Appendix 2: Averaging spectrum licences

The following process for averaging individual spectrum licences has been developed in consultation with PwC:

1. spectrum licences auctioned or tendered are collated and separated by technical parameters (e.g. AM and FM are treated separately). Each licence's population coverage, based on latest census data (currently 2001), is calculated using the technical parameters that applied at original allocation.
2. each auctioned or tendered licence is allocated to an "Averaging Group" based on comparable transmitter locations in terms of target population. A draft list of Averaging Groups identified by location is contained in Appendix 3. In applying the price-setting formula, locations are further subdivided by type (AM, UHF-TV, VHF-FM, etc).
3. the most appropriate population growth rate from the regional and district population growth rates provided in Covec's report is selected for each Averaging Group.
4. The price-setting formula is applied to each auctioned or tendered licence to produce an un-averaged renewal price.
5. A population-weighted average price per capita is derived for each Averaging Group;
6. Each licence for which a comparable right is to be offered is assigned to an Averaging Group, and its population coverage based on latest census data calculated. The offer price for each licence is calculated by multiplying the weighted average price per capita by its population coverage.