In December 2004, the British Chancellor Gordon Brown commissioned Professor Martin Cave to conduct an Independent Audit of Spectrum Holdings, with the aim of releasing the maximum amount of spectrum to the market. In the UK, one-third of the available spectrum is used for defense, maritime, aeronautical, scientific, and emergency services.
The final report was published alongside the 2005 Pre Budget Report and made over 50 recommendations, and focused primarily on public sector holdings, which account for roughly half of the total spectrum in bands that the Audit has investigated (below 15GHz). Both Ofcom and the UK government have welcomed the report and have drawn up implementation plans, which was included in last Thursday’s budget in the UK.
The (UK) government agrees with the audit that there is scope for more effective use of public sector spectrum through the introduction of spectrum trading and increased sharing with other users, and will work with Ofcom to enable this, it said in a statement. The government insisted that it would ensure that sufficient spectrum remains available for national security, defense, and essential public services.
The rationale behind the study is that by encouraging the public sector to more effectively use, or share, spectrum, unneeded spectrum could be sold to telecom and mobile operators in order to raise capital. The government is presumably hoping that any sell-off of unused spectrum will result in another windfall for the government as happened when 3G licenses were auctioned off in 2000. This auction raised 22.5bn pounds ($39bn) for the government coffers, yet it has taken years for the finances of the buyers to recover from this massive outlay.
The government admits that it is difficult to quantify the total economic benefit of the changes under consideration because this will depend on future commercial decisions by network operators, equipment manufacturers, and others, and on choices made by consumers about which products and services to buy. The government’s provisional estimate is that it would realize efficiency savings of between 250m pounds ($433m) and 900m pounds ($1.56bn).
Under the sell-off process, government departments will submit to HM Treasury assessments of spectrum holdings and specific proposals for release by the end of 2006.
However, any sell-off of unused spectrum will be a slow process. The government will publish a strategic Forward Look in March 2007, assessing current spectrum use and forecasting future needs, and every two years thereafter. The effectiveness of market mechanisms in encouraging more efficient use of spectrum in the public sector will be reviewed in 2012.
