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3. Options for change
3.1 The Spectrum Allocation Process
3.2 Security of Tenure within the Radio Licence Regime
3.3 Security of Tenure on Registration of a Management Right
25. The remainder of this discussion paper discusses possible options for the radio licence regime to offer greater security of tenure in isolation of any other changes to the regime. It does not consider other possible reforms.
3.1 The Spectrum Allocation Process
26. Changes to spectrum allocations involve consideration of:
- Supply and demand for spectrum;
- Commercial versus public good uses;
- International developments; and
- Technology trends.
27. In most cases, the Ministry uses these inputs to develop a discussion paper to seek public consultation on the best use of a particular spectrum band. The Ministry receives responses to the discussion paper, which are analysed and used to prepare papers for Government with recommendations (i.e. on the best use of the band and optimal method of allocation). Papers are written in consultation with other government departments. Once Government decisions are made, the Ministry undertakes work to implement these decisions.
28. It may be desirable to establish a defined methodology for determining when spectrum is to be reallocated. This would promote certainty around the process for spectrum reallocation.
29. Disadvantages exist to having an overly prescriptive methodology, however. It could lead to a lack of flexibility, meaning that the Ministry's ability, as well as the ability of the Radiocommunications industry, to find innovative solutions may be reduced.
Q5. Would a defined methodology for determining when spectrum is to be reallocated improve the security of tenure for radio licences? How and why?
Q6. What steps and considerations would a defined methodology incorporate?
3.2 Security of Tenure within the Radio Licence Regime
30. As noted above, the Ministry exercises its Regulation 15 power of revocation of radio licences in a limited set of circumstances, such as where:
- The Ministry wishes to re-plan the band for another use;
- The licensee is in breach of licence conditions, such as the requirement to pay annual fees or comply with technical conditions;
- The licensee is in breach of a side agreement relating to use, such as an agreement with the Ministry for Culture and Heritage or Te Puni KÅkiri;
- The licence is unused or no longer required for its original purpose; or
- Revocation is desirable for national security reasons or to comply with an international agreement.
31. The Ministry generally allows long lead times if it proposes to compel users to migrate to another band or to change frequencies. The agreement of the licensee to a transition path is often sought. On this basis, revocation under 30(a) above could be subject to a period of notice of, say, five years (although it could be a different timeframe depending upon specific circumstances. Legislation provides different periods of transitional rights to eligible licensees when management rights are created). A five year timeframe is consistent with existing government policy on renewal of management rights.
32. In addition, for revocation under 30 (a) a statement of policy could be made to ensure that a transition path, in accordance with the Ministry's transition plan, is found to replace radio licences that are displaced. In the other circumstances noted under paragraph 30, licences could be immediately revocable on written notice.
33. In order to provide greater certainty around security of tenure, the Regulations could be amended or a statement of policy made describing the framework and circumstances in which the Ministry would exercise its power. A statement of policy would apply to all licences, existing or new. Policies provide less certainty for licensees, as they have limited legal effect and are superseded by subsequent changes in policy.
34. A change to regulations may apply to all existing and new licences, but could have unintended effects, such as providing security of tenure across all licences even if a licence was intended to be terminable. However, it may be possible to write the regulations such that the inclusion of a termination date on the licence conditions overrides any security of tenure. A regulation change may take more time to introduce than the other options described above.
35. Alternatively, it may be possible to include a condition in radio licences setting out revocation rights. Conditions of revocation provide increased certainty for licensees, but only apply to new licences or by amendment to existing licences. It might be used only in well settled bands (e.g. land mobile and fixed) and adapted for other bands. A condition might be implemented relatively simply. The Regulations might also need to be amended to give effect to such a condition.
36. Another option might be to offer radio licences for a minimum period. This would provide certainty for rightholders for the period. Security of tenure would gradually diminish over time and a reallocation policy at expiry would be required, which has potential high implementation costs. Planning of the band would be more complex if the expiry dates of licences did not coincide.
Q7. Should radio licences be allocated with more certainty over their term? How and why?
Q8. If security of tenure should be provided, should different services be treated differently? What criteria might be considered in determining a suitable period for security of tenure?
Q9. In what circumstances would immediate revocation be appropriate?
Q10. Would a change to the licence or regulation be effective to give security of tenure? Is either option preferable?
Q11. Which of the options of a set term or minimum notice for revocation is preferable? Why?
3.3 Security of Tenure on Registration of a Management Right
37. Under Section 110(1) of the Radiocommunications Act, the radio licence regime in Part 13 applies to every radio frequency unless a management right is registered in respect to that radio frequency. Radio licences do not therefore need to be revoked if the band is moved to the management rights regime. Amendments to licences or the regulations may not therefore provide certainty to licensees, as the licence will cease to exist on registration of the management right.
38. The transitional provisions under the Act could be revised to provide more certainty over transition when a management right is created, and to extend the right to all frequency bands. The right to be granted a spectrum licence could be extended to all holders of radio licences. A new right to be provided with a transition path could be provided for in the Act as an alternative.
39. However, it may be that a transition path is not appropriate in all circumstances. Government may consider that people with existing radio licences should compete in an open allocation process when a management right is created in a band. Moreover, the provision of a transition path might not always be feasible if greater amounts of spectrum are converted to the management rights regime.
40. An alternative might be a clear government policy that transition paths will be provided in all cases where management rights are created. While a clear statement of policy would not provide a legislative guarantee, it might provide sufficient certainty to licensees. Section 112 provides for the government to make statements of policy with respect to the radio licence regime.
Q12. Should holders of radio licences have defined transitional rights in the event of conversion to the management rights regime? Why?
Q13. Should such rights be to a guaranteed replacement spectrum licence for a set period, or to be provided a suitable transition path? Are there other options?
Q14. Which option out of changes to licence conditions or regulations, a statement of government policy or legislative change is preferable to provide security of tenure on conversion of spectrum to the management rights regime? Why?
3.4 Financial Arrangements
41. The Crown has generally not offered financial incentives when changes to radio licences are required. In some cases there have been arrangements between two radio licensees, occasionally brokered by the Crown, but not at a cost to the Crown.
42. Under both the Management Rights regime and the Radio Licence regime, once a licence or right expires or is revoked, the previous holder bears the costs of transferring to any new licence or right they wish to use. The difference between the regimes is that under the Management Rights regime, the tenure is longer, so if spectrum is required for re-assignment before the end of the management right, the Crown has to negotiate with the current rightholder/s for early relinquishment.
43. While engineering and licence fees have been waived on occasion where a transition required duplicate services for a period, there has been no assistance with the costs radio licensees incur in making equipment changes. Financial incentives could be provided to radio licensees to assist with the costs of transition (such as equipment changes).
44. There may be disadvantages to providing financial incentives. Firstly, it may create a risk of hold-out if existing licensees decide to hold out for payment whenever a band is re-planned. This may decrease the efficiency of band planning, and increase the amount of time required for spectrum to be re-allocated for new technologies, or in accordance with changes to international standards or Cabinet decisions.
45. It may be unclear where the funding for financial incentives to displaced licensees would come from. The beneficiary of a band re-plan is not always identifiable, for example, in cases where the spectrum is re-allocated under a General User Licence. A possible option is to raise radio licence fees in order to establish a fund to assist licensees with transition costs, should they be required to migrate.
Q15. Should financial incentives be payable for changes to radio licences imposed on licensees? Why?
Q16. How would you see such funds being supplied and allocated?
3.5 Other Issues
Q17. Are there any other issues in the context of this discussion paper that you wish to bring to the attention of the Ministry?
