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Expiry of rights: Minutes
Minute of decision
26 May 2004
Contents
Public broadcasters: Radio New Zealand and television New Zealand
Non-commercial community access and other special purpose broadcasting
On 26 May 2004, the Cabinet Policy Committee:
Commercial rights
1. noted that commercial spectrum rights established under the Radiocommunications Act 1989 (the Act) are due to expire from 2010;
2. noted that in May 2003 the Cabinet Policy Committee (POL) agreed to the following policy for dealing with commercial spectrum rights at their expiry:
2.1 commercial spectrum rights be reallocated five years before expiry for a further 20 years, subject to review on a case-by-case basis to ensure consistency with New Zealand's international radio obligations and the general objective of maximising the value of the spectrum to society as a whole;
2.2 subject to the review outlined in paragraph 2.1, the Crown should receive a fair financial return for the use of spectrum in the future period;
2.3 spectrum rights be reallocated to existing rightholders based on price-setting formulae that estimate the market value of the rights, and, if existing rightholders do not wish to pay this price, the respective rights be reallocated by way of auction;
3. noted that, in accordance with Cabinet directions, the Ministry of Economic Development (MED) commissioned the development of a price-setting formula by Covec Limited, which in its simplest form applies a compound growth factor to the price originally paid for rights to determine an offer price (price-setting formula);
4. noted that initial discussions with, and submissions from, industry indicate general support for use of the price-setting formula;
5. agreed to adopt the price-setting formula referred to in paragraph 3 as a general framework for implementing the policy noted in paragraph 2;
6. noted that for some spectrum rights, base price data may need to be adjusted before application of the price-setting formula (such as by averaging or benchmarking where base price data is not available or to promote administrative simplicity), and that for other rights, alternative approaches such as allocation by auction may be required;
7. authorised the public release of the discussion paper "Implementation of a Price-Setting Formula for Reallocation of Commercial Spectrum Rights" attached to the submission under POL (04) 104 as a basis for consultation on implementation of the policy noted in paragraph 2, including application to rights due to expire before 30 April 2011;
8. noted that the discussion paper proposes the following approach for rights due to expire up to 30 April 2011, subject to consultation and Cabinet approval:
8.1 UHF-TV spectrum licences originally allocated individually will be offered to existing holders using the price-setting formula where they are in use, subject to averaging of comparable rights;
8.2 UHF-TV spectrum licences originally allocated in licence sets designed for near-nationwide coverage will be reallocated by auction where they are in use, as base prices for those rights are unlikely to reflect market value;
8.3 AM and FM spectrum licences will be offered to existing holders under the price-setting formula where they are in use, subject to averaging of comparable licences, and shorter term rights (e.g. 10 years) may be offered;
8.4 management rights for multipoint distribution services (MDS) will not be offered as these rights have had no significant use to date;
9. noted that in particular circumstances it may be appropriate to offer spectrum licences for a term shorter than twenty years;
10. noted that the discussion paper proposes MED's preferred position regarding the growth factors in broadcasting markets, as jointly proposed by the New Zealand Institute for Economic Research and Covec Limited;
11. authorised the Associate Minister of Communications be to make minor editorial changes to the discussion paper before its public release;
12. invited the Associate Minister of Communications to report to the Cabinet Policy Committee by 31 March 2005:
12.1 seeking final approval of a process for implementation of policy on expiry of commercial radio spectrum rights;
12.2 seeking approval for contractual offers to be made to relevant parties for spectrum rights due to expire before 30 April 2011;
13. invited the Minister of Communications to seek approval for contractual offers to be made for rights expiring following 30 April 2011, including those for mobile telephony, in due course;
Non-commercial rights
14. noted that in May 2003 POL directed MED, Te Puni Kōkiri and the Ministry for Culture and Heritage to report with policy proposals for dealing with non-commercial spectrum rights when they expire [POL Min (03) 9/1];
Public broadcasters: Radio New Zealand and television New Zealand
15. agreed that licences held by Radio New Zealand for provision of its public broadcast services be renewable without payment of a charge as non-transferable licences with appropriate conditions limiting their use, including, where relevant, requirements equivalent to s174-178 of the Act;
16. noted that National Radio has commenced FM broadcasts in many areas, and Cabinet agreed in November 2001 that AM frequencies vacated as a result of this change will be reallocated or auctioned as soon as is practical [CAB Min (01) 34/5A];
17. noted that for the most part, Television New Zealand's (TVNZ) services are broadcast on VHF-TV licences, for which allocation decisions will be made closer to their due date for expiry (2015), but that TVNZ also has a number of (largely idle) UHF-TV licences expiring in 2010 which it acquired on a commercial basis through the auction process;
18. noted that, as a public broadcaster with statutory functions, TVNZ may propose to initiate new public broadcasting services requiring use of its UHF-TV spectrum licences;
19. agreed that, if it receives such a proposal, Cabinet will consider issuing TVNZ the relevant UHF-TV spectrum licences without charge, provided that:
19.1 such licences are non-tradable and issued on conditions limiting their use to the purposes for which they were issued, and allowing for their cancellation in the event that related operations either cease or fail to commence within a reasonable period;
19.2 should such a proposal be accepted by Cabinet prior to offers being made or an auction being held, the relevant rights will be removed from the commercial expiry of rights process;
19.3 should such a proposal be accepted by Cabinet following any agreement by TVNZ to purchase the relevant UHF-TV spectrum licences from the Crown, any agreement to purchase the rights would need to be terminated.
20. agreed that unless such a proposal is approved by Cabinet (see paragraph 19), TVNZ's UHF-TV licences will be treated as commercial rights;
Non-commercial community access and other special purpose broadcasting
21. noted that successive governments have made licences with appropriate conditions available on a case-by-case basis for a variety of non-commercial and special purpose broadcast services without an allocation charge, in recognition that commercial licence allocation mechanisms do not favour the provision of such services;
22. agreed that expiring licences for community and access, student and educational, Pacific, other special purpose services, community extension (where no other radio service is available), and broadcasters listed in the Seventh Schedule under the Act be replaceable without charge and with appropriate conditions, subject to Ministerial approval on a case-by-case basis, where the broadcaster does not have other means of broadcasting in an area, and in the light of relevant government policies;
23. agreed that the appropriateness of offering community extension licences currently held by a broadcaster to community organisations instead, which may then choose to use them for different broadcast services, should be considered on a case-by-case basis;
Māori broadcasting
24. agreed that where AM and FM frequencies have been allocated for the promotion of Māori language and culture in accordance with relevant government policy, further non-transferable licences be made available without payment of a resource fee;
25. deferred consideration of the renewal of the UHF Right specified in the Māori Television Service Act 2003 pending completion of a review of the operation and effectiveness of the Māori Television Service Act 2003 required pursuant to section 56 of that Act, which review is required to commence as soon as practicable after 8 May 2008;
Other matters
26. authorised the Associate Minister of Communications to announce the government's decisions as outlined above and to publicly release the submission under POL (04) 104;
27. noted that the Associate Minister of Communications indicates that consultation is not required with the government caucuses or other parties represented in Parliament.
