Expertise in spectrum management
Amit Nagpal and Lee Sanders
Introducing Analysys Mason
Q2 2007
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Confidential
The role of spectrum management is becoming increasingly important due to the rapid development of wireless services
• Due to the fast development of wireless technologies and applications and the finite amount of spectrum available, spectrum managers are required to make tough decisions around the use of their spectrum
• We have assisted many spectrum managers and associated organisations with a wide variety of issues:
studies are often high profile (e.g. spectrum trading study for the European Commission) and on controversial matters (e.g. liberalisation of spectrum for mobile services in the UK)
• Our approach includes: rapid diagnosis of key issues industry consultation where appropriate rigorous and robust technical and economic analysis quantitative models to support qualitative arguments clear presentation of project recommendations
• Analysys Mason is ideally placed to identify the most appropriate solution(s): unique combination of commercial, economic and technical expertise detailed understanding of impact of regulatory decisions on spectrum users
Summary of benefits and costs of spectrum trading
in 28 European countries
Source: Analysys Mason
0
1
2
3
4
5
6
7
Jun
94
Oct 95
Mar
97
Jul 9
8
Dec 9
9
Apr 0
1
Sep 0
2
Jan
04
May
05M
obile
spe
ctru
m v
alue
(U
SD
/MH
z/po
p.)
USA 900MHz
USA 1900MHz
Europe 2GHzAsia 2GHz
Australasia 2GHz
Mobile spectrum value over time
EUR million per annum
Option A:
Trading and
liberalisation
Option B:
Trading only
Option C:
Restrict
liberalisation
Benefits
(a) Static efficiency* 39 19 (12)
(b) Transparency Included in (a) and (c)
(c) Competition* 697 18 (343)
(d) Innovation* 8070 860 (2410)
(e) Scale economies in regulation Probably small
Gain (loss) relative to status quo* 8806 897 (2275)
Costs
(f) Regulatory costs* 9 4 (3)
g) Regulatory innovation Can be mitigated by appropriate co-ordination
(h) Interference co-ordination* 83 4 (49)
(i) Standardisation Probably non-existent
(j) Other national policy goals Unquantifiable, mainly political
(k) Concentration Can be mitigated by appropriate competition policy
Loss (gain) relative to status quo* 92 8 (52)
*All welfare benefits and costs shown relative to the status quo
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Confidential
We offer a range of spectrum management services to both regulators and users of the spectrum
• Policies and procedures for licensing spectrum
• Recommendations for allocation of spectrum
• Assessment of demand/economic benefit from spectrum uses
• Recommendation of appropriate assignment mechanisms (e.g. first come first served, auction)
Spectrum allocation and assignment
Spectrum framework review
• Forecasts of future spectrum requirements, including:
forecasts of future service demand (e.g. cellular)
forecasts of future technologies and performance
calculation of resulting spectrum demand
Future spectrum demandServices for users of the
radio spectrum
Our range of spectrum management services
• Review of spectrum management strategies, including;
spectrum trading and liberalisation
licence-exempt spectrum
• Strategy implementation development of
processes and roadmaps
Spectrum award advice and support
• Marketing of licences
• Recommendation of award parameters, including:
number of licences spectrum packaging usage rights licence obligations reserve price
• Spectrum strategy advice
• Spectrum licence acquisition support
• Valuation of spectrum assets
• Introduction to spectrum trading
• Consultation process support
Allocation/assignment options Spectrum demand forecasts
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15
20
25
30
35
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45
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0 2 4 6 8 10 12 14 16
Band III Spectrum (MHz) (includes PMSE and SRD)
Sur
plus
NP
V/M
Hz
(GB
P m
illio
n)
T-DAB baseline
T-DAB lower take-up
PMR/PAMR (UHF2 re-align occurs)
PMR/PAMR (No UHF2 re-align)
London/majorurban areas
LondonLondon
Economic costs/benefits
Source: Analysys Mason
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5
10
15
20
25
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Tot
al r
equi
red
spec
trum
(M
Hz) CBS
On-siteOther wide areaLocal govtTaxiUndergroundTramBus and coachNetwork rail
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Confidential
Some of our high-profile spectrum management assignments are presented in the following slides
Case studies Client type Summary
Case study 1 NITA (Danish regulator)
Support with the successful award of a 3G licence to SONOFON
Case study 2 Ofcom (UK regulator)
Advice on the award options for the L-Band (1452–1492MHz)
Case study 3 UMTS Forum Calculation of spectrum demand from 2010 to 2020 given existing mobile traffic forecasts
Case study 4 The Independent Audit of Spectrum Holdings
Forecast commercial spectrum demand in the UK up to 2025 for a major government review of spectrum planning
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Confidential
In 2005, we supported the Danish regulator with the successful award of a 3G licence to SONOFON
• Interview programme of the existing 3G licensees to gain their view on the award process
• Extensive marketing of the licence. This included identifying potential bidders both within and outside Denmark, within the mobile sector and also in related industries
• Valuation of the licence for different types of bidders (see illustrative chart to the right). This indicated the likely bidders in an auction and helped set the appropriate reserve price
• Recommendations on the appropriate licence terms, including the licence duration, coverage obligations, etc.
• Recommendations on the award design (auction) and assistance in developing the associated documents
Business challenge
• In January 2005, one of the Danish 3G licences was returned to the National IT and Telecom Agency (NITA) following TeliaSonera’s acquisition of Orange
• Whilst the objectives were identical to the original award (to promote competition), this award presented some unique challenges: ensure that the existing 3G licensees viewed the process as fair; develop licence terms that were realistic to a new entrant, yet were not discriminatory; and create a process that facilitated competition given the presence of one incumbent non-3G operator (SONOFON)
Approach
Benefits and results
• The auction was won by the incumbent non-3G operator (SONOFON), which has since begun the rollout of its 3G network• The award process and result was accepted by the three existing 3G licensees• The NITA hailed the award to have been a significant success
Value to potential bidders of winning auction vs. alternative strategic options
Illustr
ative
Wins auction TemporaryMVNO
Waits forexpansion
band
PermanentMVNO
NP
V
Case study 1
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Confidential
We advised Ofcom on the award options for the L-Band (1452–1492MHz)
• We used our ‘tried and tested’ methodology for such awards, working with our partners DotEcon:
detailed market assessment, encompassing a review of the candidate uses of the band, an extensive interview programme with potential users of the band and equipment manufacturers, and detailed modelling of the value to individual users
award process design, including recommendations for spectrum packaging, licence design (e.g. usage rights, minimum term) and design of the award process (assessment of candidate auction formats)
• In conjunction with our sister company Mason, we also conducted analysis to understand the international interference restrictions on future users of the L-Band
Business challenge
• Ofcom’s standard process is to award spectrum on a service- and technology-neutral basis by means of an auction so that the market can determine both the best use and best user of the spectrum
• The L-Band has particular importance and represents a challenge for award design as it is of interest for a number of diverse applications: T-DAB, S-DAB, mobile multimedia (e.g. DMB, DVB-H), broadband wireless access, or audio links
Approach
Benefits and results
• Ofcom consulted on the L-Band award in Spring 2006 based on the recommendations of this study. Its intention is for an award to take place by the end of the financial year 2006/07
• Analysys/DotEcon/Mason are well established as key advisors to Ofcom on spectrum policy and award assignments. This work built on a number of spectrum studies undertaken for Ofcom. Other high-profile studies have included 2G spectrum liberalisation, award design for the 2.6GHz band and ‘digital dividend’ spectrum (both ongoing)
Incoming international interference
Valuation of spectrum for individual users
Valuation(GBP)
DVB-H XXXX
DMB XXXX
UMTS TDD XXXX
WiMAX XXXX
S-DAB XXXX
PMSE XXXX
Case study 2
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Confidential
By considering options for mobile operators facing increased traffic demands, we produced a long-range forecast of spectrum demand in Europe
• Our approach was to understand the spectrum requirements from an operator’s perspective: operators face a trade-off between the amount of spectrum they have and the number of base stations they need to deploy
• We developed a model that calculated the cost savings that an operator can make from obtaining additional spectrum, through needing to deploy less base stations
• If this saving was significant, we assumed that the operators would demand more spectrum
• We included a variety of scenarios regarding proportion of traffic which occurs during the peak hour, improvements in spectral efficiency, and competing mobile technologies
Business challenge
• In preparation for the World Radio Conference (WRC) 2007, the UMTS Forum wished to understand the spectrum that would be required by Western European mobile operators to 2020
• Analysys was asked to calculate this spectrum demand from 2010 to 2020 given existing mobile traffic forecasts (from the UMTS Forum and the European Commission)
Approach
Benefits and results
• We concluded that, given the traffic forecasts used, operators may require at least double the spectrum currently identified for mobile use• The credibility of our results was enhanced by our wide experience in cost modelling of mobile networks• The UMTS Forum has published the report on its Web site in order to encourage discussion of spectrum requirements and harmonisation among
operators and regulators ahead of the WRC 2007
0
1000
2000
3000
4000
5000
6000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
FMS ‘constant change’
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1000
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5000
6000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Spectrum currently identified for cellular use
FMS ‘smooth developmentFMS ‘economic stagnation’Magicmobile future
Tot
al s
pect
rum
req
uire
men
t (M
Hz)
Spectrum requirements for cellular operators 2010–20*
*Source: Analysys, 2006
Case study 3
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Confidential
We forecast commercial spectrum demand in the UK up to 2025 for a major government review of spectrum planning
• We identified five services which account for over 80% of current spectrum use below 15GHz: cellular, fixed links, broadband wireless, terrestrial TV and satellite
• The key drivers for each service were identified, and their projected evolution until 2025 modelled
• We used methodologies tailored to each service to calculate demand for spectrum, based on the evolution of the key drivers
• Demand was modelled for low-, medium- and high-demand scenarios for each service, with the most likely scenario for each being incorporated into a base case
Business challenge
• The Independent Audit of Spectrum Holdings (IASH) in the UK required forecasts up to 2025 of expected spectrum demand below 15GHz
• We were contracted to determine potential commercial uses for the spectrum and to predict spectrum demand for each service
Approach
Benefits and results
• We predicted that, in the base-case scenario, extra bandwidth would be required from 2012. Total demand in 2025 is likely to exceed current allocations by 2.5GHz
• Our report identified the sub-1GHz and the 6-15GHz ranges as requiring the most careful planning• The results, made available on the IASH Web site (www.spectrumaudit.org.uk), formed a critical part of the final report delivered to the government
and will help guide Ofcom’s future international spectrum allocation work
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8000
10 000
12 000
14 000
16 000
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023
2025
Spe
ctru
m d
eman
d be
low
15G
hz (
MH
z)
Economic downturn Base case Data takes-off
Current capacity sub-15GHz
Urban spectrum demand 2005–25*
*Source: Analysys, 2005
Case study 4
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Confidential
In addition to supporting spectrum managers around the world, we also regularly advise users of the spectrum on a wide range of issues [1]
Category Recent relevant experience Our achievements
Spectrum framework review
• EC spectrum trading study
• Ofcom mobile spectrum liberalisation
• Detailed set of recommendations and action plan for the European Commission to take forward; raised awareness of spectrum trading and liberalisation issues across the European Union
• Assessment of the impact of allowing spectrum not currently used for mobile services to be used for mobile services, and the impact and options for liberalising existing 2G spectrum
Spectrum allocation and assignment options and approaches
• Ofcom Band III/L-Band
• Ofcom Digital Dividend Review
• Dutch approaches to assignment
• Latin America mobile licence award
• Asian 3G assignment options
• Developed recommendations on allocation of spectrum to T-DAB, PMR and other uses, based on an assessment of economic benefits and other constraints
• Currently advising Ofcom on the award process for UHF spectrum, to be released following the switch-over to digital television
• Approach for determining optimum choice of assignment mechanism (first come, first served, comparative selection, or auction)
• Policies and procedures for licensing of new mobile operators
• Quantitative economic assessment of approaches to awarding 3G licences
Spectrum auction advice and support
• Ofcom 2.6GHz band
• Danish 3G auction 2005
• Second GSM licence in the Middle East
• Bid evaluation Belgium/Czech Republic
• For ‘UMTS expansion band’, assessment of interest from potential bidders, estimated value of spectrum, recommendation of key auction parameters including spectrum packaging
• Development of financial valuation models, preparation of an information memorandum, marketing of the licence and design and management of the auction process
• Recommendations on the number of licences, valuation and supporting regulatory policies
• Development of selection procedure; review of bids leading to successful licence awards
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Confidential
In addition to supporting spectrum managers around the world, we also regularly advise users of the spectrum on a wide range of issues [2]
Category Recent relevant experience Our achievements
Future spectrum demand
• UK spectrum demand below 15GHz • Assessed future demand for spectrum below 15GHz from the commercial sector from 2005–25 on behalf of the UK Government (Independent Audit of Spectrum Holdings)
Studies for users of the radio spectrum
• Introduction of spectrum trading
• 3G licence acquisition support
• Consultation process support
• Valuation of spectrum in USA
• Identification of opportunities and threats arising for major mobile operator from potential introduction of spectrum trading in a major West European market
• Detailed 3G business plans for operators in Hong Kong, Malaysia, Taiwan, Ireland, Morocco and Egypt and support during auctions (where relevant) leading to licence acquisition
• Detailed submission for Asian mobile operator for key government consultation
• Valuation of 800MHz spectrum for client to ensure it got market value in major transaction
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Confidential
Industry commentary
Leading Ofcom’s UHF spectrum project consortium
Analysys Mason is pleased to announce that a consortium led by Analysys, including Mason Communications (Analysys Mason Group's technical consulting arm), DotEcon, Aegis Spectrum Engineering and Dr Damian Tambini, has completed its study to further Ofcom's understanding of UHF spectrum and its possible uses.
Further details of the scope of the study can be found on Ofcom's Web site (http://www.ofcom.org.uk/radiocomms/ddr/)
Amit Nagpal, Principal Consultant, December 2006
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Confidential
Amit Nagpal and Lee Sanders
Analysys Mason Limited
Bush House, North West Wing
Aldwych, London WC2B 4PJ, UK
Tel: +44 (0)20 7395 9000
Fax: +44 (0)20 7395 9001
www.analysysmason.com