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2. The New Zealand Spectrum Management Environment
This chapter provides an overview of New Zealand's spectrum management structures and processes.
47. Parliamentary responsibility for spectrum policy under the Radiocommunications Act is with the Minister of Communications. Spectrum policy is closely connected with broadcasting policy: hence, there is a need for the Ministers of Communications and Broadcasting to work closely together. The various relationships between Ministers and Departments are shown below.
48. The Act is administered by the Chief Executive of the Ministry. Spectrum policies are developed and implemented by the Resources and Networks Branch (RNB) of the Ministry, under the delegated authority of the Chief Executive.
49. The Radio Spectrum Policy and Planning [RSPP] group of RNB is responsible for providing policy advice to the government on the allocation and management of the radio spectrum and related commercial broadcasting matters. It is also responsible for ensuring that spectrum allotments are planned in accordance with sound engineering principles. The objective is to ensure that spectrum is used in a way that maximises its value to New Zealand society - by supporting sustainable economic development and such social goals as public safety and cultural expression.7
50. RSPP's functions include:
- policy:
- advice on spectrum planning, allocation and related matters;
- policy and engineering planning documents;
- spectrum auction rules;
- auction management;
- international liaison;
- planning:
- allocation of bands to specific uses (e.g. FM broadcasting);
- allotment of frequencies within allotted bands (e.g. TV broadcast channels);
- technology forecasts;
- spectrum use forecasts; and
- international relationships.
51. The Radio Spectrum Management group (RSM) in the Business Services Branch of MED is responsible for the day-to-day management of licensing activities, including:
- registration of radio frequencies and access to them;
- assigning spectrum and radio licences;
- engineering licences;
- interference resolution; and
- compliance and enforcement.
52. Licensing and engineering fees are charged on a scale that covers the administrative costs of managing the spectrum, including those of RSM and the planning costs of RSPP. RSM's 2002-2003 budget was $11.3 million. Following organisational restructuring in that year it was reduced to $9.5 million and, in the 2004-2005, to $8.7 million, of which $7.2 million is recovered in fees and charges.
53. General information about the allocation and licensing of the radio spectrum is available on-line through SpectrumOnLine, a database maintained by MED. Technical information for radio engineers and band managers can be accessed with the PRISMS Lite search tool.
54. In order to contribute to MED's strategic priority of improving the regulatory environment, new software known as Spectrum Management and Registration Technology (SMART) is being developed. When the system is deployed, members of the public will be able to, online:
- search the Register of Radio Frequencies in real time;
- apply and pay for a radio or spectrum licence;
- pay engineering and annual fees;
- engineer a licence externally - externally engineered licences will require a policy check only;
- register instruments;
- lodge and track interference complaints; and
- modify contact details.
55. The Ministry's licensing regime is designed to:
- minimise interference;
- ensure compatibility of adjacent technologies; and
- encourage technical efficiency.
Three licensing systems operate under the Act: the Management Rights Regime (MRR), the RLR and, as a subset of both, General User Licences (GULs).
The Management Rights Regime
56. The MRR was established to facilitate a spectrum market. The intention was to decentralise spectrum assignment, allowing those who have the best information, the individual users, to make the decisions that determine spectrum allocation. For example, whether a frequency would be of greater value for FM broadcasting rather than land mobile communication can be difficult for an outside observer to assess: individual users, however, will have a good idea of how much the frequency is worth to them and will disclose that value through the price they are willing to pay for the right to use it. In a similar fashion, allowing spectrum users to decide among themselves the patterns of interference that will be permitted is attractive because users are likely to have a much better notion of the cost of interference on one hand and the cost of abatement on the other.8
57. The MRR is a tradable property rights regime, modelled on the Torrens system 9 for land transactions, with a Registrar and Register of Radio Frequencies. It encompasses two tiers of spectrum rights:
- management rights, which give rightholders (the managers) exclusive rights to a nationwide band of spectrum for a period of up to 20 years; and
- a tradable spectrum licence, which is assigned by the owner of the applicable management right, and permits the licensee to transmit radio waves within the range of frequencies specified on the licence.
58. Management rights:
- offer security of tenure;
- are recorded as depreciable assets, with legal boundaries that are recorded on a public register;
- may be assigned competitively; and
- if so, attract charges based on the assignment method (usually auction) and may be tradable.
59. Management rights can be created only by the Crown. Some have been retained under Crown ownership, while most have been sold to private interests. Management rights permit the rightholder to grant spectrum licenses for specific frequencies, within the frequency band specified in the right. Of the spectrum used primarily for telecommunications or broadcasting, approximately 30% has been converted to the MRR.
60. MED policy is to allocate spectrum in its most flexible and technology-neutral form, according to the type of radiocommunications service proposed and the criteria against which access is assigned. Management rights provide this flexibility, as they give rightholders a high degree of choice in levels and timing of investment, and in the type and configuration of the service provided. Radio licences issued under the RLR are more prescriptive. Hence, wherever appropriate, the Ministry makes spectrum available through the MRR. When supply exceeds demand or the band is heavily encumbered, however, there is little benefit in making the conversion.
61. To date, only national management rights have been offered under the Act, thus confining the range of interested purchasers to larger, well-funded organisations with a national scope. A recent report by Market Dynamics 10 argues that, to create a competitive market and facilitate the entry of smaller organisations, management rights should be offered on a regional basis, despite the complexity this would add to administering the MRR.
62. Government has chosen to retain some management rights, typically for broadcasting uses, from which it issues spectrum licences to individual users. This has created a hybrid management regime, with elements of both the MRR and the RLR (Broadcasting Issues).
Issue 2.1
How has the development of the MRR and the market for spectrum given effect to the objectives underlying the Radiocommunications Act 1989?
The Radio Licence Regime
63. There are many spectrum uses where the facility to trade spectrum rights is not desirable, and value to society is perceived to be maximised through direct allocation by the Government. These include radio-based services:
- of a non-communications nature (e.g. radio beacons, radar);
- provided in the public interest (e.g. defence, security, safety of life);
- subject to international accords (e.g. maritime, aviation);
- meeting the Government's social and cultural policy objectives (e.g. public broadcasting, Māori broadcasting);11
- facilitating scientific studies (e.g. meteorology, space communications);
- other non-commercial activities (e.g. Citizens Band; Amateur Radio).
64. Access to frequencies not taken under the MRR is managed by the Chief Executive (CE) of the Ministry under Part XIII of the Act. Current features of spectrum assignment under this regime are:
- no guarantee of tenure;12
- no value as assets;
- no tradability; and
- no competitive assignment.
65. The RLR operates on traditional frequency assignment lines, through the issue of radio (device or station) licences. The majority of the spectrum is managed under this regime, with approximately 36,000 licences extant (3,500 were issued in the year to December 2003). Most spectrum for non-cellular mobile and fixed services is assigned through the RLR. Radio licences are issued for a specified period, subject to the payment of annual fees. They are normally assigned on a first-come first-served basis and are not tradable.
Fees
66. Initial and administrative fees are charged for each individual radio or spectrum licence registered under the Act. Fees are based on cost recovery (that is, the amount charged is set at a level intended to recover the direct and indirect operating costs of the Ministry), with some differentials that relate to frequency, bandwidth and power.
67. Licence fee revenue accrues to the government, which keeps a year-to-year memorandum account so that revenue and costs can be balanced in the long term. Issues of over-recovery and cross-subsidisation under the current fee regime are being addressed by a series of amendments to the Radiocommunications Regulations.
General User Licences (GULs) and Exemptions
68. An important category of licence is managed under both regimes. These are the General User Spectrum Licence (GUSL, managed under the MRR) and the General User Radio Licence (GURL, managed under the RLR). These licences permit the use of specified spectrum with no requirement for individual licensing or fee payments.
69. Uses of the GUL bands typically include such radio-based applications as wireless local area networks (WLAN), cordless telephones, garage door openers, remote locking devices, maritime VHF radio, CB radio and, in New Zealand, low power FM broadcasting. The technologies employed, their conditions of operation, and their minimal operating radius normally limit the likelihood of interference with other services. Internationally, GUL bands are termed public parks or class licence bands. Where there is unrestricted access to such bands they are termed unlicensed bands or spectrum commons.
70. It is possible for some classes of radio licence to be exempted from licensing requirements, but the Ministry prefers to use GULs where individual licences are impracticable or inappropriate. Hence, exemptions are seldom considered, other than temporarily, when a GUL is pending.
71. A growing use of GULs as an alternative to privately owned management rights is for broadband communications services, particularly those employing such "smart" technologies as IEEE 802.11, and WiMax. Smart technologies have the potential to control the impact of interference on other services, and therefore may not require interference management or exclusivity of rights. Some commentators believe that spectrum management will eventually be revolutionised by these smart devices, as they eliminate the need to allocate specific spectrum bands to particular uses or users. However, it should be noted that, once a band has been allocated to a GUL, it can become populated rapidly by users whose nature and number is unknown to the regulator. It therefore becomes difficult to return the band to an individual licensing regime.
72. New Zealand is well advanced in using "public parks" for spectrum management, and has instituted general user licences for WLANs as well as for high-capacity long-distance links in the 5.8 GHz band (following the US lead) and for low power FM broadcasting in the guard bands (see Low and Medium Power FM Services).
73. There are incentives for users to locate their services in the GUL bands, as there are no entry or licence charges. Given that they are using a scarce public asset, there may be some theoretical rationale for the regulator exacting an appropriate usage payment. This is likely to be outweighed, however, by the difficulty of identifying users and setting a justifiable price.
Applying the Regime
74. Economic benefits of radio spectrum management are generally maximised where:
- sufficient exclusivity of use is provided to enhance the value of particular parts of the spectrum;
- security of tenure encourages spectrum-related investment;
- there is a reliable means of resolving interference problems with minimal transaction costs, both within and outside New Zealand's legal jurisdiction;
- spectrum can be acquired or disposed of freely at a fair market value; and
- concentration of control of the spectrum does not unnecessarily inhibit competition.
75. In general, spectrum is allocated to the MRR or to a GUL to promote the efficient operation of the downstream markets that use that spectrum. Key considerations when converting to the MRR are whether demand for the particular spectrum exceeds, or is likely to exceed, supply and whether the market will be in a better position to make technology and implementation choices, initially and over time. GULs are chosen where the risk of interference is low, and individual licensing would impose relatively high compliance costs without perceptible benefit.
76. Spectrum is retained under the RLR where the public interest is served by a retention of Crown command-and-control (e.g. for the use of public safety and security services or to meet Treaty of Waitangi objectives) or where commercial use of bands is settled and supply is adequate to meet demand. In the latter case, consideration could be given to pricing the bands in a way that more closely reflects their market value.
Issue 2.2
For spectrum in the RLR, are any changes to licensing conditions advisable (e.g. tradability, resource rentals, differential charging) to promote the highest value use for spectrum?
Modifying the Spectrum Environment
77. The private and public sectors have identical interests in procuring spectrum: that is, both wish to obtain it at the lowest price and/or opportunity cost in order to achieve productive efficiency. Spectrum is one of a range of goods and services utilised by government, the majority of which (for example, energy or labour) are purchased on the open market. The question should be asked, therefore, whether government should allow all spectrum to be tradable and assigned on a commercial basis.
78. The perceived advantages are that a relatively restrictive dual assignment system would be replaced by a wider and (presumably) more efficient market, and that government spectrum transactions would be transparent and equate with their opportunity costs. A possible counter-argument is that the government's primary role is to promote the public benefit, and that in a commercial spectrum market a significant number of desirable social and cultural outcomes might be defeated (see, for example Low and Medium Power FM Services). It is also likely that government's transaction costs would be increased.
79. Open market purchase of spectrum by government would require the regulatory authority to be at arm's length, as a statutory authority. Spectrum with multiple potential uses and users could be traded by this entity, which might also act as an agent for secondary transactions.
Issue 2.3
Should the transfer of spectrum from the RLR to the MRR be accelerated? Is there merit in transferring all non-essential spectrum to the MRR?
80. A further option for change is to retain the current MRR/RLR regime but to progressively allocate more spectrum to "public park" uses (see paragraphs 69 and 301), which would tend to ease the demand for individually licensed frequencies and lower the transactional costs of licensing. Intelligent technologies (see Software Defined Radio) may in the foreseeable future make this a practicable option even for such essential functions as emergency services and defence.
Interference Management
81. Interference is managed primarily through "engineering": that is, by planning such technical parameters of licences as frequency, bandwidth, power, aerial pattern, distance and other pertinent factors, so that interference is contained within acceptable limits. A simple form of interference minimisation is to create a "guard band" between adjacent transmission frequencies. These are commonly used to protect radionavigation and safety service radiocommunications.
82. While considered necessary to protect safety and security services, guard bands are per se an inefficient use of spectrum. The ideal of spectrum planning and engineering is a licence that assigns the minimum possible bandwidth and power for the service concerned, while containing interference beneath an acceptable threshold level. ITU Radio Regulations and Recommendations define some of the pertinent parameters.
83. Engineering certification for radio licences has traditionally been carried out by RSM, but the current plan is to offer licensees a choice of engineering services, with RSM providing engineering advice only when there are no viable alternatives. Certification for radio and spectrum licences under the MRR can now be undertaken by Approved Radio Engineers. Band managers are responsible under the Act for the engineering of spectrum licences within their bands.
84. RSM investigates, in order of priority, complaints about interference to safety services, broadcast services and radiocommunication systems, and also carries out audits. RSM does not investigate interference to private management rights, but will assist on a case-by-case basis when non-compliance with electromagnetic compliance legislation, interference by RLR licensees, or safety to life or property is suspected. Typical examples of interference sources are jammed microphones, unintentional distress signals, faulty transmitters, cracked insulators on power lines, shaver sockets, and faulty home appliances.
Spectrum Management Overseas
85. Most nations of the world, with such rare exceptions as Guatemala (paragraph 144), tend to have retained administrative licensing of spectrum in a governed market. There is a growing trend, however, towards the free market assignment of "commercial" spectrum. In the United Kingdom, for example, Ofcom has recommended liberalisation of the management regime (see United Kingdom). A number of other examples can be found in the Appendix.
7 Our Strategy for Growth, 2004-2007 MED, 2004
8 Management of the Radio Frequency Spectrum in New Zealand, National Economic Research Associates (London), November 1988
9 Developed in Australia, a system of the registration of interests in land in which documents are closely regulated, monitored, and examined by the recording authority to ensure that they are correct and that title is transferred without flaw. Property may not be transferred if uncorrected title defects exist.
10 Allocation and Acquisition of Radio Spectrum, Market Dynamics/Moore Wright Associates for MED, April 2003 (pp 54-56).
11 The Māori Television Service has been allocated a UHF management right, and a number of iwi broadcasters hold spectrum licences.
12 In practice, tenure is renewed indefinitely until the licence is relinquished, or cancelled for cause.
