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ERG/RSPG Joint Session

Göteborg, Sweden

‘Spectrum Policy for the Many Possible Futures of Broadband in Europe’

February 27 2008

Martin CaveWarwick Business School, UKMartin.Cave@wbs.ac.uk

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The Issue is High Speed Broadband

FTTx Market Share by Region

3%

41%

6%6%

44%

Western Europe

South and EastAsia

North America

Eastern Europe

Asia-Pacific

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Platform Endowments in Europe

2F + W Upgraded cable system, ubiquitous DSL, 3G networks (30-40%)

F + W (Near) ubiquitous DSL, 3G (50-60%)

W Wireless only- 2G/3G (3-8%)

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Cable and DSL in the EU15 (millions and %)

2003 2005 2007

CableIncumbent DSLCompetitive DSL

- resale- bitstream- ULL

4.19.62.8

54% 23% 23%

8.224.316.5

30% 28% 42%

11.837.031.3

25%

17%

56%

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What Triggers NGA Investment?

Revenue loss to current competitorsFear of pre-emption by rival NGARegulatory certainty (cf. Australian approach)Prospect of adequate (non truncated) return

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Key Issue for Regulators

How many competitors are enough?

- 2F + wireless (US generally, WBA in Malta)- ≥ 4 (Ofcom WBA notification)

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Intermediate Regulation in the Absence of Effective Competition

Access with- higher cost of capital- pricing flexibility- limitations on capacity of mandated

service (basic or ‘anchor’ product only)- limitations on PoI- but the ‘ladder’ may be

broken.

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The Role of Wireless

Uncertainty about future capabilitiesCompetitive platforms:- LTE (long term evolution)- WiMax- UMB (ultra mobile broadband)Whether it is the only option or a

competitive constraint, wireless opportunities must be maximised.

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Making Spectrum Available on Flexible Basis

Minimum restrictions on existing assignmentsRefarming regimes to minimise downtimeLicensing of additional spectrum as quickly as possible, without restrictions on useMinimising impediments to trade and change of useConsider synchronising transactions- the ‘big bang’

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2007

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The UK Frequency Allocations

20XX?

3kHz

300 GHz

Not Allocated

Not Allocated

Not Allocated

Not Allocated

Not Allocated

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The contribution of the public sector

Public sector users account for about half use of ‘beachfront spectrum’ in the EUTypically, they- especially defence ministries- are subject to little scrutinyOption 1-encourage spectrum release by monetary incentives and spectrum pricingOption 2-make them part of the market system , as buyers or (more plausibly) sellers see www.spectrumaudit.org.uk

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What Level of Harmonisation in the EU?

Focus on harmonisation of spectrum management techniques, not harmonisation of spectrum use De facto harmonisation will follow from manufacturer/operator interaction, subject to competitionEU power needed to harmonise tradable frequencies etc.Digital dividend is a test case.