Can OFCOM achieve the wireless balancing act?

November 1, 2005

The 19th-century French acrobat Charles Blondin once challenged a member of his audience to climb into a wheelbarrow he was about to push along a tightrope strung across Niagara Falls. Understandably, the terrified soul refused the invitation. Since taking the reins in late 2003, Stephen Carter and his team at OFCOM have embarked upon an equally challenging balancing act by trying to introduce greater market-led flexibility into the traditionally rigid and tightly harmonised rules that govern the allocation and use of radio spectrum. For better or worse, the wireless industry is sitting in the wheelbarrow and needs to be prepared to deal with the implications of this irreversible regulatory phenomenon.

Whatever else it may mean, the introduction of greater flexibility into spectrum management is almost certain to mean that spectrum users need to begin to take greater responsibility for protecting and defending the quality of their spectrum rights. Wireless business models may well also need to consider the commercial impact of some key regulatory questions: should the spectrum band at 1500-1690MHz originally earmarked for 3G now be auctioned for potential use by both non-3G as well as 3G technologies? Are other soon-to-be-auctioned spectra (such as the so called “DECT guard band”) suitable for more innovative solutions, for example large companies using such a spectrum to rollout their own enterprise level wireless networks? What will be done about wireless technologies like ultra-wide band (UWB)[1] which sit rather uncomfortably with the traditional approach to spectrum management? At the same time, the roll-out of spectrum trading and liberalisation make it possible that over the next few years commercial or other private arrangements will begin to supplement regulatory rules as an important part of the way in which spectrum rights are purchased, used, co-ordinated and, where necessary, defended.

The case for harmonisation

To the engineering purist, the dominant purpose of spectrum management is to minimise undue or harmful interference between the users and technologies that crowd into the radio spectrum.[2] The theory is simple enough: because of the risk of harmful interference between different users, the market cannot be guaranteed to produce efficient and competitive allocative outcomes, and therefore regulation is required. This also explains why OFCOM’s spectrum-related duties, set out in s 154 of the Communications Act 2003 (the Act), are themselves shot-through with the language of competition regulation:

It shall be [OFCOM’s] duty, in carrying out their functions under those enactments, to have regard, in particular, to the desirability of promoting –

(a) the efficient management and use of [spectrum];

(b) the economic and other benefits that may arise from the use of [spectrum];

(c) the development of innovative services; and

(d) competition in the provision of electronic communications services.

The language of the Act is drawn principally from European legislation and, in particular, Article 9 of the Framework Directive.[3]

The tension in spectrum management today is not around the desirability of these broad market-based goals but the most appropriate way of achieving them without sacrificing the principal purpose of spectrum management – avoiding harmful interference, both nationally and internationally. Until relatively recently, accepted wisdom was that efficiency would be maximised and interference best managed if the use of spectrum remained tightly controlled by national regulators and co-ordinated across geographic borders (“harmonisation”) and if technical standards for wireless equipment were legislated, either by government or appropriate industry bodies (“technical standardisation”).[4]

As well as protecting against interference, harmonisation of spectrum allocations and standardisation of equipment have also been seen as offering fundamental economic benefits, such as improving investor certainty, economies of scale and facilitating international roaming. It was the tightly harmonised development of the GSM standard, for example, that has often been credited with the high mobile penetration levels achieved across Europe when compared with the United States.[5]

The case for flexibility and how OFCOM is delivering it in the UK

The problem with international harmonisation (and, to a lesser extent, standardisation), like any form of international regulation, is that it develops incrementally and, as a consequence, often very slowly. The ITU Radio Regulations, which ultimately guide the use of spectrum internationally, are revised and amended every three to four years at the World Radio Conferences (WRC). It can often take a several years just to get substantial changes listed on the WRC agenda. Whilst regional groupings such as the EU are able to move more quickly, even at a European level agreement on spectrum issues has often proved slow and laborious.

Over the last few years, critics have become increasingly vocal in expressing doubts about the benefits of promoting tight regional harmonisation, predicated as it is upon regulators taking implicit “technology bets” by imposing common standards and technologies on the market. Instead, platform convergence[6] and the rapid development of open industry wireless standards (such as the 802.11 family of standards developed by the IEEE), together with new and disruptive technologies (such as UWB), are highlighting the way in which harmonisation is struggling to keep up with market-led innovation.

During their first 12 months as UK communications regulator, OFCOM responded by embarking upon a rapid and ambitious agenda aimed at introducing greater flexibility into spectrum management by:

· shifting spectrum ownership and management decisions to licence-holders through the introduction of a system of secondary trading in the market for spectrum;

· allowing licence-holders to apply to OFCOM for permission to change their use of spectrum (ie spectrum liberalisation); and

· to the extent appropriate, providing for “licence-exempt” bands which allow for market entry without the need for securing dedicated spectrum.

OFCOM launched spectrum trading on 23 December 2004 with the enactment of the Wireless Telegraphy (Spectrum Trading) Regulations 2004 (the Trading Regulations). Initially, spectrum trading has been made available only across a limited number of frequency bands, although OFCOM have indicated that they intend to roll spectrum trading out progressively across most other bands throughout the next few years. The introduction of trading was followed closely by the first phase of liberalisation of a number of bands so that relevant users were able to apply to OFCOM for a variation of the licence conditions governing their use of spectrum. The next crucial stage in this process will occur with the second phase of liberalisation, over the next couple of years, as OFCOM develop methods of defining licensed rights without any reference to specific uses or technologies. This will create scope for genuine flexibility by allowing the market and not the regulator to determine what wireless standards and devices use which spectrum.

The message for new and existing users of spectrum in all of this is that the introduction of “harmonised flexibility” brings with it a much greater need for users to protect themselves. Over the next few years, expect to see the task of gaining access to spectrum and defending the quality of spectrum rights becoming a much higher profile part of any wireless business or regulatory strategy. The regulatory changes encourage new and novel arrangements for sharing licensed spectrum rights. Licensees therefore need actively to manage their spectrum interests at two levels. First, and most obviously, trading and liberalisation brings with it an increased risk of interference with more intensive use of frequencies by new users and technologies. The trading and liberalisation processes mean that in the future spectrum holdings have the potential to change hands relatively quickly as well as being transferred for use by different technologies or by multiple users – all of which could increase the risk of interference. At a more strategic level, spectrum users will increasingly need to consider how to help contribute to regulatory developments in this area so as to protect or even facilitate commercial objectives.

“Do it yourself” spectrum management

Whilst OFCOM have no intention of doing away with licences, gaining access to spectrum will increasingly involve negotiating commercial rather than strictly regulatory arrangements, raising the prospect of a number of due diligence and legal issues. The Trading Regulations, for example, introduce scope for “partial” and “concurrent” licences, under which access to the same spectrum can be split between multiple licensees, either on a frequency or geographic basis.[7] This means that licensees will be able to agree their own arrangements for the shared use of bands as part of any trade. The possibility of future agreements between neighbouring or concurrent licensees raises intriguing problems – including how disputes under such agreements might interrelate with the dispute and enforcement obligations of OFCOM under the Communications Act 2003. There is also the possibility of intermediaries such as spectrum brokers offering new forms of short-term access to spectrum, such as spectrum hires, all of which will need to be carefully documented and managed.

As well as purely commercial arrangements, OFCOM will increasingly look to spectrum users themselves to agree their own co-regulatory solutions to interference management. A good example is the auction of the GSM guard band announced in July 2005.[8] OFCOM intend to auction between five and ten tradable WTA licences for concurrent use of the paired frequencies. No specific use or technology will be specified, although the licences will be available only for low-powered uses in order to avoid interference with the neighbouring GSM and DECT users. Importantly, OFCOM have proposed using licence conditions to require licensees to agree amongst themselves an industry Code of Practice to govern engineering co-ordination within the band. OFCOM expects the Code to cover matters that would have traditionally been the sole domain of the regulator such as efficient frequency use of the band, siting of equipment, information requirements and conditions on limiting transmission power. Once in place, OFCOM plan on stepping back from active enforcement in the band, stating:

As a matter of policy, OFCOM will not have a role in resolving individual engineering coordination disputes. OFCOM will only become directly involved where the objectives sought by the Code of Practice are clearly not being secured.[9]

All this is consistent with OFCOM’s insistence that licensees remain responsible for protecting themselves when it comes to undertaking spectrum trades, explicitly recognising in their liberalisation statement that “users would be expected to assume greater responsibility for planning their use of spectrum in accordance with the enhanced freedom that liberalisation would give them.”[10] Whilst OFCOM maintain a public register of spectrum licensees, they will not warrant the accuracy or currency of the register. Moreover, the use of the register has some significant practical limitations:

· it provides insufficient detail to support a trade by not including important commercial information about licence requirements and restrictions (eg power levels or “masks”, antennae restrictions etc), interference levels or pre-existing licence breaches; and

· there is no requirement imposed on either the parties to a trade or OFCOM to notify neighbouring or affected spectrum users of a proposed spectrum trade.

All of these limitations simply reinforce the need for spectrum licensees to undertake careful due diligence prior to any trade or transaction involving wireless licences, including any acquisition of licence-holding entities. For others who use frequency bands near those that have been opened to trading, it may well mean keeping a watchful eye on the register for new entrants and applications.

With almost no spectrum trades having taken place so far and liberalisation still very much in its formative stages, a number of these practical issues remain largely theoretical. Nonetheless, the trend towards flexibility and market-driven management of spectrum is real and irreversible.[11] Those who use or require access to spectrum need to consider how future developments may impact upon the security and quality of their spectrum assets or the broader implementation of their wireless strategies.

Influencing strategic developments

Although the initial shape of spectrum trading and liberalisation has been determined in the UK, OFCOM are now faced with the complex task of delivering on the detail. The challenge of implementing flexibility in spectrum management is not to be underestimated and accounts for the considerably slower progress made by OFCOM over their second year. The nub of this problem is defining rules for spectrum use which are truly “technologically neutral” and no longer link the grant of a licence under the Wireless Telegraphy Act 1949 to a specific technology or defined use. There is also the equally challenging task of harmonising the position in the UK, as far as possible, with the approach adopted by other Member States.

For the purposes of phase one of their liberalisation project, OFCOM have been content to assess applications for change of use by applying the same Technical Frequency Assignment Criteria (TFAC) that have been used to date in their own planning of spectrum assignments and fresh allocations. This is a reasonably safe but short-term solution for OFCOM. Few operators are likely to apply to change the use of their spectrum if they are faced with substantially the same approval process as applies to an application for a new licence. As a consequence, the next stage of the liberalisation process involves a more radical overhaul of the method of defining spectrum rights so that they are truly independent of use or technology. Here the UK is heading into largely uncharted waters and some licensees are concerned that it could represent a shift that leads to erosion of the quality of their rights.

A case in point is UWB. OFCOM launched a consultation on the introduction of UWB in the UK in February 2004, which expressed enthusiasm for allowing for the licence-exempt operation of UWB equipment in the UK. However technical studies subsequently exposed serious interference issues for a number of users, most notably public fixed wireless access in the 3.4GHz band, leading to concerns by a number of industry stakeholders.

Some 18 months after the first consultation and following sustained lobbying by industry, OFCOM published an input document for the current CEPT working group tasked with developing a European position on UWB. The OFCOM proposal recommends the application of stricter technical standards than apply to UWB in the United States as well as the mandating of “detect and avoid” technology to minimise interference with fixed wireless equipment. All of this makes good sense and shows the benefits which can be gained by pursuing a measured and co-ordinated approach to greater flexibility. It also demonstrates the importance of stakeholders both monitoring and taking an active role in contributing to OFCOM policy in this area, either individually or through relevant industry associations.

Some strategic lessons from the mobile and broadcasting sectors

The industry players with the most substantial financial stake in the legacy regulation of wireless technologies are the mobile networks. Given the £20 billion investment made in acquiring their “exclusive” rights to rollout and commercialise 3G, the prospect of liberalisation of nearby spectrum and the auctioning of a further large 190MHz slice for 3G or related technologies (referred to as the “3G expansion band”) threatens to dilute the value of this investment. It is little wonder, then, that the 3G operators have been vocal in seeking a slower and more careful transition to the liberalised market. The mobile operators have raised the prospect of a formal legal challenge to any OFCOM decision that proved inconsistent with the “legitimate expectations” created during the auction process in 2000. Operators have also raised questions of discrimination – given that other relevant licensees[12] (which would be in a position to be able to support 3G networks) would not be encumbered with the same rollout obligations as applied to the original 3G licences.

In response to these concerns, OFCOM have indicated that they intend to delay the introduction of liberalisation of 3G while the commercial and legal issues are ironed out. At the same time the auctioning of the 3G expansion band has been delayed by wrangling at a European level over the extent to which alternative, non-3G technologies should also be able to bid for this valuable spectrum. OFCOM still remain hopeful of awarding the expansion band early in 2007, although this is likely to pose an increasingly challenging timeframe.

Over the longer term, spectrum will also be needed for entirely new mobile business models. There is growing noise in the market, for example, about the prospect of mobile TV. The concept of “mobile TV” is not new and has been used to refer to a range of mobile video delivery options, from the download of short, one-minute “mobisodes” over 3G networks to video streaming and, at the other extreme, full TV broadcasting to special purpose handsets using the broadcast standard DVB-H. Whilst some video streaming is possible over 3G, full terrestrial broadcasting is likely to require access to the more traditional UHF band. Gaining access to UHF spectrum for mobile TV could prove difficult.

In practice, the phased digital switchover plan announced by the government (and the BBC) means that there is little chance of any nationally co-ordinated band of UHF spectrum becoming available for new wireless platforms for at least five or six years. OFCOM have said that they will wait until 2007 before exploring the possibility of trading or liberalisation across the terrestrial broadcast frequencies, once the switchover plan has been bedded down. Even after switchover, mobile TV faces stiff competition for access to this spectrum dividend from, amongst others, the providers of existing terrestrial services who see potential for the spectrum for additional channels and High Definition TV (HDTV). The mobile TV challenge is simply one high-profile example of the way in which securing appropriate spectrum rights remains a key and often challenging priority for any wireless business plan.


The practical effects of OFCOM’s mission to introduce “harmonised flexibility ” into spectrum management in the UK are likely to be felt slowly and incrementally. Neither the OFCOM liberalisation and trading process nor digital switchover will necessarily prompt a flood of new entrants and spectrum licensees, at least any time soon. However still waters run deep and the fact remains that the approach to regulation of the wireless market in the UK and Europe is shifting fundamentally and irreversibly.

Those stakeholders who are hoping to exploit the commercial value of wireless platforms need to come to grips quickly with the increasingly commercial nature of spectrum management. The OFCOM Spectrum Advisory Board may not have been overstating it to suggest in their first Annual Report that in the future both OFCOM and industry may need to develop an understanding of a new kind of “spectrum property law”.[13] If so, spectrum users would be well advised to start putting their wireless stakes in the ground now.

Simon Muys is an Australian-qualified regulatory and telecommunications lawyer with Olswang.


[1] UWB is a form of wireless technology that uses low-powered signals over a very wide bandwidth to support LANs and short distance data transmission.  By operating at low power, UWB devices are said to be able to operate below the “noise floor” and therefore without interfering with licensed users.

[2] This is most clearly seen in the ITU Radio Regulations, which are structured around the priority of avoiding harmful interference. The term “harmful interference” is itself something of a term of art and is defined in No. 1.169 of the ITU Radio Regulations as interference which “endangers the functioning of a radio-navigation service or of other safety services or seriously degrades, obstructs or repeatedly interrupts a radiocommunication service operating in accordance with the Radio Regulations.”

[3] Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (Framework Directive).

[4] The close relationship between harmonisation and standardisation in the area of spectrum management is reflected in the close working relationship between the European standards body (ETSI) and the spectrum management body (CEPT). 

[5] Europe, with its GSM standard and legislated roaming arrangements, has a mobile penetration of approximately 90%.  This contrasts with a lower penetration in the US (61%), a country with multiple wireless standards.

[6] Platform convergence, for the purposes of this article, is used as a reference to the delivery of the same (or closely substitutable) applications using different technologies or service platforms.  One example is the delivery of mobile content using both the 3G and the DVB-H platforms.

[7] Partial transfers are dealt with in reg 6 of the Trading Regulations and concurrent transfers in reg 5.

[8] Award of available spectrum: 1781.7-1785 MHz paired with 1876.7-1880 MHz: Consultation Document, OFCOM, 28 July 2005 (the GSM Guard Band Consultation).

[9] The GSM Guard Band Consultation at para 6.36.

[10] A Statement on Spectrum Liberalisation: Implementation in 2005, OFCOM, 26 January 2005 at para 2.18.

[11] This was reinforced again most recently, at a European level, by the Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee and the Committee of the Regions on a market-based approach to spectrum management in the European Union.  COM (2005) 400, 14 September 2005.

[12] Most notably the 3.4GHz licence currently allocated to Public Fixed Wireless Access.

[13] First Annual Report of the OFCOM Spectrum Advisory Board, 15 June, 2005 at p 14.