Spectrum - Culture, Media and Sport Committee Contents


Written evidence submitted by the Federation of Communication Services

SUMMARY

The FCS understands the objective of releasing the 800 MHz and 2.6 GHz spectrum is to ensure rapid and maximum deployment of mobile broadband.

—  The FCS is concerned that there will continue to be barriers to entry into the UK mobile broadband market.

—  The spectrum packages should contain adequate spectrum for each national licensee and a minimum of 2x10 MHz of 800MHz spectrum to enable a healthy fourth operator to compete effectively.

—  There is concern that the proposed coverage obligations do not appear to guarantee better geographic coverage than currently achieved for voice services. We propose that the obligations are extended to include geographic coverage of important public transport routes.

—  The licences should include an obligation to support roaming between providers. This may help to improve the service coverage available to consumers.

—  Rapid delivery of services requires regulatory oversight and FCS suggests wholesale access obligations on the licensees and national roaming between the networks.

—  FCS supports an allocation for sub-national RANs to encourage niche services and argues that there may be a role for setting aside sufficient spectrum to ensure that the Critical National Infrastructure has broadband spectrum for the future, following the example of the USA.

—  The use of auctions for spectrum assignment may not be appropriate in cases of services of public interest such as the Critical National Infrastructure.

—  The band 821-832MHz is not included in the current award. This is clearly a potentially important future opportunity into which other types of services could be deployed. We would expect that a full analysis of other uses, particularly services of public interest, will be necessary prior to any policy of a future auction of this spectrum being established.

INTRODUCTION

The Federation of Communication Services, FCS, is the trade association for the communications services industry representing 320 member companies who deliver products and services by means of wireless, copper and fibre. The majority of FCS members are affected in some way by this consultation and we are pleased to have the opportunity of offering this response.

The views that we put forward are from FCS members who are:

—  Existing and potential new entrant mobile licensees.

—  Mobile service providers and resellers of mobile services who wish to deliver mobile broadband to their customers.

—  Providers of services to the critical national infrastructure and business radio.

Each of these companies is able to support the government's growth agenda by delivering service either to business customers or the general public or both.

KEY ISSUES

In its recent consultation, Ofcom has carefully set out its objectives and stresses the importance of promoting competition and delivering wide coverage of services, which we applaud. These objectives combine to deliver both UK Government and European requirements for mobile broadband. However it is unclear when full mobile broadband service will be delivered. Once the spectrum is released and network operation is started commercial delivery is probably up to five years away and the challenge is to ensure rapid deployment.

SPECTRUM PACKAGES

Ofcom's own research in The Measuring Mobile Broadband in the UK report [May 2011]: http://stakeholders.ofcom.org.uk/market-data-research/telecoms-research/broadband-speeds/main/mobile-bb-10 demonstrates that dongles and data cards have limitations when delivering data over 3G and that, even though network optimisation can maximise service, there is increasing customer demand. The spectrum released by the proposed auction should support projected demands into the next decade.

Ofcom has proposed that in line with the current public mobile market there should be a minimum of four national wholesale licensees and up to 10 shared low power licensees,[15] which maintains Ofcom's infrastructure competition policy.

In this scenario, Ofcom's high level rules for spectrum floors, safeguard caps and spectrum set aside for sub-national operators appear reasonable.

The spectrum packages proposed in this award could be combined with existing spectrum holdings of the four current national wholesalers and/or those released by the Everything Everywhere entity. All providers would need to be able to support an equivalent service to maintain the fair infrastructure competition principle. A healthy fourth operator will require a minimum of 2x10 MHz of low frequency spectrum to be able to compete effectively as Ofcom says it wishes.

MOBILE COMPETITION AT THE RETAIL LEVEL

The FCS believes it is crucial to ensure a healthy competitive retail market so that customers across the UK can easily access current and new services and applications. The FCS retains the view that there continue to be barriers to retail competition in the mobile sector that are not experienced in the fixed broadband market.

WHOLESALE ACCESS OBLIGATIONS TO ENSURE RAPID DDELIVERY

Ofcom and Government are clear that this award is critical to the delivery of mobile broadband, but receipt of services by customers is not certain. The FCS is inclined to favour fair and equivalent regulated access to national wholesalers either as a spectrum licence condition or as a consequential regulatory measure in the event that wholesale access is not forthcoming for the scenario of competing national licensees.

NATIONAL ROAMING

A national roaming obligation among competing licensees would ensure that mobile broadband is delivered where needed. There are already roaming obligations for access to 999 and 112 calls, which demonstrates that this is technically possible. Ofcom would need to ensure that fair termination rates are set without any delays due to reference to the Competition Appeals Tribunal, but this approach would help to satisfy "not spots" and "patchy access". Mandatory national roaming would avoid consumers having to purchase mobile services from a particular carrier on the basis of coverage; it would also reduce the problem of consumers being sometimes reluctant to port away from one network operator to take advantage of new services on a different network in case the coverage of the new operator is not as good.

ROLE OF AUCTIONS

While auctions will be suitable for the national commercial wholesale operators, as in this case to encourage roll out and use of mobile broadband, we do not support allocation of spectrum by auction for every type of licence and noted that in Ofcom's draft annual plan 2011-12 section 3.8 et al, Ofcom now recognise "The market alone is unlikely to secure efficient allocation and use of public assets like spectrum and numbering in all cases".

Once spectrum is released by auction into the market place it is difficult to recover unless rules on "hoarding without use" are brought into play.

OTHER LICENSEES

Ofcom accepts that national wholesalers may act to constrain entry by sub national RANS and as the competition regulator should act to negate this tendency.

We believe that there is demand for sub national RAQNS/low power licences. DECT guard band licences acquired by auction in May 2006 are in use and providing useful services to consumers and business customers in niche markets. The proposal for 10 licences (although this number is not clearly justified) would be supported by existing and potential new licensees. The FCS Mobile 200 group of DECT guard band licensees has demonstrated that competing licensees can work together to develop an engineering co-ordination code of practice which currently operates effectively for the licensees. This template could be brought into play for the new low power spectrum licensees.

Ofcom has not considered the requirements of other potential licensees that require national coverage but for whom the service levels of public mobile telephony services are inadequate for some of their functions. The Critical National Infrastructure community including the utilities, transport and emergency services require certain access to spectrum to fulfil their primary legal obligations. Each of these sectors has time limited obligations set by government and European policy, where communications that are both self provided and publicly available are required.

The railways are one example and quoting from the submission to Ofcom's consultation by Network Rail:

"The railway, in common with other critical national infrastructure, relies on high-quality, highly reliable telecommunications. The quantity and quality of information needed to run the network safely and efficiently is set to continue to grow as signalling, passenger information and train management become increasingly sophisticated to deliver the railway Britain's economy needs.

Currently, GB mainland railway operational communications, to train drivers and key staff, is delivered using legacy analogue radio systems, which are gradually being replaced by GSM-R. All of these systems are built upon a common foundation of good quality, dedicated radio spectrum. This is however just one system element required to deliver a mobile communication system fit for purpose. The next generation of operational mobile communications, such as Automatic Train Operation and In-Cab CCTV, will require even more intensive data flows.

Auctioning spectrum to commercial users makes sense if we want to maximise government's revenues. However, requiring providers of critical national infrastructure to compete with mobile telephone operators risks either under-providing essential spectrum, or over-paying for it.

Maximising income from the auction must be set against the cost to essential public services of doing so. Network Rail's income is made up of direct grant from government and income from train operators, many of whom are in receipt of public subsidy. Most other critical national infrastructure is publically funded; forcing competition between essential public services and commercial operators is unlikely to deliver value for money.

One way to proceed would be to reserve sufficient spectrum for critical national infrastructure. This approach has been followed in the United States and ensures that revenue from commercial operations is maximised and the public interest protected.

If this approach is not followed, in favour of a conventional price-led auction, it is likely that critical national infrastructures may have to buy mobile data services from commercial operators. This would be problematic, because the specifications of the two types of use are quite different. The railway requires extremely reliable and high-quality communications, well beyond what is required for mobile telephone networks. If a mobile telephone signal is weak it is an irritation; if a train with in-cab signalling loses contact with the control centre it would cause significant delays to multiple trains; in the worst-case scenario it could become a safety risk.

In summary, we believe that auctioning spectrum is appropriate for commercial users but not critical national infrastructure or emergency services users. The different specifications required, as well as value for money for taxpayers, mean that to require Network Rail and others in a similar position to compete with mobile telephone services risks under-specifying or over-paying, or both. Reserving a proportion of the spectrum for critical national infrastructure would enable the government to maximise revenue from commercial operators without denying essential public services' rather different telecommunications needs. This approach could either be achieved through direct access to suitable spectrum, or by applying public service commitments to some of the auctioned spectrum"

ANSWERS TO SPECIFIC QUESTIONS

1.  Whether the proposed method of spectrum allocation promotes, or hinders, competition in the provision of mobile broadband services;

The FCS stresses the importance of competition at the retail level.

For either of the spectrum package scenarios set in Ofcom's consultation the crucial means of delivering mobile service to customers is to ensure a healthy competitive retail market so that customers across the UK can easily access current and new services and applications. The FCS retains the view that there continue to be barriers to retail competition in the mobile sector that are not experienced in the fixed broadband market.

The FCS notes that the assignment of spectrum through an auction process may be efficient in economic terms for commercial uses such as public mobile telephony however, it is not the only way to assign spectrum. Were any part of the spectrum to be considered to be valuable for other services the FCS would recommend that other assignment processes be used for that part. In the particular case of spectrum to be used for services of public interest the FCS believes that auctions are inappropriate and a more "directed approach" to satisfying these needs be taken.

2.  Whether the upcoming auction can provide value for money for tax payers and how that should be balanced with benefits for consumers;

The Ofcom approach appears to only consider assignment by means of an auction process. There appears no substantive wider consideration of the total value to the UK that might be achieved by this spectrum were some of it to be used for other purposes. This approach may be in danger of failing to identify other uses that might provide better value for tax payers.

The use of some of the spectrum to provide services of public interest that UK citizens will need for the foreseeable future and which may be very difficult to support by other means is a case in point. The 800MHz spectrum bands could provide excellent geographical coverage opportunities for these services at modest cost. Whereas, the auction appears to seek to place these frequencies into the same class of use as the 900MHz band which today does not provide total geographical coverage. The coverage obligations within the Ofcom consultation proposals will not (and are not intended to) guarantee good coverage on a geographical basis. Therefore it is not clear why improved geographical coverage should be expected as a result of this auction, especially for broadband services which will require even higher levels of infrastructure investment.

In addition to the points relating to operational efficiency in Network Rail's response to the Ofcom consultation (noted above), the needs of rail passengers to use broadband services while travelling are important. There is likely to be strong economic advantages to the UK to having the rail passengers to work efficiently while travelling. This will require good coverage along the railway lines which include rural geographies. The specification of coverage in terms of population density may not align well with the UK Government's growth agenda. The use of mobile communications and especially mobile broadband communications may be extensive while travelling on trains (for example). Coverage for on-train communications is already acknowledged to be inadequate (see section 6.7 of Ofcom's consultation) and the proposed coverage specification appears to not address this.

To alleviate this potential shortfall it may be preferable to examine a coverage obligation that seeks a high level of population to be addressed while at the same time specifically providing adequate broadband service to the railway and other critical transport routes throughout the UK. Thus the 800MHz licensee may be obligated to meet the population coverage requirement with specific geographical obligations also (perhaps along transport route lines). As an incentive they may be offered more radio spectrum.

3.  The potential for next generation mobile internet services offered by the forthcoming availability of spectrum;

The FCS wishes to highlight the opportunity presented by having low-power assignments included in the available packaging. Shared access could be arranged in similar to the DECT guard band licensees through the development of an engineering code of practice co-ordinated by their trade association and in addition would benefit from mandated roaming.

It is not clear how Ofcom settled on the total of 10 low power licences and we suggest that there is no limit on the number of low power licence holders if they are to be allocated by auction. However Ofcom's policies to encourage competition and maximum spectrum use should not be restricted by limiting leasing and trading among the low power licensees.

We question whether 2Mbps is sufficient and whether 6Mbps would be a more suitable threshold

4.  Whether the upcoming auction can deliver improved mobile broadband coverage in rural areas, as well as cities;

The FCS notes that the proposed packaging of the spectrum is rather small for some of the options in the 800MHz band. This will severely curtail the extent to which good mobile broadband services can be delivered to many users outside the reach of the 2.6GHz network. In other words, the FCS is concerned that the proposed packaging arrangement will make a two-tier society quite likely in the UK. The urban-based group would have access to mobile broadband where they live but the other group would not able to take advantage of those same service levels. Taking in to account that these same people may remain similarly challenged in getting quality broadband access through wired means for the foreseeable future, this is a very serious impediment for the realisation of the UK Growth Agenda.

The FCS notes it may very well be possible to deliver services at a relatively slow data rate to many places using this spectrum. But, this slow rate will restrict the available services and consequently the uptake. The operators having licences for these smaller 800MHz packages will thus be placed in a difficult commercial position and their customers will remain largely poorly served if that spectrum is all they have to rely upon.

The FCS urges that the smallest 800MHz package sizes are reconsidered and a minimum of 2x10MHz introduced (as suggested under Option 2 noted in table 5.1 the Ofcom Consultation).

5.  Whether licence fees for mobile operators have previously been set at appropriate levels, and how this should be assessed;

The FCS makes no comment on this.

6  How the position of the UK compares with other countries, with regards to the allocation and utilisation of mobile broadband spectrum;

The FCS makes no comment on this.

7.  The possible impact on alternative uses for spectrum.

Ofcom has not considered the requirements of other potential licensees that require national coverage but for whom the service levels of public telephony services are inadequate for some of their functions. The Critical National Infrastructure community including the utilities, transport and emergency services require certain access to spectrum to fulfil their primary legal obligations. Each of these sectors has time limited obligations set by government and European policy, where communications that are both self provided and publicly available are required.

It is also noted that the specification of coverage by population significantly reduces the likelihood that the public networks resulting from this award will be usable for mission-critical communications by the emergency services (and others). Whilst these users will no doubt continue to use public services on a best-efforts basis, the coverage specification proposed within the award appears to confirm that a further series of spectrum arrangements will be necessary to meet the future needs of the emergency services.

In relation to indoor reception, the current rules restricting the use of cell enhancers etc. imply that the mobile network operator must make provision for indoor coverage. This may prove challenging at 2.6GHz due to the high frequency and the absorption of the signal by modern building materials.

In this context it is important to note that measures taken under the carbon agenda to improve temperature control by shielding the glass (for example in railway carriages and commercial and domestic buildings) have the unfortunate side effect of reducing the likelihood of adequate signal reception. Broadband connectivity has been achieved within carriages by some Train Operators through the use of access equipment but this has been done with WiFi technologies and not mobile technology. Mobile radio network reception has been left unaddressed due to the regulations banning enhancers.

The band 821-832MHz is not included in the current award. This is clearly a potentially important future opportunity into which other types of services could be deployed. We would expect that a full analysis of other uses, particularly services of public interest, will be necessary prior to any policy of a future auction of this spectrum being established.

June 2011


15   It is not clear how the number of 10 low-power licences was determined. Back


 
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Prepared 3 November 2011