Increases in population coverage - variations to existing sound broadcasting licences

Policy for determining value of modifications to sound broadcasting licences

Scope

This gives a revised policy for determining the value of modifications to current commercial licences for sound broadcasting (which expire in 2011) and future licences commencing in 2011.

Former policy

The former policy was based on determining comparable licences sold by the Ministry in the relevant area, averaging the sale prices, and calculating an average price per head of population. The population increase of the licence modification was then used to calculate a value of the modification. The licensee was then able to accept either a non-contestable purchase of the modified licence at 110% of the calculated price, of follow a process to purchase the modified licence on a contestable basis.

The former policy used data for licences sold by the Ministry but required decisions about which licences were included and did not consider the tenure of licences. The tenure issue is increasingly important as the remaining period of any modification is now just a few years.

New policy

The new policy uses the values used in determining renewal prices for the 2011-2031 period to calculate modification values, but with an addition to recognise that the tenure of the modification for current licences is only until 2011.

The price calculation is therefore:

Price = [(Pm – Po) x P(area) x (T/240) x 1.1] plus GST.

Where
Pm is the population count of the modified licence
Po is the population count of the original licence
P(area) is the price per head in the relevant transmitter area as listed below
T is the tenure in number of months before expiry of the modified licence.

For current licences T is therefore between 29 (for a modification in November 2008) and 1 (for a modification in March 2011); or
For future licences T is 240 (licence commencing in 2011, expiring in 2031).

If the licensee does not wish to price as calculated above, then an option of cancelling the present licence and the Ministry allocating the modified licence by a contestable process is available.

For licences with restricted hours of transmission (e.g. daylight only) the T value may be further modified to reflect the hours of transmission prescribed on the licence. All hours are considered to be of equal value.

Modification of licences granted non-contestably under the “low value criteria will require a contestable allocation process for increases in population coverage which exceed the population limit (presently 1500).

Application date

This policy is applicable for modifications sought from 16 May 2008 onwards, although it will not be applied retrospectively to any arrangements already completed. POLDOC 008 is no longer applicable for sound broadcasting licences.

Application notes:

1. If Price is calculated to be negative then no increase is charged and no refund is given.
2. If the modified licence is in a different area to the original licence the formulae becomes:

3. The Ministry reserves the right to decide on the applicable population values in any specific instance, and will use its normal propagation prediction tool to derive population counts. At present either the MAPINFO or ICS Telecom tool may be used, but other tools may be used in the future. It is necessary that population counts for the “original” and “modified” licences are obtained with the same propagation model and parameter settings.
4. The FM licence renewal pricing was done using the Kordia model (EPCL – 3dB) but the Ministry cannot assume this tool will always be available. Population data from the renewal offer process using the Kordia model is available and can be used as a benchmark to verify the suitability of any particular population counts. If appropriate, the Ministry may use these values to scale population values from other propagation models.
5. Parties proposing modifications are able to provide their own population counts to the Ministry for consideration, but should also identify the technical basis of this engineering work.
6. Renewal pricing was done using 2001 Census data as it was the latest available data. There is no objection to using either 2001 or 2006 data, providing the “before” and “after” counts are done using the same database.
7. Where there is any uncertainty the Ministry can advise on which specific averaging group value should be used for a particular licence.
8. The Ministry recognises that there may be situations where a proposed licence would have pockets within the coverage contour where the signal is above the minimum field strength, but reception is degraded by signals from other licences (i.e. adverse protection ratios). These areas are expected to be insignificant in determining the overall population counts and will generally be included on the basis of field strength being adequate (although may be excluded by some propagation tools). If the degradation is from adverse protection ratios and is over a significant area, it is probable that the certification requirements of the Radiocommunications Act would not be met. The proposal would therefore not proceed.
9. Where there is overlap or fringing field strengths between licences which are planned for synchronous use, the population counts for each licence should be determined as separate licences, without regard for any impingement or overlap from the other licence(s). This is the present Ministry policy published under Policies for licencing VHF-FM broadcasting services.
   
10. The Ministry will consider the incorporation of new pricing data from auctions held after the renewal offer process only when there is a significant amount of new data available. Modifications to these licences will therefore use the data from the renewal offer process provided below.
11. Application to local commercial licences. These licences were sold with restrictive conditions and therefore achieved a lower market value than for a full commercial licence. When a local commercial licence is being modified the modification price should be calculated using a value per head of population derived from the auction price of the specific licence, and not the figures applicable to full commercial licences given below. The tenure factor, the 1.1 multiplier and GST are still applicable. In practice this calculation is equivalent to doing a normal “full commercial” calculation, with scaling to reflect the lower initial purchase price.
12. Application in MR207. This Management Right commences in 2011 and expires in 2031. Several circumstances exist:

• When the MR 207 licence has already been settled under the offer contract - In this case the Ministry would agree to applying the renewal offer early payment discount to a modification payment. This approach is consistent with modifications which were incorporated into licences subject to the renewal offers of May 2008 and for which early settlement was chosen. The discounted payment would be available only until 31 March 2009, with the full payment being required for modifications after that time.
  
• When the MR 207 licence has not been settled under the offer contract – The Ministry would normally expect that the licence contract is settled before further modification. As an alternative, the Ministry would be prepared to accept either a licence modification under the normal procedures, with full payment of the modification price (but with full purchase still subject to the existing contract settlement); or if the modification price is significant (exceeding $50,000 plus GST) a replacement contract being entered into for the modified MR 207 licence for the total of the original price and assessed modification value.
  
• When the MR 207 licence has been purchased at auction (i.e. Auction 10 0r 11), but the transfer is subject to a Statutory Declaration of ongoing use – In this case the full purchase price has been paid at auction in dollars of today, and the Ministry would therefore agree to a modification on payment of the modification value at the time of modification (with transfer to be effected when the Statutory Declaration was made).
  

The Ministry would normally require and modification of a Crown owned MR207 licence to be associated with a modification of the corresponding current licence in MR 143 (and vice versa). Where an MR 143 licence cannot be modified for technical reasons, the Ministry will accept the modification of only the MR 207 licence on the basis of a replacement contract being entered into as outlined above.

Any proposals for modification which require a new contract to be instigated should be lodged with the Ministry by 1 November 2009 and would be dealt with thereafter. Normal engineering charges would apply. Parties seeking such a modification should forward the details of their proposal to the Ministry to radiospectrum@med.govt.nz rather than initiating an electronic modification.

AM Licences: P(area) value

FM licences: P(area) values for each area