H. & KAWASHIMA K. (1999): Teletraffic, 2nd ed., Springer, Berlin.

ALCATEL (2005): "Enabling Profitable Carrier Ethernet Services", white paper. www.alcatel.com

Bundesnetzagentur: - (2005): An analytic cost model for broadband networks, Bonn. http://www.bundesnetzagentur.de/media/archive/2078.pdf - (2007): Regulierungsverfügung/Beschluss wegen der Auferlegung von Verpflichtungen auf dem Markt Nr.12, "Breitbandzugang für Großkunden", der Märkte-Empfehlung der EU-Kommission (IP-Bitstrom-Zugang) Bonn. http://www.bundesnetzagentur.de/enid/7043e18f55ceebd16d4568680fca3ed4,0/Regulierungsverfuegung/Regulierungsverfuegung_BK_4a-_6/_39_2yg.html

CRAWFORD M. & VRHEYE D. (2003): "Residential Service Aggregation in the second mile", Alcatel Telecommunication Review, 2nd Quarter.

COURCOUBETIS C. & WEBER R. (2003): Pricing Communication Networks: Economics, Technology and Modelling, Wiley & Sons, March.

ERG (2004): (03) 33rev1, ERG common position – adopted on 2nd April 2004.

EURO-NGI (2003): Deliverable D.JRA. 6.2.1. Description of the Current Cost and Payment Models for Communications Services and Networks. Network of Excellence EURO-NGI. http://eurongi.enst.fr/archive/127/DWPJRA621.pdf

GARCIA A. & HACKBARTH K. (2006): "Next Generation IP Access Networks planning", WSEAS Transactions on Communications, Issue 3, Vol. 5, March.

HACKBARTH K., RODRIGUEZ DE LOPE L., GONZALEZ F. & KULENKAMPFF G. (2002): "Cost and Network models and their application in telecommunication regulatory issues", Proceedings of ITS-2002, Madrid, September.

HACKBARTH K., RODRIGUEZ DE LOPE L. & KULENCAMPFF G. (2005): "Techno-Economical Study on Cost Modelling for Bitstrean Accesss Services", Proceedings of HETNET's 2005, Bradford.

HACHBARTH K., PORTILLA J. A. & DIAZ C. (2005): "Cost models for Telecommunication Networks and their application to GSM systems", in M. Pagani (Ed.), Multimedia Technology and Networking, Idea Group Reference.

ROBERTS J.W. (Ed.) (1992): Performace evaluation and design of multiservice networks, COST 224 Final Report, EUR 14152 EN, Luxembourg.

MMR (2003): Bistream Access in the New EU Regulatory Framework, MMR 10/2003 Beck, Munich.

Competition in International Mobile Roaming: Alternative Clusters (*)

K.R.Renjish KUMAR & Heikki HÄMMÄINEN Networking Laboratory, Helsinki University of Technology,

Espoo, Finland

Abstract: Traditionally, international mobile roaming (IMR) has generated significant revenue for the operators. The business model has also remained untouched or unchallenged until recently. The traditional bilateral models are today giving way to clusters. The emergence of Internet Protocol (IP), in recent years, has also enabled the possibility of alternative business models and new entrants, acting as complements or rivals to the existing roaming model. In this paper, we identify three different types of IMR clusters and their characteristics. Strategies for competition and cooperation among clusters are discussed. Analysis is based on the existing alliances in Europe. We analyze the impact of competition on a traditionally dominant mobile operator from the member of an emerging alternative cluster type, in terms of the amount of IMR revenue, subscribers and traffic generated and migrated. Our analysis shows that the bit-pipe access network pricing is one of the key factors in providing affordable international roaming services. Notably, the emergence of alternative clusters can create competitive pressure on traditionally dominant mobile operators leading to a considerable reduction in existing tariffs. Regulators should take note of the changing dynamics of IMR market and support the emergence of alternative clusters in order to foster growth and competition for the benefit of customers. Key words: International mobile roaming, clusters, alliances, convergence, roaming alternatives, emerging business models.

nternational mobile roaming, an integral feature of mobile communications, generates 15 to 25% of a mobile operator's revenue, according to some estimates (INTUG, 2003). There were approximately

207 million roaming subscribers in the year 2004 (with global revenue of USD 78.5 billion) and this is expected to grow to 850 million by the year 2010 (Informa, 2005).However, the roaming industry has seen very little change in the last decade, with respect to the business models and the stakeholders involved in provisioning of the service. Traditionally, it has been

I

(*) An earlier version of this paper titled "International Mobile Roaming Alternatives: An Impact Analysis" appeared in the proceedings of WTC (WTC/ISS/ISSLS) conference, 2006.


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in the realm of licensed mobile network operators under the umbrella of GSMA (GSMA, 2006). This arrangement has led to regulatory issues, such as lack of competition, leading to high retail prices, (SUTHERLAND, 2000) particularly within the European Union (EU), resulting in investigations conducted by the National and European regulatory authorities. Notably, the failure of sector-specific regulation and competition law in the case of IMR is reflected in the recent decision of the European Union to establish price cap regulation in both wholesale and retail tariffs (LESCOP, 2007).

In recent years, IMR industry has experienced evolution in business relationships primarily due to the recent emergence of IP as the de facto protocol for data transmission over mobile networks, enabling new packet-switched roaming architectures based on GPRS Roaming eXchange (GRX). Traditionally the dominant circuit-switched roaming model based on a bilateral relationship, both technological and financial? has evolved into a packet-switched hub-and-spoke model. In addition to this, a mandatory separation of network and service operations by regulatory authorities, especially in Europe, has also provided opportunities for third-party service providers to enter into the IMR market. Voice over IP (VoIP) has gained wider acceptance among consumers and corporate customers in recent years. For instance, a recent market survey (Ofcom, 2006) by Ofcom shows that more than 50% of the customers in different age and technology ownership groups are aware of this alternative option. VoIP services provide benefits to customers and service providers alike with regards to cost savings. On the other hand, traditional IMR services lack transparency in retail pricing information. Customers avoid using IMR services due to the high retail IMR prices and lack of transparency (FCA/FICORA, 2005). Therefore, customers may have a motivation to migrate to a suitable alternative which can substitute the traditional IMR model. A majority of the international roaming revenue still comes from voice calls and SMS. Data and content provisioning for roaming subscribers are at the very early stages and the progress is hindered due to technical issues such as interoperability and business issues such as high roaming data tariffs. Hence, operators have every motivation to maintain their voice revenue stream, at least in the near future until they substitute their voice revenue with data and content revenue.

Competition from roaming alternatives can therefore be of major concern to operators. We view the IMR business evolution in three stages (POHJOLA et. al., 2004; KUMAR & HÄMMÄINEN, 2004), namely, 1) Bilateral, 2) Cluster 3) Centralized. In recent years, the second stage of IMR evolution, i.e., cluster is taking shape with the formation of alliances such as

K.R.R. KUMAR & H. HÄMMÄINEN 153

Freemove (Freemove, 2007). Note that the term cluster mentioned in this paper has a meaning closer to the concept of alliances discussed in some of the existing literature (GULATI, 1998; RIECK et. al., 2005; SAXTON, 1997; IRELAND et. al., 2002).We identify three different types of clusters as the IMR market evolves. While two of the types consist of mobile operators with traditional business model, the third type, an emerging cluster, consisting of independent third party service operators with a business model that takes advantage of the separation of service and network, might pose as a credible alternative. One such example of a member of the emerging alternative cluster is Skype (Skype, 2007). The existence of high retail tariffs and the complexity in tariff plans for international mobile roaming can act as drivers for migration of IMR customers to low-cost alternatives such as the Skype solution. According to a study (Evalueserve, 2005), mobile operators can lose up to 6.8% of their revenues due to this migration of roaming subscribers by the year 2008. The greatest impact is expected to be on European mobile operators. The mobile operators themselves have recognized this development (Telefonica, 2005).

In this paper, we first analyse the second stage of IMR evolution, i.e., clusters. Different types of IMR clusters and their characteristics are discussed in the following section. Different scenarios of competition among clusters are analyzed in the section after. Finally, an impact analysis of competition from a member of an emerging cluster on traditionally dominant mobile operator is analyzed quantitatively and qualitatively in the following sections, followed by conclusions in the last section. Analysis of the cluster, in this paper, is from the view-point of the IMR industry and market.

Cluster formation

As mentioned in the previous section, IMR industry is currently undergoing changes in technology and business models. In (POHJOLA et. al., 2004; KUMAR & HÄMMÄINEN, 2004), we identified three stages of IMR evolution. In this paper, we identify three different types of clusters, which belong to the second stage of this evolution.

The overall proposed evolution of IMR relationships is illustrated in figure 1. Each of the clusters emerging in the IMR market today has its own characteristics, competing with other clusters, using different strategies.

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Figure 1 - International Mobile Roaming evolution

Type I Type II Type III

Bilateral Cluster Centralized

The classification is made primarily based on the type of operators participating in each cluster. The scope of our analysis is on clusters from the view-point of IMR industry. However, it is worth mentioning here that besides IMR, other drivers for the formation of clusters include an interest to increase the bargaining power for acquiring handsets, networks and services, offering seamless services to customers etc.

The three types of clusters identified from the view point of IMR are described as follows:

Type I: This type of cluster is represented by a single operator (owning both the service and network operations) with multi-national presence based on its own subsidiaries (having a controlling stake with investments on networks and services). The operator may also have some strategic or equity-based partnerships. The combined model for Type I is illustrated in figure 2

Figure 2 - Type 1 cluster model

Parentoperator

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The number of geographical markets covered by such an operator is higher than those by any other single operator. One such example of this cluster is the Vodafone group (Vodafone, 2007). Type I cluster structure follows a combination of portfolio and franchise model, i.e., the parent operator which controls the cluster maintains a portfolio of subsidiaries


(portfolio model) while having strategic and equity-based relationship with partner networks (franchise model).

Type II: This type of cluster is represented by operators, having typically medium size and position in one or more geographical markets, forming cooperative alliances in order to fulfill objectives such as increasing the international footprint for their subscribers, seamless service provisioning across multiple markets and competing with other operators and clusters such as Type I. Note that each of the members in such an alliance is not large enough to be able to compete alone with Type I cluster. FreeMove alliance is one such example from Europe.

Figure 3 - Type II cluster model

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The cooperative model for Type II is illustrated in figure 3. Control within the cluster is shared among the members through the implementation of a cluster core.

Type III: This is an emerging cluster type, in its early stages of development, formed as a result of convergence, based on the separation of network and service operations. In this cluster, an independent service operator with no access networks of its own will align with other mobile or unlicensed network operators or access aggregators in order to offer seamless services to its own as well as partners' subscribers in multiple markets.

Currently, there are very few examples of such a cluster. One such example is the partnership of Skype with wireless network aggregators such as Boingo (BOINGO, 2007) and The Cloud (CLOUD, 2007) as well as handset vendors such as SMC (SMC, 2007) in order to offer its subscribers' access to WLAN hotspots across the world. This example is interesting since Skype has no specific home market of its own and therefore is a truly

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global service operator unlike other operators in Type I and Type II clusters. Figure 4 illustrates the Type III model.

Figure 4 - Type III cluster model

SO

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In figure 4, the independent service operator (SO), which do not own its own networks, forms a vertical alliance with different players in order to offer services to its customers. By vertical alliance, we mean that the role of each of the players in the cluster is complementary to each other and therefore, the ability of these players to offer services independently is quite low. This can be considered also as the strength of this cluster since the different players offer capabilities that are complementary to each other thereby reducing any conflict of interest. Type III clusters may also evolve horizontally by SOs having alliances with other SOs resulting in super-clusters, i.e., larger cluster consisting of multiple clusters. Thus, the relationships in Type III cluster are different from those in Type I and II. SO requires some key enablers to offer services to its customers. Some of these key enablers are as follows:

• The access aggregator or broker who aggregates the networks is essential to reduce the transaction cost involved in roaming agreements and settlements between service and network operators.

• A trusted charging and billing provider is key to offering seamless service for customers. In recent years credit card companies such as Master Card and Visa, as well as online payment companies such as Paypal have emerged as key players in this role.

• Mobile handset vendors are crucial in offering multi-mode (Cellular + WLAN/WiMAX) support for handsets at affordable prices to increase the penetration of services.


Besides, the key enablers, the pre-requisite for the emergence of Type III as a worthy competitor to Type I and II clusters is the availability of low cost wide and local area network access at affordable prices to customers.

To understand the structure of these clusters, we identify some key factors that can influence their formation and functioning. These factors are defined as follows:

• GSMA membership: This factor determines whether an individual member of the cluster is a full member of GSMA, the global association for operators who own mobile spectrum license.

• Member size: This factor defines the size of individual members in the cluster. The size can be assessed as large, medium or small depending on their market capitalization and/or number of subscribers.

• Cluster ownership: This factor defines the degree of power concentration in a cluster. This is primarily based on the extent and size of telecommunication assets such as customers, networks and services that each member of the cluster has in different markets. The degree of power concentration can be assessed as single operator owned, dominant operator owned, or distributed ownership. The rate of scaling up the telecommunication assets or activities of the cluster such as management and rollout of networks and services, acquiring and managing customers etc may depend upon this factor. The degree of dependence of members of the cluster on each other also depends on the type of cluster ownership. The degree of cluster stability also depends on the type of cluster ownership. A cluster with single operator ownership or an equally distributed ownership will have the highest level of stability.

• Cluster objectives: This factor defines the main objectives of the cluster. These objectives can be to have collaboration either in technology, marketing or both.

• Synchronization of objectives: This factor is crucial in deciding the future course and longevity of a cluster.The greater the degree of synchronization of objectives, the stronger will be the cluster. The degree of synchronization can be assessed as high, medium or low.

• Cluster head: This factor defines the player in a cluster who has direct relationship with the end-user of the IMR service and is the front-end or representative of the cluster to the external world.

• IMR business model: This factor defines the business models adopted by the IMR value network in each of the clusters. The business models are

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either traditional (vertically integrated) or emerging (horizontal, i.e., separation of service and network).

Table 1 - Qualitative assessment of cluster types

Key factors Type I Type II Type III (e.g.: Vodafone group) (e.g.: Freemove ) (e.g.:Skype alliance) GSMA membership

Yes (ownership of mobile spectrum license)

Yes (ownership of mobile spectrum license)

No (do not own mobile spectrum license)

Member size Large Medium Small Cluster ownership Single operator Dominant or distributed Distributed

Cluster objectives Collaboration in Technology and Marketing

Collaboration in Marketing

Collaboration in Technology

Synchronization of objectives High Medium to low High Cluster head Parent operator Core SO IMR business model

Traditional (Vertically integrated)

Traditional (Vertically integrated) Emerging (horizontal)

To analyze how these factors influence cluster formations that distinguish them from each other, Table 1 illustrates the qualitative assessment of each of the clusters with respect to these key factors. The assessment is based on the observation of each cluster type example in European markets. Type I is represented by the Vodafone group, Type II is represented by Freemove alliance and Type III is represented by Skype alliance (includes other key enablers such as Boingo Wireless, SMC networks and The Cloud). Type III clusters have some positive attributes when compared with the other cluster types. However, note that Type III is an emerging cluster which requires some key enablers (shown in figure 4) in order to become a credible threat to other clusters. We discuss the possible scenarios for competition among the clusters in the following section.

Cluster competition

Cluster competition has emerged as an active area of research in management (GOMES-CASSERES, 2006; PEKAR, 2001) .One of the primary goals of cluster formation is to compete with other operators by offering affordable and seamless service to its customers thereby distinguishing itself from other competitors.

However, cooperative behavior among the clusters is also a possibility, depending on the degree of synchronization of objectives, in different areas, with other clusters. From an IMR view-point, we identify some such areas for


cooperation and competition among the clusters as illustrated in table 2. Next, we identify some of the possible scenarios for Type III cluster's evolution and corresponding impact on the cluster competition landscape.

Table 2 - Areas for cooperation and competition among IMR clusters

Access technologyGeographic region

ProductCustomer segment

Access technologyGeographic region

ProductCustomer segment

•Voice•Video•Messaging•Content•Data

•Wide area networks•Local area networks•Broadband networks

•Pan- European•Northern Europe•Eastern Europe•Southern Europe•Western Europe

•Consumer•Business

Figure 5 - Homogenous Super-cluster

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Scenario I: Homogenous Super-clusters

In this scenario, Type III cluster will evolve vertically and horizontally, by aligning with other similar Type III clusters creating a homogenous super-

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cluster. An illustration of the homogenous super-cluster is presented in figure 5. This would lead to an increase in the value of the cluster, giving each player additional value to participate and effectively compete with Type I and Type II clusters in one or more of the areas (shown in table 2). Technical and financial interoperability between SOs and other horizontal level players will be key enablers in the emergence of this cluster.

Scenario II: Heterogenous Super-clusters

In this scenario, Type III cluster will evolve by aligning with mobile operators who may not be interested or able to join Type I or Type II clusters, thus forming a heterogenous super-cluster. Such operators include the traditional mobile operators with own networks or those without it (such as MVNOs). This means that the characteristics of the players at the horizontal level will be heterogenous. An SO will have relationship with a mobile operator, giving it an opportunity to offer IMR services over the wide area mobile network. Such a relationship can be selective and limited to the areas of cooperation (shown in Table 2) in order to avoid any cannibalization of revenue for the mobile operator. The separation of service and network by the adoption of IP as the network layer protocol and interoperability will be key enablers in the emergence of this scenario.

Scenario III: Cooperation

The clusters may not always be in a competing mode, especially those who do not have conflict of interest in the different areas (shown in Table 2). Such clusters may adopt a cooperative strategy towards other clusters. In other words, Type III may cooperate with Type I and/or Type II to create a cooperative model. For instance, Type III will focus on consumers only due to the lack of certain enablers such as security essential for business customers, while Type I and Type II will focus on business customers.

Figure 6 - Cooperation model (Centralized model)

Type I Type II

Type III

Centralized

Aligning with other types of clusters will enable the utilization of complementary capabilities resulting in value addition for players in every


cluster involved. Such a cluster alignment may eventually converge towards a centralized model (as shown in figure 1). An illustration of this model is presented in figure 6. Note that Type I and Type II are clusters consisting of GSMA members only whereas Type III is a non-GSMA cluster. Therefore, the formation of a cooperation model would represent a combination of GSMA and non-GSMA members. Additional effort is required in order to support technical and financial interoperability among these clusters in this scenario.

Literature on alliances, in sectors such as airlines and military, has noted the impact of alliance creation on wars and competition (SMITH, 1995; KLEYMANN, 1999; LEEDS & ANAC, 2005). A similar impact is also expected in the telecommunications sector. Since competition or lack of it, is an issue currently being addressed by the regulatory authorities, regulators should encourage Type III clusters which might help to solve the competition issues in the IMR market today. However the level of competition or monopoly depends on the nature of alliance formation. This has to be carefully studied by the operators as well as regulators. The impact of cluster formations on individual operators who are unable or uninterested to be part of any of the cluster types will require special attention from the regulators. Operators will have to make the decision on whether to join any of the cluster types depending on its future strategies (pull) or with the expression of interest from one or more clusters (push).

In the following sections, we assess the impact of Type III cluster on a dominant mobile operator. To begin with, we discuss the emerging alternative Type III cluster example considered for our analysis.

Emerging alternative cluster example: Skype alliance

The emerging alternative cluster (Type III) for our analysis is represented by the Skype alliance. We would like to reiterate here that the Skype alliance is only considered as a representative of many such potential roaming alternative clusters and the analyses in this paper are applicable to any other such alternatives. To make our point of representation clearer, we have used the term "Skype-like" in the following sections. We have considered Skype as a representative example as it has been quite successful as a VoIP service until now, mainly as a domestic alternative to voice calls. Skype user penetration as of April 2005 in OECD countries (OECD, 2005) shows a

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major increase on a year-on-year basis. This penetration is expected to grow in the future with increasing broadband penetration (OECD, 2006). From a roaming perspective, we consider three applications of Skype (SkypeIn, SkypeOut and Skype Zones), bundled together, as the Skype roaming suite, a potential alternative to traditonal operator-based roaming. We consider Skype's customer base, emergence of IP and lower cost service as the three main drivers for making it a potentially successful alternative to mobile roaming.

Roaming typically occurs in two different levels: 1) Service 2) Access network. In the case of the traditional operator-based mobile roaming model, both service and access network are provided by the same home operator (vertically integrated model). The lack of separation between the service and access network level leads to dominance of the operator over its subscribers, which is the case today. However, Skype with its roaming service suite solves this problem by decoupling the service and the access network. At the service level, Skype offers its SkypeIn and SkypeOut service while at the access network level, it offers the Skype Zones that can be accessed at affordable rates wherever present. Alternatively, the user can also use any other WLAN hotspots available at affordable rates. The service also works independent of the access technology, thereby eliminating the dominance of a specific access network technology. Figure 7 illustrates the mapping of the Skype roaming suite to the traditional operator-based roaming service.

Figure - 7 Mapping of Skype roaming suite to traditional roaming service

SkypeOut

SkypeIn

Call-HomeIn-country

Country-to-country

Call-Received

SkypeZone/ Any other access Operator provisionedAccess network Access network level

Service level

Skype roaming suite Operator-based roaming

SMS and MMS services can be substituted by instant messaging in Skype. One of the key features of the Skype roaming suite is that users can be reached using E.164 numbers. Calls can also be made to subscribers of both mobile and fixed-line networks.


The recent initiatives on providing free or low-cost hotspot access usage via services such as FON (FON, 2007) and announcements of greater collaboration between handset vendors such as Nokia with VoIP service providers such as Google (Google, 2006) and Skype (Nokia, 2007) increases the feasibility of such emerging alternative clusters.

Emerging business models

The Skype-like roaming suites can follow two kinds of horizontal business models, each of which are completely different from the traditional bilateral model. These emerging models are:

• Standalone model: In this model, a Skype-like provider can offer its solution using the visited network (independent of access technology) as a bit-pipe. Here, a Skype-like provider relies on its own subscriber base and may not have a revenue sharing agreement involved with the home or visited mobile operators. As an example, Skype Zone currently offers a low-cost access network based on the WLAN technologies such as 802.11a,b,g. However, in future, this can be technology independent. The standalone model is similar to the one illustrated in figure 4.

• Heterogenous Super-cluster/Cooperation model: In this model, a Skype-like provider may enter into agreements with either home or visited mobile network operators for providing its solution. The model is similar to scenario II and scenario III in the third section. Here, a Skype-like provider has the advantage of using operator's subscriber base. However, the revenue generated is shared with the home and/or visited operator. Skype's recent agreements with German mobile operator E-plus and Hutchison's "3" are some such examples. However, in this case, the subscribers of the operator are tied to the visited network access partners of the home operator.

The key difference between the two business models is in the relationships that exist between the Skype-like provider and customer, i.e., a direct relationship with the customer (standalone model) and an indirect relationship with the customer, through the mobile operator (heterogenous super-cluster/cooperation model). The standalone model looks more feasible at least until mobile network access prices are considerably reduced and/or operators do not feel the threat of roaming revenue cannibalization from such alternatives.

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Impact analysis

In this section, we consider the impact of Skype-like roaming suite on traditionally dominant mobile roaming operator business, quantitatively and qualitatively. We begin our analysis with the quantitative measurements of impact. The standalone model of Skype is considered for our comparison. The impact on mobile operator's business is measured in terms of the revenue, subscription and traffic migration to the Skype roaming suite from the mobile operator. We adapted the ECOSYS (ECOSYS, 2007) methodology for our quantitative analysis.

Main assumptions

The home market scenario considered for this analysis is similar to that of a Nordic country, i.e., a developed country with smaller population size and higher mobile penetration. The home mobile operator in focus is an incumbent with a dominant share of the domestic and roaming market. Hence, a roaming market share of 35% is assumed for the operator during the period of study. The home operator maintains the traditional bilateral model, by establishing roaming agreements with its partners (visited operator) abroad for providing roaming services to its customers. For this, an inter-operator tariff (IOT) is fixed for each of the services. We assume a 50% share of revenue as the IOT for each service, both for inbound and outbound roaming. The roaming customers are classified as 1) Consumer 2) Business. Both of these segments can either be an inbound (roaming over the home operator's network) or outbound (roaming over a visited operator's network) roaming customer. Consumers' main motivation for travel is assumed to be leisure. Hence, dual-mode mobile handsets (mobile + WLAN) are the most possible way of accessing roaming services. All the business customers are assumed to carry WLAN-enabled laptop computers.

The market figures in terms of population, mobile subscribers, mobile subscriptions, inbound and outbound roaming subscriptions are shown in figure 8. Here, the number of subscriptions is assumed to be 115% of subscribers (due to multiple handsets or SIMs). The inbound roaming subscriptions are assumed to be twice that of outbound subscriptions. This ratio is based on the tourist statistics of an example Nordic country (Stats, 2007). The growth in roaming subscriptions is assumed to have a CAGR of 26%. This assumption is based on the global growth trends expected during the study period (Informa, 2005).


Figure 8 - Market figures for the model

Market figures

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We expect a greater demand of this nature for international roaming during the study period due to an increase in travel, especially among consumers, worldwide (WTO, 2005) and greater purchasing power among consumers, especially among emerging markets (increase in inbound roamers to Europe) such as India and China and increase in intra-regional travel within Europe. Pre-paid and inter-technology roaming are some of the other drivers for customer growth in future. A linear growth model is assumed in order to simulate the forecasted linear growth in international travel (WTO, 2007) for the period of our study (2005-2012). Since international travel is a major driver for roaming among all the drivers mentioned previously, we expect a higher correlation with the international roaming demand and hence the linearity. Also note that publicly available information on the existing and future demand of international roaming is very limited which makes it very difficult to predict the actual demand.

The international market for roaming is classified into three zones: 1) Zone 1: Regional countries such as Sweden, 2) Zone 2: Western European countries such as Spain, 3) Zone 3: Other countries, i.e., remaining countries such as the United States. The roaming service segments are classified based on the service termination point: The services can be terminated at home (Call-home), or in the visiting country (In-country), or to a 3rd country (country-to-country (C2C)), or at the roaming subscriber's handset (call-received).Three services that generate the most roaming revenue for operators today are considered for the study: 1) Voice call 2) SMS 3) MMS. SMS and MMS can be classified as data services

Table 3 - Customer distribution

Total Customers Zone 1 Zone 2 Zone 3 Consumers (%) 85 40 35 25 Business (%) 15 40 35 25

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Additional assumptions for customer distribution are presented in table 3. The service usage amount per week i.e., the number of calls and messages sent by a business customer is assumed to be four times that of a consumer. The annual international travel duration of a consumer is assumed to be 4 weeks and for a business user is 12 weeks. Other usage assumptions for our model are presented in table 4.

Table 4 - Usage per service segments

Service segments Call-Home In-Country C2C Call-Received Consumer (%) 80 15 2 3 Business (%) 15 70 5 10

The roaming usage amount considered per week for all the customers is the same as their domestic usage. This assumption helps to identify the maximum impact on the operator in case of migration. However, it has to be noted that in reality, due to higher tariffs, the usage of a service while roaming is much less than the amount of usage of the same service at home. Also, in our model, we assume that consumers will make only 80% of their roaming calls using Skype or any such alternative due to coverage limitations of hotspots vis-à-vis mobile networks. Though, it is worth mentioning here that hotspots are growing rapidly worldwide, especially in Europe and US in particular (Jiwire, 2006).

All the assumptions are made based on inputs from multiple public sources such as regulatory reports, press releases, consultant report extracts and tourism reports (refer to the References section). Any additional assumptions specific to the cases will be mentioned separately. The study period for our analysis is from 2005 to 2012. The case analysis follows.

Case modelling

Migration to Skype-like service by customers with dual-mode handsets

To analyse the impact on traditional operator-model, we consider a scenario wherein consumers and business customers of traditional home operator, with dual-mode handsets (mobile + WLAN interface), migrate to Skype-like roaming suite service in order to save the roaming expenditure. Since the type of access network used is a key factor in reducing the roaming charges, these customers will use Skype Zones or any other freely


available hotspots instead of WLAN hotspots owned by the visited operator. The total roaming subscribers of home operator in the base case or case 1 (without migration) and the net amount of roaming subscribers of home operator as a result of migration are presented in figure 9

Figure 9 - Home operator's roaming subscribers (retained and migrated) Case 2 roaming subscribers

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The Skype-like roaming suite's penetration is limited by the dual mode penetration. The limited coverage of hotspots will impact service usage. The impact of limited hotspot coverage is considered in the model, as discussed above. In our study, all dual-mode handsets of customers are considered to have Skype-like roaming suite installed in order to take the benefits of the alternative option. The result in figure 9 shows that in the next couple of years, migration of business and consumer customers will be limited due to the minor share of handsets enabled with a Skype-like service. However, in the long-run, consumers also will have a major share of such handsets. In other words, the net effect of migration of customers due to these handsets will be of minor significance in the next few years, since dual-mode handset penetrations are expected to be lower. However, towards the end of the study period, the impact of migration on traditional home operator's IMR business is considerable.

Figure - 10 Roaming revenue loss (in %) Case 2: Roaming revenue loss

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Figures 10 and 11 present the results for this scenario in terms of the total revenue and service usage loss experienced by the traditional home operator during the period of study.

Figure 11 - Service usage loss (in %) Case 2: Roaming service usage loss

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The results show that business segment loss in revenue and service usage is much higher than that of the consumers. Voice service experiences the maximum impact among all the three services considered. However, in the initial period of study, impact of roaming alternative is fairly insignificant primarily due to the lower penetration of dual-mode handsets.

Note that the case of business users with laptops migrating to Skype-like roaming suite was not considered significant because even though the majority of business users have the possibility of using their laptops for voice and messaging services while roaming, in reality, they might still prefer using the handsets.

Qualitative analysis

Pricing, area of coverage (AoC), capacity and the quality of experience (QoE) 1 (Nokia, 2004) are the parameters considered for the qualitative analysis.

From the AoC, capacity and QoE point of view, traditional operator-based model appears to be the best choice for customers since the existing mobile access technologies such as GS.

1 Note that QoE is different from quality of service (QoS). QoS is a measure of network related quality (or quality from a network perspective) whereas QoE is a result of the QoS along with other performance factors related to the user experience (quality from an end-user’s perspective) for a service.


Figure 12 - Qualitative analysis summary

Pricing AoC Capacity QoE

Stationary

Mobile Operator-based model

Standalone model

However, it loses out on pricing to the standalone model of Skype-like service. The access network pricing is the primary factor for this difference in pricing. However, the QoE for voice and instant messaging (substitute of SMS and MMS) cannot be guaranteed for a Skype-like service unless provided by a dedicated third-party service provider. All these mean that the potential for maximum impact by Skype-like service is on customers' usage in stationary areas. Figure 12 summarizes our qualitative analysis. Even though, business customers are more likely to use these areas, the lack of QoE in terms of security, reliability and other performance factors of the network might act as an impediment for using Skype-like service unless it provides a secure service tailored for business customers. The heterogenous super-cluster/cooperation model of a Skype-like provider, which can also be considered as a complementary service offer by a mobile operator, doesn't offer any advantage for the customer unless the access network pricing, which is bound to the operator's subscription is considerably lowered from the existing prices.

Conclusions

The industry structure of IMR is experiencing changes due to the emergence of IP-based technologies. In this evolution, three different types of clusters (Type I, Type II and Type III) and the factors defining their individual structures are identified. Type III clusters may emerge into homogenous (with other independent service operators) or heterogenous (with smaller mobile operators or MVNOs) super-clusters with the support of key enablers such as third-party charging and billing providers, handset vendors and access aggregators, creating a viable competitive threat to the traditional IMR clusters.

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Our analysis of the impact of alternative clusters belonging to Type III on traditional operator IMR business provides insights into the expected trends in an operator's roaming revenue, subscribers and their usage levels. The results show that business voice service is the major source of revenue for an operator. The impact on this revenue segment can be higher if dedicated third-party service providers offer specialized services (such as security and reliability) using alternatives such as Skype or if Skype itself caters to the business customer needs. The penetration rates of dual-mode handsets will also determine the impact on the operator. Recently, operators have introduced solutions such as unlicensed mobile access (UMA) (UMA, 2007), also known as Generic Access Network (GAN) (3GPP, 2007) for seamless interworking between the mobile and limited mobility access networks such as WLANs. However, in the case of roaming, the benefit of this service can reach customers if and only if the current tariff plans for WLAN hotspots are considerably reduced. Alternatives such as Skype's roaming suite can act as a catalyst for creating competitive pressure. Also, Type III clusters currently limited only to WLAN hotspots, if extended to any wide-area access technology in the future can change the competition scenarios in international roaming. However, a competitive access network tariff offer together with an ability to provide a single billing interface for both the home and roaming services can give an advantage to operators in order to prevent the churn.

Operators can currently restrict the roaming customers from accessing hotspots or access networks other than the ones provided by their partners, either by not offering dual-mode handsets (in countries where bundling of handsets and subscriptions exist) or using the control mechanism embedded in subscriber's SIM card. However, these measures are unlikely to be ignored by regulatory authorities who have been keen to introduce greater competition in the international roaming market. Regulatory support is essential for the successful emergence of alternative Type III clusters. With an increasing existence of different types of clusters in the IMR market, regulators need to understand the changing landscape of IMR competition, and propose appropriate policies facilitating growth that benefit the industry players as well as customers. This would mean revisiting issues such as the definition of IMR market and enabling favourable wide-area (mobile) network access rights for Type III clusters.


References

Boingo (2007): Boingo wireless. www.boingo.com

Cloud (2007): The Cloud homepage. www.thecloud.net

ECOSYS (2007): ECOSYS project. http://optcomm.di.uoa.gr/ecosys/papers.html

Evalueserve (2005): Impact of Skype on Telecom Service providers, Evalueserve report.

FCA/FICORA (2005): Mobile roaming usage abroad, FICORA and FCA survey. http://www.ficora.fi/englanti/document/Roaming2005_eng.pdf

FON (2007): FON homepage. http://www.fon.com/en/

Freemove (2007): Freemove alliance homepage. www.freemovealliance.com

GOMES-CASSERES B. (2006): "How Alliances Reshape Competition", in Shenkar O. & Reuer J.J. (Eds), Handbook of Strategic Alliances (pp. 39-53), SAGE publications.

Google (2006): Nokia adds Google Talk. http://www.lightreading.com/document.asp?doc_id=94968

GSMA (2006): GSM Association homepage. www.gsmworld.com

GULATI R. (1998): "Alliances and Networks", Strategic Management Journal, 19, pp. 293-317.

Informa (2005): Global Mobile Roaming, Informa Telecoms and Media report.

INTUG (2003): The wholesale national market for international roaming; possible remedies. http://www.intug.net/submissions/ERG_roaming.html

IRELAND D., HITT M. & VAIDYANATH D. (2002): "Alliance Management as a Source of Competitive Advantage", Journal of Management.

Jiwire (2006): Jiwire press release. http://jiwire.com/press-100k-hotspots.htm

KLEYMANN B. (1999): "Future Developments in the Structure of Airline Alliance Networks". http://www.touchbriefings.com/pdf/12/avia031_r_kleymann.pdf

KUMAR K.R.R. & HAMMAINEN H. (2004): "Assessing the Value of Roaming over Mobile Networks", ITS 15th Biennial Conference, Berlin, Germany.

LEEDS B.A., & ANAC S. (2005): "Alliance Institutionalization and Alliance Performance", International Interactions, 31, pp. 183-202.

LESCOP D. (2007): "Regulating International Roaming Charges: Why Less When More is Possible?", COMMUNICATIONS & STRATEGIES, 66, pp. 159-166.

Nokia: - (2004): "Quality of experience (QoE) of mobile services: can it be measured and improved?", Nokia White Paper. - (2007): Skype for the Nokia N800 Internet Tablet. http://www.skype.com/download/skype/mobile/n800/

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OECD: - (2005): SourceOECD. http://fiordiliji.sourceoecd.org/pdf/d12.pdf - (2006): OECD Broadband Statistics. http://www.oecd.org/sti/ict/broadband

Ofcom (2006): Regulation of VoIP services, Ofcom consultation report. http://www.ofcom.org.uk/consult/condocs/voipregulation/voipregulation.pdf

PEKAR P. (2001): "Alliance Enterprise Strategies Destroying Firm Boundaries", in McKnight L.W., Vaaler, P.M. & Katz, R.L. (Eds), Creative destruction, Business survival strategies in the global internet economy, pp.119-144, Massachusetts Institute of Technology.

POHJOLA O.P., KUMAR K.R.R. & HAMMAINEN H. (2004): "Roaming Dynamics in GPRS and Beyond: Options and Strategies", Networks, Vienna, Austria.

RIECK O., YINZHI C., HABIB H., & JUNZHENG (2005): "Alliances of Networks and Networks of Alliances: International Cooperation in Mobile Telecommunications", ITS 16th European Regional Conference, Porto, Portugal.

SAXTON T. (1997): "The Effects of Partner and Relationship Characteristics on Alliance Outcomes", The Academy of Management Journal,Special Research Forum on Alliances and Networks, 40, pp. 443-461.

Skype (2007): Skype products. http://www.skype.com/products/

SMC (2007): SMS Networks homepage. www.smc.com

SMITH A. (1995): "Alliance Formation and War", International Studies Quarterly, 39, pp. 405-425.

Stats (2007): Statistics Finland, Transport and tourism. http://www.stat.fi/tup/suoluk/suoluk_liikenne_en.html

SUTHERLAND E. (2000): "International roaming charges: Over-charging and Competition law", Telecommunications Policy, 25, pp. 5-20.

Telefonica (2005): Telefonica's response to ERG. http://www.erg.eu.int/doc/publications/consult_wholesale_intl_roaming/wir_telefonica.doc

UMA (2007): "Unlicensed Mobile Access (UMA)". http://www.umatechnology.org/overview/index.htm

Vodafone (2007): Vodafone group homepage. www.vodafone.com

WTO: - (2005): World Tourism Organization indicator. http://www.world-tourism.org/facts/eng/pdf/indicators/ITA_purpose04.pdf - (2007): "World Tourism Organization 2020 Vision". http://www.world-tourism.org/facts/eng/vision.htm

3GPP: - (2006): "IP Multimedia Subsystem (IMS)", Release 7, 3GPP TS 23.228. - (2007): "Radio Access Netwok; Generic Access to the A/Gb interface", Release 7, 3GPP TS 43.318.

Features

Regulation and Competition

Firms and Markets

Technical Innovations

Public Policies

Use Logics

Book Review

Firms and Markets

New Business Models: the Theatre of Ubiquity

Henri TCHENG, Isabelle DENERVAUD & Jean-Michel HUET BearingPoint

ew economic models have gradually risen arisen, a few years after the Internet bubble burst. In comparison with the first wave (1999-2000),

three differences are noticeable: the scale of the phenomenon (one billion internet users were reached at the end of 2005); then the spectacular success of new services constituting the "web 2.0" (for instance, MySpace, a blog site, has become the second most visited site in the world after Yahoo and ahead of Google) and finally the setting up of genuinely different economic models. The latter phenomenon is especially of interest. As opposed to the early days of Internet that encompassed conventional B-to-C (business-to-consumer) or B-to-B (business-to-business) distribution models with the recognized virtues of dematerialized content, today new business flows rise, coming from the consumer: C-to-C (consumer-to-consumer) and C-to-B (consumer-to-business) distribution models.

N

By analogy with Jean-Paul Sartre's Huis clos, Mrs Smith, loving attending theatre plays, lives one night through a puzzling experience. Sitting on the front row, she notices that members of the audience have gone on stage during the play and have replaced the actors. Not approving of this new artistic style, she decides to leave. On her way out, she becomes fearfully aware of what is happening: not only are these new actors simultaneously on stage and spectators but they are also running the cash desk and taking charge of security outside the theatre. Mrs Smith's surprising experience is in fact experienced by many of our contemporaries with new economic models and new customs enabled by and developed with numeric services.


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A three-step sequence can thus be identified following the theatrical analogy: firstly, the enhancement of conventional economic models by a stronger presence of the audience, then the reversal of models by members of the audience themselves who become actors and finally the establishment of a "theatre of ubiquity", where everyone is as much actor as spectator.

The audience is much more present: Enhancement of classic economic models

And yet the rules of the game were so simple! Companies were naturally monitoring their economic models; some were positioned as B-to-B players, others as B-to-C. B-to-B actors put an emphasis on audience, direct marketing, customer databases as well as inter-company agreements. B-to-C players were focusing on products and services provided to the end customer. In both cases, customers were end-of-the-line spectators, their role was limited in what was written or produced. They were consumers.

However, the rise of Internet is quite disrupting these rules: conventional business flows (B-to-B and B-to-C) are being reinforced by dematerialized content and service and by the development of related uses, revolving around three dimensions.

The first dimension is the most historical: Internet has become a new distribution / commercialisation channel. One of the most striking examples has been the travel industry. In 2005, online tourism has represented 45% of the total turnover of online trade. It is no longer necessary to book through traditional agencies. Moreover, traditional players that are usually positioned upstream to agencies (transport, hotel, etc.), also use internet to promote their service or partnerships with other professions.

The second dimension, surely the best known, relies on the fact that the customer is increasingly at the heart of concerns: marketing becomes targeted, modular and customised. On the one hand, the customer acquires a form of bargaining power; tools such as blogs, forums and recommendation sites give the former spectator access to more information, in particular the purchasing experience of other customers. New websites have entered the market, positioned on offering comparison of products and prices: those influence the customer behaviour considerably.

H. TCHENG, I. DENERVAUD & J.M. HUET 177

On the other hand, companies capitalize on and exploit better and better aggregated information on the various market segments and on the customers they address. As soon as the guest is logged in on e-commerce sites, it is possible to know his or her previous purchases, to cross information with data about other customers and thus promote the products/services which should be of interest to him/her. Amazon introduced the idea with the e-commerce wave back in 1995. It is now fully industrialized.

Furthermore, Internet provides companies with more effective and relevant advertising tools. For instance, e-mailing virtues are numerous as compared to traditional mailing campaigns: "how many e-mails have been read?", "to which message did the customer react to?", "Which advertisement sparked off the purchase?", etc.

Finally, commercialisation over the internet opens up considerable opportunities in terms of offering diversity and modularity. The example of Dell illustrates this development. Nowadays, customers can choose one-by-one the various parts of their computer and order a tailored product.

The third dimension is the most recent: the web introduces evolution in Internet users' behaviour, allowing spectators to become an opposition force. On the one hand, the development of the Internet is progressively reforming the intermediation role ("disintermediation"): some commercial structures are set up (like the main auctions on the basis of CVs or inverted auctions in general, etc.) that bypass conventional economic models. This phenomenon already affects the cultural goods industry which is completely reviewing its economic models moving from an access model to an audience model

Spectators become players: model reversal

If B-to-B and B-to-C models are impacted by the web, the real turning point lies in the rise of C-to-C and C-to-B models.

In the first C-to-C case, the major issue for companies is to value and monetize person-to-person exchanges. Today, being connected with the right person at the right time has a price, as demonstrated by the success of various new entrants on the world wide web: Meetic (website on which men pay several euros to meet the woman of their life), MSN (instant messaging system allowing users to communicate free of charge, users who remain

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connected several hours a day, creating a community/audience which MSN can promote to advertisers), Ebay (trusted third parties offering users to sell online their own products for a commission received by Ebay) or live small ads sites.

Another issue is developing applications allowing users to value and monetize their own personal expertise such as translation services, cooking support, IT advice or mathematics lessons. Several companies have developed such a positioning, providing "Audiotel" type services on the web. Pioneering players like Ether offer a prepaid telephone number behind which their users get their own line, through which they can provide individuals with their services. The user experience is simple: customers of these new suppliers call this number; Ether calls the supplier and then connects the two players. The service is managed online; exchange of the service remains physical (each user, customer or supplier has his/her own phone).

JyvePro and Wengo have also launched their service. These two players, like Ether, offer users the opportunity to create a voice service and sell it to other users. But they provide their customers with dedicated telephony software to use the service. Thus, an end-to-end service is provided to the customers, from the creation to the sale and completion of the service, including promotion. Remuneration of both companies is simple: they perceive a commission fee on the effective transactions between users.

The C-to-B model goes even further. Take the example of web 2.0, which follows three major trends in the monetisation of exchanges.

Content auto-production: The most well-known dimension of web 2.0 is represented by blogs and, more broadly, content auto-production. This flourishing phenomenon is constantly growing and is reaching a spectacular scale in terms of usage: more than three million French blogs are identified on the web.Today the "Blogs" phenomna is given a lot of media coverage. Moreover, free software and open source communities are enablers for content auto-production, with, for instance, the development of "open publishing" contents and other open encyclopaedias. Thus, Internet users can now consult more than 1,500,000 articles on English-speaking Wikipedia.

Sharing applications: Sharing applications are another feature of C-to-B exchanges which have known quite important media coverage. In this respect, peer-to-peer for music and other cultural content constitutes, financially speaking, a significant but not the most important example. The


major economic issue deals with the sharing of computer calculation power. Not to mention "SETI@home", a Research project on Extraterrestrial Research or Geno@home for the Téléthon in France, but also the sharing of calculation power for pharmaceutical research, for development of biotechnology and nano-technology, insurance probabilities or financial trading tools represent a market worth several billion dollars.

Upward innovation: Many companies found their development on so-called "downward" innovations, initiated "from the top" (often initiated by their R&D department). Since a few years ago, some significant changes in communication behaviour have occurred "from the bottom" through cooperative processes bringing together volunteer user networks. The development of the cooperative and open production model of free software is certainly the most emblematic and effective form of so-called "upward" innovations. The choice between upward and downward innovation is structuring: in the second case, intellectual property encourages innovation insofar as it allows a temporary monopoly. However, in this model, excessive protection of the first inventor could strongly reduce incentive for the following innovations. In the case of "upward" innovation, the reputation enjoyed by contributors is a genuine incentive to innovation; moreover the increase in the potential number of contributors increases the probability of later innovations.

Spectators are actors and spectators: the phenomenon of ubiquity

The analysis of "C-to-C" and "C-to-B" business models illustrates both the emergence of these practices but also their economic potential. Although these models need to be stabilized, they illustrate a fundamental trend that goes far beyond economic models or value chain evolutions. The customer is no longer simply the "king" or "at the heart" but is the initiating point of new business flows (C-to-C, C-to-B) or even of innovating processes (upward innovation). Companies are therefore in this way strongly impacted and no longer really control what was their prerogative: control of business models.

Over and above the foreseeable emergence of different economic models, the internet era has opened a digital revolution which reveals new perspectives and upheavals. Foremost, our relationship to time and space is modified.

Firstly, individuals reinvent their relationship with time. Days are no longer twenty-four hour long! Today, anyone can do several things at the

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same time… watch TV while shopping on the Internet, have a phone conversation while chatting on their PC or swapping SMSs and MMSs with friends. The conventional definition of leisure time takes on a dual dimension through people's newly found ability to carry out several activities at the same time. Thus, Europeans spend around 17 hours and 48 minutes watching TV per week (+ 15 minutes in 10 years) and 10 hours 48 minutes on the internet (+10 hours and 35 minutes in 10 years). The spectacular arrival of the Internet in Europeans' lives was not detrimental to TV, even if the Internet is used more often than TV is watched (as is the case for 15 to 25 year olds in the USA). This new relationship individuals have with time is one of the factors that call into question the mechanisms of monetizing audience value. The advertising audience is usually measured according to the nature of the medium (TV, radio, posters, …), by the extent of the population reached, related exposure times or even the impact on memorisation rate and top-of-mind of a brand in its market. TV allows both visual and auditory memorisation of an advertising message whereas radio maintains memorisation by repeating advertising messages. Posters allow fine geographic targeting of the population. Although a wide range of activities conducted in parallel by an individual has a positive impact, as the number of advertising media may be valuated (especially on the web), the memorisation capacity can be damaged however insofar as he or she is submitted to several advertising messages at the same time. Although a day is no longer considered to take 24 hours but 27 (owing to the time spent in watching TV programmes, surfing on the internet and phoning at the same time) it is not sure whether the audience can be better valued. Finally, in a context of advertising exposure, (multiplication and globalisation of brands, saturation of advertising spaces and development of brand platforms), the measurement of the campaigns efficiency and their ultimate monetization can only become more and more complex.

Secondly, the individual's relationship to space is deeply changing, as it was during the nineteenth and twentieth centuries by two successive industrial revolutions. Whereas the first industrial revolution – steam engines – allowed humans to extend their everyday image of the world, initially highly local, to the national level, the second revolution – oil and electricity – extended the human field of knowledge and influence on the world… These two revolutions have had an impact on the relative definition of physical distances between individuals and their capacity to exchange. They also had an indirect impact on work time which has considerably increased with the possibility of staying up and having night-time activities. Conversely, the current revolution has introduced a complete dematerialisation in


exchanges. Today, through videoconferencing, a marginal phenomenon which should be soon generalised, individuals may be virtually present with their loved ones, colleagues and customers/ suppliers in just a few clicks… Likewise "presence walls" may materialise an individual from head to toe, life size when several thousand miles away. These new tools will allow exchanges between individuals, in real time, without losing the one-to-one quality. This new acceptance of space-time therefore gives an "ubiquitous" dimension to individuals with other people while allowing them to revisit effective time… In this way, productive time seems to be :

• Lengthened, as these new virtual exchanges save non-productive time spent travelling. For example, when an individual, in the days of the Gallic Wars took 74 hours to cover the 800 or so km between Lutecia and Massalia, Paris-Marseille was covered by train in 19 hours in 1855, 8 hours 50 minutes in 1950 and 3 hours in 2006.

• Duplicated, as communication tools not only allow us to cover distances but also use different parallelized tools to exchange, sometimes discreetly) with several contacts (use of instant messaging in parallel with business negotiation through videoconferencing, for example)

• Fragmented by the management of presence, absence or unavailability in different contact operations.

To get back to business, these changes will have a great impact on revenue models as work and management methods are affected. The phenomenon itself is not new but surprises today by its width and the scale of recent changes. Different fields and functions are concerned (communication, training, management, recruitment, knowledge management, sales process, customer relations).

Spectators beyond the theatre: beyond "Homo Oeconomicus"

By extension, the society and its whole organisation may be revolutionized. There are many impacts and they go far beyond the commercial sphere. Two significant examples illustrate this trend.

• The field of citizenship: the citizen can capture an increasingly large public space. States have sustained the spread of the Internet (reducing digital inequalities) and the impact concerns the whole political arena. Although a lot of ink has been spilt over the many politicians who have set up their blogs, they are not the most significant example (behind the blog of any major candidate in the French presidential election of 2007 there are

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twenty or so writers/moderators). The use of the Internet should thus allow citizens' expression by meeting their need for transparency and sharing. This is the "electronisation of the republic" (need for transparency, to transmit opinion and be heard). For example, a governmental portal in South Korea meets these expectations by offering South Korean citizens the possibility of reporting any malfunction in their immediate environment to the administration via the Internet (savings ideas, online voting, etc.). The Internet, as a political tool can be used to know the desires of citizens, calls for a series of questions around an electronic republic and the obsolescence of governance rules.

• The artistic field is just as affected with the development of "net art" linked to the medium (digital) but also new forms of expression in which the artist plays a different role. Photography has just entered the Academy of Fine Arts, it will thus be necessary to wait a few decades to see if these changes are long-lasting or not. Whatever the case, they already allow the exploration of new forms of artistic performance (networked creation, use of 3D and lights, MOO – Multi-user Domains Object-Oriented Environment- games, etc.).

In both these cases, not only the structures and institutions are called into question (questioning and contestation are a cyclical phenomenon and intrinsic to political and artistic fields) but the role of the individual (citizen on the one hand / artist on the other) has been also modified according to a pattern similar to C-to-B or C-to-C: the citizen, the artist, here again, as an individual is the starting point of the flow (voting, creative, expressive) and not the recipient of a standardised principle dictated by an institution (conventional democratic or artistic expression). The individual is both an actor and spectator in his/her own play.

In the end, the difficulty lies in grasping the whole phenomenon. This model of ubiquity is both the result of technological progress and corresponds to the junction of major sociological trends and practices (sustainable development, over-exposure of the ego, …). The ubiquity model is also a new vision of the individual in his or her ecosystem. Perhaps the period we live in is just the beginnings of a deeper revolution. No one will believe that this ubiquity is a utopian vision of the world but it is important to remember that utopia consists of three ages:

- a "golden age", Jules Vernes' one, during which technology was believed to produce a better world;


- a "critical age" during which technology disappoints, expectations are deceived: there are many drifts, hopes and utopian visions of the founding fathers are soon forgotten; and - an "age of man" where human beings take an introspective look at themselves, thinking about the ultimate purpose of achievements.

We just need to know which utopian field we are in. Is this model of ubiquity only transitory (over the past ten years or so, before the bitterest disappointments encountered after 2000) or sufficiently profound to become the turning point expected since the arrival of information technology 60 years ago? Are we moving towards a genuine age of man where the individual would take advantage of the possibilities provided by communication technology ?

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References:

CHESBROUGH Henry (2006): Open Business Models: How To Thrive In The New Innovation Landscape, Harvard Business School Press, December.

CHRISTENSEN Clayton M. (2003): The Innovator's Solution: Creating and Sustaining Successful Growth, Harvard Business School Press.

COUTURIER François, DENERVAUD Isabelle, HUET Jean-Michel & BAGNOULS Philippe (2002): "Convergence and telecoms – who's going to get the value?", European Business Forum, Spring 2002.

HAMEL Gary & PRALAHAD C.K. (1996): Competing for the future, Harvard Business School Press.

MAUBORGNE Renée & CHAN KIM W. (2006): Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant, Harvard Business School Press.

SCHUMPETER Joseph (1962): Capitalism, Socialism and démocracy, Harper Perenial.

The World Television Market 1st Semester 2007 (*)

Florence LE BORGNE IDATE, Montpellier

here are 1 billion TV households in the world, with nearly 50% using terrestrial reception and 21% with access to digital television. The world

market for television services should reach 268 billion EUR in 2007, an increase of 3.8%. Europe, the United States and Japan still represent nearly 80% of the market. The top 10 television companies are North American. Their turnover comes largely from their national market. 2006 marked a turning point with the appearance of companies active in both commercial and paid television markets. Consolidation continues, in commercial as well as paid television. Media companies have increased their investments in community sites.

T

Reception still dominated by terrestrial

According to IDATE's estimates, 1.1 billion households have a television set, with 53% in the Asia/Pacific region. Terrestrial television reception represents 47% of TV households, constantly dropping, ahead of cable (34%), particularly advanced in China, India and the United States, and satellite (17%), whose market share is growing the fastest. On a worldwide basis, the impact of television over ADSL remains small (barely 1%).

(*) IDATE’s study, "The World Television Market" presents an analysis of the main segments of the television industry (commercial, public and paid television) for the primary markets, the strategy of the major media com-panies, key trends and 5 year forecasts.


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Subscription television continues to grow

The worldwide market for subscription television represented nearly 495 million households in 2007. Cable remains the primary media for multi-channel offers worldwide. This is especially true in Asia, as well as in other regions around the world to varying degrees. Satellite seems to have more momentum, both in terms of growth in the number of subscribers and in the area of digital TV services distribution. The number of satellite TV service subscribers continues to grow more rapidly than cable subscribers. The regions with the most momentum are:

- Asia, whose subscription TV growth rate has dropped slightly even though the absolute value of growth remains strong. The outlook remains very favourable, with the development of Premium offers expected to be released especially in India and China; - Latin America and Africa/Middle East where market growth rates remain high.

21% of TV households receive digital television

Digital television is found primarily in TV households in the largest markets: the United States, Western Europe, and Japan. The growth of digital TV on a global scale is increasing however, with a penetration rate for services growing 3 points in 2007, reaching 21% of TV households. For some countries, in particular the United Kingdom and the United States, the conversion to digital is a relatively short-term objective. As the most promising driving force behind the rise of digital, satellite continues to move into the least advanced countries, whilst the world's two largest markets in terms of TV households, namely India and China, are still lagging behind in their attempts to digitise their gigantic cable networks.

Rebound in growth

In 2007, the total value of the worldwide market for television services was estimated at 268 billion EUR. However, growth should experience a slight slow-down. Growth was estimated to be about 3.8%, compared to 5.8% in 2006. This level of growth follows several difficult years, with the height of the crisis coming in 2001/2002. The slow-down in 2007 has primarily resulted in pressure on advertising revenue, essentially in the most advanced markets, such as the United States, and some European countries, such as the United Kingdom. Generally, the three primary markets worldwide, the United States, Europe and Japan, remain heavily dominant,

F. LEBORGNE 187

representing between them 78% of worldwide TV revenue. However, combined, they continue to lose 1 to 2% of worldwide market share per year. Subscription television revenues recorded the highest growth rates, but advertising still remains the main source of revenues for the TV sector worldwide.

The weight of American companies on the TV market

The ranking of the 30 largest companies in the world reveals: - the coexistence of various types of firms: diversified conglomerates, with the largest turnover figures, public television services, commercial television companies financed by advertising, and pay television operators; - the weight of the North American companies, which hold the first ten spots in the ranking. This can be explained first and foremost because of the size of their home market, as the major American companies are still not very globalised in spite of some noteworthy exceptions, like News Corp. (an Australian company); - the weight of public TV services, whether Japanese or from the major European countries, which compete in size with their private competitors, sometimes even overtaking them.

Sustained growth by the sector leaders and disparity in profitability

The thirty largest companies in the world saw their accrued turnover increase 9.3% in 2006, to a level significantly higher than that recorded in 2005 (6.4%). The average profitability of the largest companies worldwide rose in 2006 (ratio between Net Profit/Turnover of 9.1% vs. 8.5% in 2005) Two of the companies listed showed negative results (compared to six in 2005). Ranking based on increase in turnover between 2005 and 2006 re-vealed generally sustained growth and better profitability in companies focused on a particular audiovisual market segment than diversified con-glomerates. Free television channels all experienced audience erosion, with various impacts on their advertising revenues. Pay television operators are still experiencing growth momentum, due in particular to ARPU growth.

Strategic moves by television companies

Several trends are visible in terms of strategic options for the major companies:

188 No. 67, 3rd Q. 2007

- closing the gap between commercial and pay television, - incumbent operators launching more and more channels, - acceleration in diversification to the Internet, - consolidation and focusing amongst companies, - growing globalisation of European and American audiovisual companies.

Key Market Trends

Several decisive changes should mark the period between 2007-2009.

The expected launch of high definition TV in Europe

Even though HDTV is a reality in the United States and Japan, its deployment in Europe is hampered by operators' hesitation about economic models, a still underdeveloped inventory of HD compatible televisions, and a certain lack of programming.

Widespread VOD and PVR offers

A growing number of terminals integrate a hard disc capable of storing television programmes: in parallel, Internet Access Providers are devel-oping "nPVR", or networked PVR, solutions. Finally, major Internet opera-tors are gradually launching solutions for on-line storage of television pro-grammes. Unlike the United States, VOD services for TVs are still not heavily deployed in Europe and are mainly only available over DSL and fibre optic cable networks. As initiatives increase, the Italian, French and British markets appear to be the leaders in this area. The VOD market should experience increasing popularity with the continued deployment of video over DSL services, especially after the restructuring phase is over in the cable sector. However, this type of service is considered to be less of a service to generate significant revenue over the short-term than a differentiator between offers.

Mobile television: consumer demand, uncertain economic model

The first feedback on mobile television services is encouraging. How-ever, most new services appear beyond linear television channel broad-casting: on-demand consumption of feature films, interactive programmes using the mobile phone's upstream channel, and, especially access to community video sites. Even though consumers seem to want mobile television, its ability to generate revenue remains uncertain.

F. LEBORGNE 189

Television 2.0: increasing popularity of new services

Video and television services over the Internet will take on extremely different forms: video search engines, community content aggregation, VOD services, simulcast of traditional channels, etc. Whilst the market is still in its infancy, it is probable that the development of television over the Internet will impact traditional media. The widespread use of production and broadcast tools will lead to intensified competition, especially at the higher levels in TV's value add chain, more precisely, in TV channel production. Traditional channels will first have to compete against other media, in particular the press and radio as they put their content into pictures, then deal with the arrival of new Internet players in the market. On the other hand, the Internet introduces the ability to cut out the middleman, allowing TV producers, as well as owners of video libraries, to access viewers directly, threatening channel producers.

Worldwide TV Revenues, by region/country, 2001-2010

(million EUR) 2003 2004 2005 2006 2007(e) 2011(f) North America 91 747 100 332 101 421 109 139 111 282 130 973 USA 86 378 94 792 95 624 102 765 104 821 124 111 Europe 61 443 65 833 69 042 72 267 75 522 89 659 France 8 525 8 967 9 233 9 794 10 346 12 119 Germany 12 155 12 343 1 948 13 205 13 424 14 331 United Kingdom 13 981 15 152 15 804 15 669 16 015 17 505 Asia Pacific 45 003 48 760 52 688 55 707 58 920 73 972 China 5 099 5 659 6 617 7 209 78 55 11 080 Japan 25 601 26 625 27 831 27 159 29 210 34 560 Latin America 11 430 12 930 14 686 15 634 16 444 19 863 Africa Middle East 3 855 4 220 4 721 5 083 5 562 7 172 Total 91 747 100 332 101 421 109 139 111 282 130 973

(e) estimates – (f) forecasts

Source: IDATE

190 No. 67, 3rd Q. 2007

The 30 largest audiovisual companies in the world

Rank Company Country 2006 Revenues

Change on previous year

2006 Audiovisual revenues

Change on previous year

1 Time Warner USA 44 224 1.3% 32 665 5.3% 2 Walt Disney Company USA 34 285 7.3% 22 167 6.6% 3 News Corp.* USA 25 237 5.8% 17 433 7.2% 4 Comcast USA 24 966 18.5% 16 633 17.2% 5 NBC Universal USA 16 188 10.2% 16 188 10.2% 6 DirecTV USA 14 756 12.1% 14 756 12.1% 7 Viacom USA 11 467 19.3% 11 467 19.3% 8 CBS USA 14 320 1.5% 11 447 0.1% 9 Liberty Media USA 8 613 8.2% 8 613 8.2% 10 Echostar USA 8 443 16.2% 7 986 17.4% 11 BSkyB* UK 7 632 8.0% 7 632 8.0% 12 BBC** UK 7 369 4.4% 7 369 4.4% 13 ARD**** Germany p.m n.m. p.m. n.m. 14 Liberty Global USA 6 488 43.6% 6 488 43.6% 15 Sony** Japan 64 277 4.4% 6 414 1.7% 16 RTL Group Germany 7 077 10.3% 6 258 10.3% 17 Cablevision USA 5 928 14.5% 5 928 14.5% 18 NHK** Japan 5 705 -1.5% 5 705 -1.5% 19 FujiTV Networks** Japan 5 103 24.5% 5 103 24.5% 20 Mediaset Italy 4 702 1.9% 4 702 1.9% 21 Vivendi France 25 149 2.9% 4 555 5.4% 22 ITV UK 4 013 -0.7% 4 013 -0.7% 23 Televisa Mexico 3 480 12.2% 3 424 25.3% 24 Francetélévisions*** France 3 422 2.2% 3 422 2.2% 25 TF1 France 3 330 -7.7% 3 330 -7.7% 26 RAI*** Italy 3 099 2.3% 3 099 2.3% 27 ProSiebenSat.1 Germany 2 641 5.8% 2 641 5.8% 28 ZDF**** Germany p.m. n.m. p.m. n.m. 29 MTG Sweden 1 374 26.5% 1 374 26.5% 30 RTVE*** Spain 1 116 4.7% 1 116 -0.3%

n.m. : not meaningful n.a.: not available

* year ended June 30 ** year ended March 31

*** year ended Dec. 31, 2005 ****no available figure for 2005 or 2006

Source: IDATE, according to the companies

World Telecom Equipment Market Vendors review – 1st semester 2007 (*)

Julien SALANAVE IDATE, Montpellier

e observe a strong market consolidation: four main equipment suppliers represented 63% of the market in 2006 (compared to less

than 50% in 2004). Growth is marked by a transfer of momentum to Asia/Pacific and emerging regions. The most dynamic market segments are 3G (UMTS and CDMA EV-DO) for mobile equipment and broadband access, convergence infrastructure, and finally optical (WDM) for wireline equipment.

W

The year following the Big Bang…

Long awaited, the reshuffling of the telecom equipment industry landscape finally started in 2006. Several announced mergers are essentially a defensive response to consolidation by operators and the change in their investment model, as well as to the transfer of potential market growth to BRIC (Brazil, Russia, India, China) economies. In addition, they mark the difference in approaches between equipment manufacturers with strong intrinsic growth (Cisco, Ericsson) looking for acquisitions capable of accelerating this momentum, and equipment manufacturers reporting much more modest growth rates and looking for cost synergies (Alcatel-Lucent, Nokia Siemens Networks).

(*) This paper is a summary of a market report published by IDATE in the framework of its DigiWorld catalogue. For more information, see: www.idate.org.


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In this context of strong market consolidation (the four main equipment suppliers now representing 63% of the market compared to less than 50% in 2004) and the still enduring momentum of Chinese equipment suppliers (Huawei, ZTE) and specialists (Tellabs, Juniper, Ciena), the "intermediate" diversified players that no longer have critical mass, such as Nortel, Motorola, NEC or Fujitsu, particularly are suffering.

Pro forma market share in 2006 of the main equipment manufacturers by segment

Source: IDATE

The present situation will therefore not constitute a stable equilibrium in the industry with lately, the UMTS assets acquired by Alcatel-Lucent and other merger activities that could involve these intermediate players as well as the large IT companies of the world. The latter play a growing role of supplier to the large telecom operators and are in a better position to propose to them new economic models, based on the sale of solutions and services instead of equipment.

J. SALANAVE 193

Top 20 worldwide infrastructure suppliers (sales in network infrastructure in 2006, in millions of USD pro forma)

0 5 000 10 000 15 000 20 000 25 000 30 000

Cisco

Ericsson

Alcatel-Lucent

Nokia Siemens

Nortel*

NEC

Huaw ei

Motorola

Siemens entr.

Fujitsu

Avaya

Juniper

Tellabs

ZTE

3Com

Samsung

UTStarcom

LG

ECI

Ciena

* including UMTS activity subsequently sold to Alcatel

Source: IDATE

Consolidation effect in carrier infrastructure markets

The mobile equipment segment which represented 36% of the global telecom equipment market had been the most impacted by the consolidation happening. This market is from now structured among the few biggest vendors: the three major mobile equipment vendors accounted for 69% of market share.

On a contrary side, the fixed equipment segment which includes several sub-segments remained a fragmented market which was not impacted by the market consolidation. Cisco and Alcatel-Lucent still remained the market leaders and became seriously challenging by Huawei. Applying lower prices, the Chinese equipment maker held strong position in broadband access and optical transmission equipments.

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The growing role of infrastructure services

Infrastructure services constituted the more dynamic market of the industry with a 11% growth during 2006. All telecom infrastructure vendors see a major growth opportunity in this market and more particularly in managed services.

In 2006, Cisco was the leader mainly adressing infrastructure services to the entreprise customers. Regarding carriers, Ericsson has maintained its leadership position leveraging its dominant position in mobile equipment.

Book Review

Laurent BENZONI and Patrice GEFFRON (Eds) A collection of Essays on Competition and Regulation with Asymetries in Mobile Markets Ed. Quantifica, Paris, 2007, 145 pages by Edmond BARANES

This is a work that brings together several recent economic examinations of the mechanisms and consequences of the exogenous "asymmetries" between operators competing in mobile markets. Providing an international perspective, the book includes contributions from academics and regulatory authority representatives, offering up their views on the impact on competition of positive externalities (network and "club" effects) and on the leverage obtained by differentiated interconnection tariffs in situations of competition between operators of different sizes. The conclusions deliver a reminder of the necessity of facilities-based competition sustained by numerous, independent operators, and the virtues of and need for the adoption of a careful and nuanced approach to asymmetrical regulatory measures – governing the establishment of asymmetrical call termination tariffs according to the markets’ structural balance being one area open to immediate application.


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Summaries

Olivier BOMSEL Gratuit ! Du déploiement de l'économie numérique Ed. Gallimard, Coll. Folio actuel, 2007, 305 pages Never before has "free" been so ubiquitous, so prized and so hotly disputed as in the digital age. This singular historical and economic phenomenon is often associated with the ongoing decline in data processing and transport costs but, more than anything, it derives from "network effects": thanks to the extended arena of application of binary coding, the usefulness of digital innovations (internet, search engines, mobile phones, electronic payment systems, TV, etc.) increases with the growth of the user population. As a result, a critical mass of users needs to be conquered as quickly as possible, through carefully chosen subsidies and creators of irreversibility. Result? A shift in the source of financing but also of the guaranteed income, the conflicts of interest. Users are no longer being offered things cheaper, as in back in the days of Fordism and price-driven competition, but rather for free, the deployment catalyst, thanks to which monopolies emerge, enabling the dominance of Microsoft, the success of Google, the spread of mobile telephony, of peer-to-peer networks… A powerful economic weapon, free is no longer collective subversion, but rather a private tool serving corporations. Its mechanisms are increasingly subtle, more violent, more questionable than the promises surrounding them. In whose interest is it to give? How do the shifts operate? To what end, to whose benefit, in search of what impact?

Cahiers du Centre de Recherches Informatique et Droit Ed. Bruylant, Bruxelles No. 28, Alexandre CRUQUENAIRE (Ed.), La protection des marques sur Internet, 2007, 164 pages No. 29, Etienne MONTERO & Dominique MOUGENOT (Eds), Phenix – Les tribunaux à l'ère électronique, actes du colloque du 8 février 2007, 249 pages No. 30, Maris DEMOULIN (Ed.), Les pratiques du commerce électronique, 2007, 191 pages

The authors

Edmond BARANES is Professor of Economic Sciences at the University of Montpellier and IDATE's Scientific Consultant. He is the Editor for the COMMUNICATIONS & STRATEGIES journal and represents IDATE within academic networks. He holds a Ph.D. in Economic Sciences and a Master of Economics (University of Paris I Panthéon-Sorbonne, 1991). He received a Post graduate diploma (DEA) in Mathematical Economy and Econometrics (1991) and a Master of Econometrics I (1990) from University of Paris. [email protected]

Martin CAVE is a professor at Warwick Business School, UK. He is a regulatory economist, specialising in the communications industry and co-editor of The Handbook of Telecommunications Economics (2002, 2005) and of Digital Broadcasting (2006). He advises a number of regulatory bodies in Europe and worldwide. [email protected]

Isabelle DENERVAUD is a Senior Manager at BearingPoint Paris Office. She worked on various projects on transformation, marketing and innovation issues for telecom, media and energy sectors. She is in charge of the Innovation Expertise Center, published a white paper on innovation management trends as well as points of view related to disruptive business models, competitive dynamics and new products launches. Before joining BearingPoint, Isabelle worked for the World Bank, R&D of Compagnie Generale des Eaux, Coopers & Lybrand, PricewaterhouseCoopers and IBM. She is a graduate of Ecole des Ponts and ESSEC. [email protected]

Richard FEASEY is the Public Policy Director for the Vodafone Group, coordinating global public policy and regulatory affairs throughout Vodafone's 28 operating companies including Europe, Africa, the Americas, and the Asia-Pacific. Richard has over fifteen years experience in international telecommunications in fixed, internet and wireless sectors; having been responsible for public policy at Worldcom International, Ionica plc and TeleWest Communications plc. He has chaired worldwide industry bodies and is currently chair of the Regulatory Advisory Board of the GSM Association.


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Klaus HACKBARTH Klaus Hackbarth has been Full Professor in the Department of Communication Engineering at Cantabria University, Santander, Spain, since 1992, where he teaches telecommunications network architecture and network design. Currently he is a member of the Excellence Network EURO-FGI were he leads the Cantabria University research team and forms part of the Steering Committee. His current research activities lie in the field of Broadband and Mobile Network design and planning, mainly with application to cost studies for national and European Regulation entities. He has collaborated in this field with the WIK-Consult, Bad Honnef, Germany since 1998. Before joining Cantabria University, he worked in the R&D centre at Telefónica from 1989 to 1992 mainly as project leader and expert for international projects. He worked for nearly 15 years in the Telecommunications Engineering Centre at Deutsche Telecom in Darmstadt. In the 1980s he took part in studies that led to the decisions by the German Federal Ministry for Post and Telecommunications to introduce broadband pilot services. The main focus of his work at the time was optimal network design and dimensioning. Klaus Hackbarth studied electrical engineering at Berlin Technical University where he received his first degree in 1974 and his Ph.D. in 1984. He is a member of the German association of electrical engineers VDE.

Rüdiger HAHN entered the federal ministry for post and telecommunications in 1990, and was, until 1992, assistant head of section and an advisor in the department of "Principles of Regulation". Since 1993 he has been an advisor for the department "Legal aspects of regulation." In 1996, Hahn became head of divison of "Mobile and Satellite Communication" and in 1998 head of the directorate of the department of Regulation and Licensing for the Regulating Authority for Telecommunications and Post. Since 2001, he has been head of the department of Legal Aspects of Telecommunication Frequency Regulation for the Federal Network Agency.

Heikki HÄMMÄINEN is a professor of Networking Business at the Networking Laboratory, Department of Electronics and Communications Engineering, Helsinki University of Technology (TKK). Prior to joining TKK, professor Hämmäinen made an industry career with Nokia including roles as head of laboratory in Nokia Research Center (Communication Systems Laboratory), vice president (System Development, Network Systems Division), director (System Development, Mobile Internet Applications Division), and general manager (Location Business) in Nokia Networks. His recent duties include ITS (Board Member), Conference on Telecommunications Techno-Economics 2007 (TPC chair), and Nordic and Baltic Journal of ICT (Editorial Board). [email protected]

Jean-Michel HUET is a Senior Manager at BearingPoint Paris Office. He worked on different issues on marketing and innovation management for telecom, media and utilities companies. He has published numerous articles and points of view on entry strategies, management and convergence, including a book (Les tendances du management, Pearson, 2007) Prior to joining BearingPoint, Jean-Michel was

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product manager at France Télécom Mobiles and consultant for PricewaterhouseCoopers and IBM BCS. He is a graduate of Reims Management School and Sciences Po Paris. [email protected]

Dragan ILIC is a graduate of Cologne University and has studied economics. As a research assistant (2002-2004) among others, he worked on econometric studies. In 2005, he joined the “cost modelling and Internet economics” department at WIK. Since that time, he has worked on a numerous number of projects in which he gained experience in developing and parameterizing cost models (FL-LRIC as well as historical cost models). He is specialised in access networks (copper and fibre based), broadband networks and mobile networks. In the context of fibre based access networks, he investigated roll-out strategies for fibre based access networks (VDSL), taking account of technical and economic issues. [email protected]

K.R.Renjish KUMAR is a PhD student at the Networking Lab, Helsinki University of Technology (TKK) and Manager at Capgemini Consulting, India. As a Research Scientist at the Networking Lab (2003- April 07), Renjish worked on techno-economic issues in mobile, convergence and international roaming. He was with Siemens ICM, Singapore as R&D engineer (2001-02), working on the policy server design prototype for UMTS core network and with Cognizant Technology solutions as Programmer Analyst (1997-99). Renjish has a Masters (Computer science) from National University of Singapore (NUS) and B.E. (Electronics and communications) from National Institute of Technology (N.I.T) Surathkal. He has worked in EU project involving key players of the European telecom industry and also published papers in international conferences and journals. His current areas of interest include techno-economic and strategic studies in the telecom, Internet and media sectors. [email protected]

Gabriele KULENKAMPFF is the Head of Department of “Cost Modelling and Internet Economics” at WIK. She has a PhD in economics from Trier University, Germany. She has been with WIK since 1998. As well as cost modelling, she has advised on regulatory costing and pricing issues and market structures and corporate strategies. In 2001 she was appointed head of the department of cost modelling. Gabriele Kulenkampff has led and is leading several project teams with a focus on regulatory costing and pricing. She managed and carried out studies on bottom-up as well as top-down cost modelling. Regulatory principles with regard to cost standards and their application in regulatory rate cases are one of her core competencies. The current subjects she is investigating are bitstream access, QoS, and NGN/NGA in the context of the upcoming regulatory requirements. In summary, she has worked on the regulation of network access (narrow band and broadband), cost based rates for ULL and interconnection as well as issues concerning cross subsidisation. Prior to her employment in WIK Gabriele Kulenkampff worked as a researcher and lecturer in Microeconomics and Public Economics at Trier University. She has considerable experience in economic modelling.

200 No. 67, 3rd Q. 2007

Florence LE BORGNE is head of TV & New Media Practice at IDATE. Florence’s prime area of focus is the development of digital technologies (terrestrial, cable, satellite and IPTV, mobile TV, digital cinema, video and TV on the web) dealing with both the economic and strategic aspects of those sectors. More generally, her work involves analysis of media groups’ strategies, chiefly in Europe and Japan. Before coming to IDATE, she worked as the Head of Research in the Nord-Pas-de-Calais Regional Development Agency's Economic Observation department, where she devoted herself primarily to issues relating to the Information Society, the development of telework and the mastery of key technologies. Ms. Leborgne is a graduate of the Lille school of management EDHEC (Ecole des Hautes Etudes Commerciales). [email protected]

Philippa MARKS is a London-based independent consultant specialising in the analysis of economic, public policy and regulatory issues in the media and telecommunications industries. She is an expert in the application of market mechanisms to spectrum management and has advised regulators and operators on spectrum pricing, trading and liberalisation in a number of European countries and in Asia. She has been a Director at Indepen Consulting and at NERA. She has Masters degrees in economics from Canterbury University, New Zealand and Oxford University, UK, She is a member of Ofcom’s Spectrum Advisory Board. [email protected]

Fulvio MINERVINI is a Ph.D. student at the Warwick Business School, University of Warwick, UK, and a research fellow at the University of Macerata, Italy. His research interests include spectrum policy, regulation of network industries and regulatory authorities. He has been involved in a number of research projects in those fields and most of his published work is on spectrum management and regulated industries. He teaches courses in public finance and economics.

Gérard POGOREL is Professor of Economics and Management, Ecole Nationale Supérieure des Télécommunications, (ENST Paris). He graduated from HEC Graduate School of Management (Ecoles des Hautes Etudes Commerciales, Paris) and holds a Doctorate in Economics from Université de Paris-I Pantheon-Sorbonne. He has published numerous articles, books, and reports and participates in numerous Government-level and regulation Authorities Committees on telecom and media policy and regulation in France, Germany, Italy, Thailand, Indonesia, and with the European Commission in Brussels. He is a member of the international panel of experts for the World Competitiveness Yearbook, (IMD, Lausanne). [email protected] www.enst.fr/egsh/pogorel

Frédéric PUJOL is Director of Studies, Head of Mobile Services Practice at IDATE. Previously, Frédéric acquired solid experience in mobile network architecture working for the France Telecom Group (Sofrecom, Telesystems). He holds a post-

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graduate degree in engineering from ISEN (Institut Supérieur d'Electronique du Nord, Lille, 1986), where he majored in Telecommunications, and from CITCOM (Centre d'Ingénierie des Technologies de la Communication, Paris, 1987), where he majored in Network Architecture. [email protected]

Laura RODRIGUEZ DE LOPE has been contracted researcher in the Department of Communication Engineering at Cantabria University since 2002. She has participated in various research projects for fixed and mobile network planning in relation to corresponding cost studies for regulator authorities. She studied Telecommunication Engineering at Cantabria University and received a Masters Degree in 2002. She participated in Post-graduate studies for mobile and wireless technologies and received the Diploma of Advanced Studies in 2007 from Cantabria University. She is currently working on a PhD Thesis in the field of cost modelling for Broadband networks.

Julien SALANAVE is Director of Telecom Economics and Strategies practice at IDATE where his responsibilities include assignments carried out for operators and regulators on issues relating to telecommunications equipment. Julien also heads up IDATE's publications on the sector. Prior to joining IDATE, Julien worked as representative and associate for venture capital firms Apax Partners and later Newbury Ventures, where he was responsible for equity investments in the telecommunications sector. Previous to that, Julien Salanave worked in investment banking and as a strategic consultant. He is a graduate of the Ecole des Hautes Etudes Commerciales (HEC) business school in Paris. [email protected]

Martin SIMS is the managing editor of the specialist spectrum policy newsletter, PolicyTracker (www.policytracker.com) and lectures at the University of East London. He is a former editor of Intermedia, the policy journal of the International Institute of Communications and has first hand experience of the UK broadcasting sector, having worked as a News Editor in independent radio then as a journalist for BBC network news.

Henri TCHENG is a Managing Director at BearingPoint Paris office. He is the head of telecommunication, media, utilities and energy sectors. He worked for many companies on the field of new business models, entry strategies, regulatory and economic issues as well as transformation and project developments. For the last fifteen years, Henri has conducted studies and published numerous points of view and insights related to the telecom and energy industries and related incremental or disruptive business models. He manages and edits regular Lettres Convergences. He has written a book on MVNO (Devenir opérateur mobile sans réseau, Editions d’Organisation, 2006). He is a graduate of l’Ecole Poytechnique. [email protected]

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Gary TONGE is an independent consultant specialising in spectrum-related policy and technology. He was formerly Director of Technology of the Independent Television Commission. Gary is a Fellow of the Royal Academy of Engineering, the Royal Television Society and of the Institution of Engineering and Technology. He holds a PhD in Applied Mathematics from Southampton University. [email protected]

Pierre de VRIES is a Research Fellow at the Economic Policy Research Center at the University of Washington, Seattle. He was formerly Chief of Incubation and Senior Director of Advanced Technology & Policy at Microsoft Corporation. He is an independent researcher and consultant working at the intersection of technology and society; areas of interest include communications policy, and cognitive limitations on innovation and governance. He holds a PhD in theoretical physics from Oxford.

Brian WILLIAMSON is a London based independent consultant focussing on regulatory policy and strategy development in the areas of communications, media and radio spectrum. Prior to becoming an independent consultant, Brian was a Director at Indepen working on strategy and regulation in the telecoms and media sectors, following employment at NERA and at the New Zealand Treasury. Brian has contributed to the development of thinking about the relationship between economic growth, ICT, the communications sector and public policy; and has developed new regulatory concepts in the communications sector including "equivalence" and "anchor product" regulation. Brian has a BSc in Physics and an MSc in Economics from the London School of Economics.. [email protected]

ITS news

17th Biennial Conference

Call for papers

CALL FOR PAPERS 17th Biennial Conference

of the International Telecommunications Society June 24-27, 2008

Montréal, Canada Abstracts Due: October 31, 2007

www.ITS2008Montreal.org VOIP and other information technologies are accelerating industry convergence, and competition is intensifying among traditional telecommunications services providers, television, Internet, mobile, fixed, terrestrial and wireless firms. Mergers and acquisitions, vertical and horizontal integration, and new competitive strategies are increasingly used by major stakeholders to consolidate their positions.

Telecommunications service providers are using new pricing and bundling strategies and are increasingly demanding a hands-off approach to regulation. Regulators have difficulty reconciling the new industry realities with traditional ways of regulating.

The purpose of this Conference is to bring together academics, industry analysts, policy makers, consultants and other major stakeholders to present and discuss the most recent research findings.


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The 17th ITS Biennial Conference will provide industry decision-makers, academic experts and government policy-makers an opportunity to explore and debate contemporary issues that are facing domestic and international telecommunications industry participants.

The Conference Program Committee would like to invite you to submit abstracts on any topic related to the conference theme. Suggested topics include, but are not restricted to, the following:

• Evolving Market Structure • Competition, Regulation and Next Generation Networks • Growth Strategies and Financial Performance • Changing Demands for ICT Services • Measuring Regulatory Efficacy and Effectiveness: Benchmarks,

Models and Transferability • ICT, Productivity and Demand Forecasting • Changing Ownership Patterns and Forms: Privatization, Foreign

ownership and Private Equity Ownership of Communications Entities • Regulation, the Internet and Network Neutrality • Universal Access: Definitions, Delivery and Alternatives • Broadband Development • Regulation and Competition Policy: Rivalry or

Complementarity • Telecommunications and Development • International Trade Law and Telecommunications • Impact on Labor of Changing Technologies • Impact of Changing Technologies on Intellectual Property

Rights • E-Government • Revision of the EU Telecom Framework and its Performance

across Europe

ITS news 207

• Service Convergence: Industry and Regulatory Implications • Economics of Security and Data Protection • Evolution of Wireless Services: Technology, Markets,

Regulation • Spectrum Management: Tools and Technology Impact

The Program Committee wants to emphasize that these topics are simply suggestions. All worthwhile topics will be considered. All proposals must be submitted online at: www.ITS2008Montreal.org

Abstracts must be in English and may not exceed 500 words. They must be received by midnight Eastern Time on October 31, 2007 for consideration.

Authors of accepted papers will be notified by February 1, 2008. Pease direct inquiries to: [email protected] or 1-905-436-0375 (Canada).

The ITS Conference will be held at the Hilton Montréal Bonaventure, one of the best-equipped single-level convention complexes in the nation. The Hilton is a unique penthouse oasis located in the heart of the city nestled amidst 2 1/2 acres of landscaped gardens alive with playful ducks and winding brooks.

The ITS will offer a unique Social Program for all of its attendees that will allow guests to sample the wonders of Montreal and its beauty! To obtain more information on our Social Program, e-mail us at: [email protected] or check the conference web site.

MONTRÉAL is Canada's second-largest city. Its North American skyline of glass and concrete rises above churches and monuments in a melange of European styles as varied as Montréal's social mix. This is also the second-largest French-speaking metropolis after Paris. The result is a truly multidimensional city, with a global variety of eateries, bars and clubs, matched by a calendar of festivals that makes this the most vibrant place in Canada. The city has undergone a resurgence, becoming the driving force behind the high-tech industry that's transforming Canada's economy. Visit Tourism Montreal for a detailed look at the City: www.tourisme-montreal.org

208 No. 67, 3rd Q. 2007

ITS 2008 Program Committee

Chair Richard Schultz McGill University, Canada Co-chair Anastassios Gentzoglanis University of Sherbrooke, Canada Members

- Elias Aravantinos, Queens College, New York, USA - Aniruddha Banerjee, Analysis Group, Inc., USA - Johannes M. Bauer, Michigan State University, USA - Jeffrey I. Bernstein, Florida International University, USA - Erik Bohlin, Chalmers University of Technology, Sweden - Marc Bourreau, École Nationale Supérieure des

Télécommunications, France - Ken Ducatel, European Commission, Belgium - Christian Dippon, NERA Economic Consulting, USA - Hidenori Fuke, Komazawa University, Japan - Abraham Hollander, University of Montreal, Canada - Alain Houle, University of Sherbrooke, Canada - Peter Humphreys, University of Manchester, UK - Rekha Jain, Indian Institute of Management, India - Hudson Janisch, University of Cape Town, South Africa - Ashok Jhunjhunwala, IIT Madras, India - Danny Kotlowitz, Telstra Corporation Limited, Australia - Despo Ktoridou, Intercollege, Cyprus - Stanford L. Levin, Southern Illinois University Edwardsville,

USA - Claudia Loebbecke, University of Cologne, Germany - Jürgen Müeller, Berlin School of Economics (FHW), Germany - Karl-Heinz Neumann, WIK Wissenschaftliches Institut für

Infrastruktur und Kommunikationsdienste GmbH, Germany

ITS news 209

- Teodosio Pérez Amaral, Universidad Complutense de Madrid, Spain

- Brigitte Preissl, Deutsche Telekom, Germany - Victor Prochnik, Federal University of Rio de Janeiro, Brazil - Milagros Rivera, National University of Singapore, Singapore - Don Romaniuk, Independent Business Consultant, Canada - Michael Ryan, Arnold and Porter (UK) LLP, England - Rohan Samarajiva, LIRNEasia, Sri Lanka - Stephen Schmidt, TELUS Communications, Canada - Christopher H. Sterling, George Washington University, USA - Dennis L. Weisman, Kansas State University, USA - Jason Whalley, Strathclyde Business School, Scotland - Bill Withers, Government of Anguilla - Patrick Xavier, Swinburne University of Technology, Australia - Xu Yan, Hong Kong University of Science and Technology,

Hong Kong - Demetris Yannelis, University of Piraeus, Greece - Dimitri Ypsilanti, OECD

ITS Global Corporate Members - Analysis Group - Arnold & Porter - BT - France Telecom - IDATE - NERA - National Telecommunications Commission (Thailand) - NTT DoCoMo - Telecom Italia - Telecommunications Authority (Turkey) - TELUS Communications

ITS Societal Members - Deutsche Telekom - KT

Non-Profit / Governmental Members - BAKOM - InfoCom Research, Inc.

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Key Dates

October 31 Abstracts due February 1 Authors notified of paper acceptance May 1 Papers due (Paper presenters must register) May 15 Last day for early registration May 25 Last day to book hotel at guaranteed rate June 24-27 Conference

Guide for authors COMMUNICATIONS & STRATEGIES is an international journal that aims to publish peer-reviewed papers focusing on the industry's key issues and offering a forum for the finest socio-economic analysis of the telecoms, IT and audiovisual sectors. It proposes thematic Dossiers including several papers and interviews with academic or institutional personalities. In addition to the Dossier, we usually publish a selection of papers that typically cover innovative issues in the sector. The Features rubric contains short papers offering factual analyses of recent developments in the fields of regulation and competition, firms and markets, technical innovations, public policies and use logics, as well as book reviews. COMMUNICATIONS & STRATEGIES is indexed in EconLit, ESSEC, CNRS Journal Ranking in Economics and Management (Section 37 du Comité national Economie et Gestion)

Submission of papers All papers submitted for publication will be reviewed using the "double blind" system by at least two referees, selected based on the subject matter of the paper, from the journal's panel of referees. Shorter articles appearing in the "Features" section are refereed at the discretion of the Editor. As far as practical and technical questions are concerned, proposals must be submitted in Word format (.doc) and should not exceed 6,000 to 7,000 words. Please ensure that all illustrations (graphics, figures, etc.) are in black and white - excluding any color - and are of printing quality. Bibliographical references should be included at the end of the article. Should these references appear in the text, please indicate the author's name and the year of publication in brackets.

Coordination and information Sophie NIGON

[email protected] +33 (0)4 67 14 44 16 www.comstrat.org

Regulatory and Policy Implications of Emerging Technologies to Spectrum Management

Documents

Transcript of Regulatory and Policy Implications of Emerging Technologies to Spectrum Management