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Background
Radio spectrum management
7. The objective of radio spectrum management is to maximise the value of radio spectrum to society. To achieve this, it is necessary for spectrum to be held by those that value it most.
8. Since 1989, the Crown has progressively created and allocated tradable, fixed-term rights in relation to spectrum under the Act. These rights have been in one of two forms - nationwide management rights and location-specific spectrum licences - and have generally been for terms of 20 years. Rights intended for commercial purposes have been allocated by price (tenders or auction). The Crown has retained management rights in respect of spectrum suitable for broadcasting (i.e. it has allocated spectrum licences only). Spectrum suitable for telecommunications is held by way of management rights - nearly all of which are held privately. The tradability of spectrum rights means that spectrum use can be easily changed over time to higher value uses that emerge due to changing technology and consumer preferences.
Expiry of rights
9. There is currently no policy in place for dealing with commercial spectrum rights once they expire. The first rights to expire are UHF television licences, which are due to expire in 2010. The Act provides that rights revert to the Crown at expiry, but is silent as to how they should be allocated, either initially or at expiry. An amendment to the Act in 2000 provided for the Crown to create a "succeeding" management right ahead of expiry to ensure a seamless transition from one term to another.
10. This paper is concerned with a reallocation policy that can be applied to privately held commercial management rights and commercial spectrum licences created under management rights held by the Crown. The policy does not apply to licences created under management rights held privately. Issues relating to spectrum licences reserved for the promotion of Māori language and culture and the achievement of the Government's public broadcasting objectives are discussed in paragraphs 39 and 40
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Previous decisions
11. On 5 November 2001, Cabinet agreed to interim decisions outlining a policy for the reallocation of commercial spectrum rights on expiry. These were:
i. that commercial spectrum rights be reallocated five years before expiry for a further 20 years, subject to a 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;
ii. that, subject to the review outlined in i above, the Crown should receive a fair financial return for the use of spectrum in the future period;
iii. that spectrum rights be reallocated to existing rightholders based on price-setting formulae that estimate the market value of the rights, and that, if existing rightholders do not wish to pay this price, the respective rights be reallocated by way of auction.
12. Cabinet agreed that a final decision on the policy for dealing with commercial spectrum rights at their expiry be subject to a satisfactory outcome on the issue of local content on radio, and progress on radio services for young people.
13. Cabinet invited the Minister of Communications to report to the Cabinet Policy Committee seeking a final decision on the policy for dealing with commercial spectrum rights at their expiry once the above conditions had been met [POL Min (01) 29/8-9 refers]. This report back was delayed due to the general election held in July 2002. The 2002 Labour Party Election Manifesto states that Labour will ensure that, at least five years before expiry, holders of commercial spectrum rights are offered the opportunity to renew that right for a further 20 years on terms and conditions negotiated with the Government.
14. On 11 December 2002 the Cabinet Policy Committee:
- Noted that under the proposed policy rightholders will obtain a presumption of rollover for a further 20 years, and not a presumption of (let alone any legal entitlement to) indefinite rollover; and
- Deferred further consideration of the proposed policy until further decisions have been made on radio services for young people: POL Min (02) 22/5 refers.
Views of interested parties
15. The views of interested parties on the reallocation of spectrum rights were sought through a public discussion paper released in June 2000. The general view of respondents was that rights should be reallocated to existing rightholders at least five years in advance of their expiry for a price negotiated with the Government. Essentially, rightholders want the Government to decide its reallocation policy well before their rights expire so that they can plan and invest effectively.
