UK Def 07

 

Memorandum from James Elder

 

Spectrum Charging

 

MoD spectrum usage

The Ministry of Defence is the largest public sector user of radio spectrum using 30% of available spectrum for communication, radar, sensing and control applications.

 

Sale of spectrum holdings

Under its Comprehensive Spending Review (CSR) settlement the Ministry of Defence is required to "...a significant proportion of its spectrum holdings during 2009 and 2010."[1] The Treasury has had its eyes on the receipts of the sale of defence spectrum for some time. As part of the 2004 Pre-Budget Report the then Chancellor of the Exchequer commissioned Professor Cave to undertake a comprehensive audit of public sector spectrum holdings. In his report, Independent Audit of Spectrum Holdings, he concluded that spectrum pricing should be extended to all MoD bands.

 

The Audit considers that pricing all MoD bands on a comparable basis to civil spectrum imposes a greater level of certainty and more consistent incentives on the MoD to pursue opportunities for spectrum sharing or release.[2]

 

Professor Cave's conclusions were endorsed by the government in its response to his audit. It is clear from the government's response that the Treasury was looking to the MoD to the release significant amounts of spectrum that could then be auctioned to the private sector.

 

On the basis of the Audit's recommendations, the MOD expects to identify bands for further or new sharing and trading. The MOD will release or share certain bands, or spectrum at the margins of bands, where there are no significant obstacles to do so, with the first efficiency savings to be achieved by the end of 2007....

 

The band-by-band audit provides a useful guide to where action may be appropriate. Specific spectrum targets will be discussed and set as part of the 2007 Comprehensive Spending Review, on the basis of the Audit's band-by-band study and the assessment of MOD bands provided to HM Treasury by the end of 2006. In this assessment, the MOD will outline specific proposals for release or sharing of spectrum, based on the Audit's band-by-band study. The MOD will also include appraisal of any significant costs involved in implementation.[3]

 

Although Professor Cave recommended that the MoD should benefit from the release of defence spectrum to the private sector the CSR is silent on this issue.

 

Spectrum Charging

The recent requirement that the MoD pay for the spectrum it uses is a new charge on the defence budget. Until 1998 the MoD did not pay for its use of the radio spectrum although it did pay a modest fee to the Radiocommunications Agency to cover that agency's direct administrative costs of spectrum management. Administrative Incentive Pricing (AIP) was introduced under the Wireless Telegraphy Act 1998 whereby government departments, with some exemptions for particular frequencies, agreed to pay fees for spectrum use on a comparable basis to commercial users. Since the introduction of AIP the MoD's spectrum charge has grown significantly.[4]

 

Financial year

Price paid ( million)

1999-2000

12.408

2000-01

22.732

2001-02

22.625

2002-03

23.740

2003-04

24.292

2004-05

24.292

2005-06

55.398

2006-07

49.518

2007/08

49.518

Total

284.523

 

The then Chief of Defence Procurement, Sir Peter Spencer, stated his concerns when he gave evidence to the Committee.

 

I think the 50 million extra per year for spectrum charging, or whatever it turns out to be, is one of many pressures on the budget so it would be irresponsible just to shrug it off and say, "we will mop that up", it is another burden that we will have to cope with one way or another.[5]

 

Although the spectrum charges for the CSR period have yet to be set it is likely that they will rise. Indeed Professor Cave envisages that the MOD may, in future, have to compete in the marketplace alongside the private sector.

 

I don't think the British public is ready for the notion of the Ministry of Defence competing with Vodafone for spectrum. They might be in ten years' time, but not at the moment.[6]

 

The government endorsed this view in its reponse to the Independent Audit of Spectrum Holdings.

 

From March 2006, there will be a presumption that public bodies will acquire spectrum through the market, with administrative assignment by Ofcom only being made in exceptional cases..[7]

 

International Experience

Australia is the only other country that charges its military for spectrum use. However, the introduction of spectrum charging has made no difference to the Department of Defence's spectrum use.

 

The present spectrum charges have had no impact on Defence spectrum management techniques or the efficiency with which Defence uses the spectrum. Spectrum is essential to Defence operations and simply has to be provided...[8]

 

Allied Concern

The US is adamantly opposed to spectrum charging. In evidence to the Senate Armed Services Committee Wesley Clark made his opposition quite clear:

 

Use of the frequency spectrum remains vital to the conduct of military operations. More combat and support systems are dependent on access to the frequency spectrum than ever before.

 

Increasing competition with commercial and scientific users has made this a contentious issue. Within the USEUCOM AOR, we expect efforts to charge for military use of the spectrum will intensify. There has been progress on protecting DoD spectrum and countering spectrum reallocation with the FY'00 Defense Authorization Act. However, a new NATO policy on spectrum pricing which discourages charging other members for spectrum use must still be approved by the North Atlantic Council. While approval of this policy will be a positive first step, we must remain steadfast in our refusal to pay for military use of the frequency spectrum. A coordinated national and military spectrum strategy will help strengthen our arguments on this issue in Europe.

 

The US government recognises commercial concerns about the military use of scarce spectrum; however, under the Commercial Spectrum Enhancement Act commercial users must pay all the relocation costs if they ask the Department of Defense or any other federal agency to vacate part of the spectrum.

 

The introduction of spectrum charging in Australia and the UK is causing concern with other allies. In June 2000 the Combined Communications Electronics Board[9] issued a statement outlining its concerns that spectrum charging was having an adverse effect on Allied interoperability and training:

 

Of greatest concern is that the act of charging for spectrum use by allied military organizations, which are not themselves commercial revenue producing enterprises, may detract from the spirit of cooperation and continued efforts to achieve interoperability among friendly nations who may be called upon to engage in mutual defense or work together in a coalition operation anywhere in the world. As defense budgets are being reduced by significant amounts in every nation, the eventual, inevitable result of paying for spectrum use may well be a much-reduced scale of international training activity. This in turn will lessen the readiness and ability of our military forces to operate together.[10]

 

The CCEB issued a further statement in June 2002 reiterating its concerns that spectrum charging could result in the "Loss of access to essential radio frequency spectrum may require the unplanned early retirement of whole communications or weapons systems or require existing equipment to transition to other frequencies potentially impacting on readiness, reducing combat effectiveness or causing expensive unprogrammed systems replacement or modification."[11]

 

Conclusion

The receipts from the sale of defence spectrum may provide the Treasury with a useful short term fill up for the public finances but very little thought seems to have been given the long term consequences. There seems to be no recognition that defence spectrum requirements should be based on wartime scenarios, even in peacetime, since the delay and disruption of reclaiming spectrum in an emergency make such recovery impractical. Spectrum charges will be an increasing burden on an already overstretched defence budget and could make future equipment purchases a great deal more expensive and limit the UK's ability to operate within a coalition. For example, if equipment is modified to conform to spectrum limitations within the UK, the MoD could find itself in the ridiculous but costly situation whereby it is required to maintain one set of equipment for training within the UK and another set of equipment for use outside the UK.

 



[1] HM Treasury, 2007 Pre-Budget Report and Comprehensive Spending Review, (Cm 7227, 2007/08), para. D8.8.

[2] HM Treasury, Independent Audit of Spectrum Holdings, para. 3.6.

[3] UKSSC, Government Response to the Independent Audit of Spectrum Holdings, page 27.

[4] HC Debates, 22 October 2007, column 9W.

[5] Defence Committee, Defence Procurement, (HC 56, 2006/07), Q212.

[6] New Statesman, Roundtable Discussion: Spectrum Charging, 23 July 2002, www.newstatesman.com/pdf/spectrumcharging.pdf.

[7] Cabinet Official Committee on UK Spectrum Strategy, Independent Audit of Spectrum Holdings: Government Response and Action Plan, para. 3. www.spectrumaudit.org.uk/pdf/governmentresponse.pdf

[8] Defence submission to the Productivity Commission Report, paragraph 111.

[9] The CCEB is a five nation, Australia, Canada, New Zealand, United Kingdom and United

States, forum that works to coordinate military communications-electronics matters between its members.

[10] CCEB, Spectrum Pricing Statement of Opinion, June 2000

[11] CCEB, Significance of Spectrum Access for Military Operations, June 2002.