Spectrum - Culture, Media and Sport Committee Contents

Written evidence submitted by Arqiva


—  Access to broadband increasingly matters. There is an increasing social and economic cost to each person who falls on the wrong side of this "digital divide".

—  The longer that areas which are broadband "not spots" remain unconnected, the less desirable they will be for inward investment, and the less attractive they will be as a place to live to each successive year's school leavers.

—  The 800 MHz and 2.6 GHz spectrum are both needed to meet growing demand for data by users of smartphones (such as the iPhone) and tablets (such as the iPad), where the 2.6 GHz is best suited to delivering high bandwidth in urban areas, while the 800 MHz is ideal for covering non-urban areas, including very rural areas.

—  But it is also essential that the 800 MHz spectrum achieves what fibre cannot do—universal access to broadband.

—  Arqiva strongly believes that it would be proportionate and highly desirable for Ofcom to increase the coverage obligation for one of the 800 MHz licences from 95% of the UK's population to 99% of each Nation's population.

—  This would bring considerable economic and societal benefits and would also achieve optimal use of this precious spectrum.

—  A range of international studies show that a 10% increase in broadband penetration increases GDP by 1%.

—  In our view, any short-term cost to the Treasury of imposing a 99% coverage obligation on one 800 MHz licence would, over the long term, be considerably less than the opportunity cost of not providing access to broadband, or of providing it years later, to at least hundreds of thousands of homes, schools and farms and other small businesses.


Arqiva is a media infrastructure and technology company operating at the heart of the broadcast and mobile communications industry and at the forefront of network solutions and services in an increasingly digital world. Arqiva provides much of the infrastructure behind television, radio and wireless communications in the UK and has a growing presence in Ireland, mainland Europe and the USA.

Arqiva is implementing UK Digital "Switch-Over" from analogue television to Freeview—a huge logistical exercise which touches every Parliamentary constituency, requiring an investment by Arqiva of some £700 million and which is successfully being delivered to time and budget.

Arqiva is also a founder member and shareholder of Freeview, and operates two of the UK's three Freeview commercial multiplexes, providing 40 services on Freeview to 19 million homes.

Arqiva was a key launch technology partner for Freesat and is also a shareholder in YouView and the licensed operator of the Digital One national commercial DAB digital radio multiplex.

Arqiva operates nine international satellite teleports, over 70 other staffed locations, and around 9,000 shared radio sites throughout the UK and Ireland including masts, towers and rooftops from under 30 to over 300 metres tall.

In addition for broadcasters, media companies and corporate enterprises Arqiva provides end-to-end capability ranging from:

—  outside broadcasts (10 trucks including HD, used for such popular programmes as Question Time and Antiques Roadshow);

—  satellite newsgathering (30 international broadcast SNG trucks);

—  10 TV studios;

—  spectrum for Programme-Making & Special Events (PMSE);[35] to

—  satellite distribution (over 1200 services delivered).

Elsewhere in the communications sector, the company supports cellular, wireless broadband, video, voice and data solutions for the mobile phone, public safety, public sector, public space and transport markets.

Arqiva's major customers include the BBC, ITV, Channel 4, Five, BSkyB, Classic FM, the four UK mobile operators, Metropolitan Police and the RNLI.

Arqiva has bid in three Ofcom spectrum auctions, securing spectrum in two of them.

Arqiva is a British success story, owned by a consortium of long-term investors and has its headquarters in Hampshire, with other major UK offices in Warwick, London, Buckinghamshire and Yorkshire.

Arqiva welcomes the opportunity to respond to the Culture, Media and Sport Committee's new Inquiry into Spectrum.


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

1.  Arqiva agrees with Ofcom that mobile operators would need access to spectrum for both capacity and coverage (essentially sub-1 GHz spectrum) in order for there to be effective competition. There was therefore a risk that one or more of the current operators could have found itself post-auction with a sub-optimal spectrum portfolio with which to maintain its market position, hindering competition. Ofcom has addressed this by proposing an auction design intended to achieve each of four mobile network operators having spectrum for both capacity and coverage.

2.  However as network infrastructure is increasingly shared, and with future mobile technologies supporting carrier aggregation (and therefore pointing the way towards spectrum sharing), competition is increasingly focussed at the service layer.

3.  So there is a risk that, while the proposed method of spectrum allocation promotes competition, Ofcom may be engineering an outcome which may not reflect where the market, of its own volition, is heading.

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

4.  Although securing best value for tax payers is usually thought of purely in terms of auction proceeds, best value should also take account of the economic contribution and achievement of public policy objectives deriving from its use. Indeed Ofcom is charged with securing optimal use of spectrum, not maximising proceeds from its sale.

5.  Of all the spectrum currently lined up for future award by Ofcom, the forthcoming auction of 800 MHz and 2.6 GHz is the single most important. This importance results not just from the need for the mobile operators to address rapidly increasing subscriber demand for data, but also because of the widespread recognition that ensuring universal access to broadband is one of the most important public policy objectives to achieve over the medium term.

6.  Not everyone will be offered fibre; wireless will be the only cost- and time-effective means of providing access to broadband for virtually all those who won't be, with 800 MHz the optimal spectrum to use for that. Satellite broadband will also play a role, but its higher cost and lower speed (combined with higher latency) makes it sub-optimal for all but those who couldn't be cost-effectively offered broadband by other means.

7.  In meeting these expectations, and of satisfying its statutory duties to secure optimal use of spectrum and to serve the interests of citizens and consumers, Ofcom must balance:

—  competition concerns;

—  spectrum efficiency (which, for LTE[36] "4G", is maximised with large contiguous holdings);

—  enabling innovation; and

—  contributing to achieving public policy objectives.

8.  Arqiva believes that Ofcom has got the balance about right - apart from one major issue which must be revisited before Ofcom publishes its draft Regulations for the auction.

9.  While Ofcom has recognised the key role which 800 MHz could and should play in delivering universal access to broadband, their proposed coverage obligation stops short of actually ensuring that universality would be achieved.

10.  This is short-sighted. There is an ever-greater social and economic cost to each person who falls on the wrong side of this "digital divide".

11.  Set against any reduction in auction proceeds directly attributable to an increased coverage obligation would be the economic and societal benefits (visible benefits to consumers). Universal access to broadband maximises digital inclusion, which is an instrument of real social change:

—  Improving the life chances for the unemployed;

—  Widening access to online educational materials and resources, raising children's grades and life chances; and

—  Enabling the financially-disadvantaged and less knowledgeable, or media literate, to pay the same discounted prices for commercial products and services as everyone else.

12.  Studies undertaken by McKinsey, Allen, OECD and the World Bank show that a 10% increase in broadband penetration increases GDP by 1%.

13.  Surely ensuring that the 800 MHz spectrum achieves what fibre alone cannot do - universal access to broadband—must be a key component of providing the best value for money for tax payers, and delivering benefits for consumers?

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

14.  The take-up of internet-connected personal mobile wireless devices—smartphones, tablets, Kindles—has been astonishing and continues apace.

15.  In addition to fast access to the internet, with pages re-sized for a smaller screen and hundreds of thousands of apps optimised for handsets (and for as long as it's connected, a smartphone is constantly sending and receiving data), smartphones are also supplanting stand-alone music and video players, portable games machines and satellite navigation devices.

16.  And with Near Field Communication (NFC) technology becoming integrated, smartphones are becoming the most ubiquitous means of making contactless payments, and will likely become consumers' loyalty cards as well. Smartphones are also becoming a new way to shop, allowing awareness of your interests, tastes, past purchases and location - and your "phone may alert you to purchasing opportunities accordingly.

17.  So handsets acquired principally for their internet connectivity offer much more besides. And technology allows these phones to get smarter (dual core processors now here) with bigger, better screens and more storage.

18.  Therefore the forthcoming availability of additional mobile broadband spectrum offers a twofold advantage. Firstly, the spectrum provides operators with an additional tool[37] to address their subscribers" insatiable appetite for data. Secondly, when the latest LTE technology is deployed, it will offer consumers much faster download and upload speeds.

19.  In 2009 there were 10 million UK mobile internet subscribers, but by 2014 PwC forecast there will be 24.5 million. For many of those consumers mobility, with the ability to be reached anywhere and all the time with personalised, context-specific services, has huge value.

20.  By 2015, Enders Analysis expects:

—  UK smartphone penetration to reach 75%;

—  Mobile internet use to reach 28% of total time spent online; and

—  Mobile advertising spend in the UK to reach £420 million, equivalent to 10% of desktop spend.

21.  400 million smartphones worldwide use more bandwidth than the six billion standard cellular phones in use.[38] 60% of time spent on smartphones is a new activity (maps, games, social etc) for mobile users.[39]

22.  This is a revolution. There can be little doubt that the smartphone is the new PC. But without a data connection, its value is hugely reduced.

23.  The UK needs the 800 MHz and 2.6 GHz spectrum to be awarded without delay - and for the 800 MHz (ideally suited to covering large non-urban areas) to be deployed as widely as possible. This is both to spread the benefits of smartphone (and tablet and laptop dongle) use widely, and to enable that spectrum to be available for use to offer fixed substitute broadband to homes, schools, farms and other small businesses which could not economically (even with public subsidy) be offered fibre.

24.  The most certain way to ensure that the potential for next generation mobile internet services offered by the forthcoming availability of spectrum is spread widely is for Ofcom to require universal coverage from one of the 800 MHz licences.

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

Why improved coverage of broadband matters

25.  Businesses have long realised the importance of having broadband access to stay connected to suppliers and customers, and to have the potential of expanding their geographic spread of their customer base—worldwide if they wished.

26.  Farmers are becoming increasingly vocal where lack of broadband access to the commercial and public services necessary for their chosen profession becomes an additional burden to an essential line of work which, for many, is hard enough already. Other rural SMEs share that view.

27.  Increasingly consumers and citizens need access to broadband for education, work, interacting with public services and for their social life too. Access to broadband at home enables remote working and hobbies to be turned into cottage businesses, and future SMEs.

28.  As we have said previously, recent studies have shown that a 10% increase in broadband penetration increases GDP by 1% and, in addition to the economic benefits, access to broadband can be an instrument of real social change.

29.  There is an increasing social and economic cost to each person who falls on the wrong side of this "digital divide". The longer that areas which are broadband "not spots" remain unconnected, the less desirable they will be for inward investment, and the less attractive they will be as a place to live to each successive year's school leavers.

30.  Achieving universal access to broadband, ensuring that no-one is excluded from the connected, digital society of the future, is one of those rare public policy objectives which has the strong support of all of the main political parties.


Why 800 MHz spectrum has a key role to play

31.  While many broadband "not spots" are in urban and suburban areas, and best addressed by fibre, a large number of not spots are in rural areas and the outer suburbs where the need to upgrade individual connections to each home or business to provide broadband by fibre or other fixed line solution can be ruinously expensive—and this will all take considerable time.

32.  If insufficient homes are clustered together, fixed line solutions are unviable. Fibre requires 50 households per cabinet to make it economic to deploy, so many rural homes could not be offered fibre with the funds currently available for subsidy.

33.  Fibre is not cost effective to deploy for more than 1 million households—wireless broadband is the only practical solution for virtually all of them (with satellite broadband being offered to the final few). Wireless broadband could be deployed quickly and offered to all consumers within range of each transmitter as soon as it was switched on.

34.  The 800 MHz spectrum is ideal for providing universal broadband access (having previously provided universal public service television), covering large areas, bending around hills and going through walls. Conversely the 2.6 GHz spectrum offers high bandwidth but small cell size, and is ideally suited to urban and inner suburban areas,

35.  The effectiveness of using 800 MHz spectrum to deploy 4G wireless broadband in rural areas was modelled for Ofcom and Arqiva in 2009 and, at the end of 2010, Arqiva borrowed some of this spectrum from Ofcom and carried out an extensive 4G trial.

36.  We were able to demonstrate delivery of high speed broadband (in excess of 50 Mbit/s) in a challenging rural environment (difficult and highly costly for fibre to address) where citizens currently experience typical speeds which are less than 500 kbit/s.

37.  800 MHz wireless broadband must be an essential part of the solution to achieve the government's key public policy objective of universal broadband. The special contribution which 800 MHz spectrum should make to achieving this objective has also been recognised by the European Commission, where a recent Commission Proposal[40] to the European Parliament and the Council included:

"Member States…shall ensure that the provision of access to broadband content and services using the…800MHz band is encouraged in sparsely populated areas, in particular through coverage obligations."

38.  Of course, wireless broadband spectrum could be implemented both for mobile broadband (handsets, tablets, dongles) and for fixed substitution (where fixed broadband wouldn't be cost-effective).


The optimal coverage obligation

39.  While Ofcom, in its proposals for the auction, has recognised the key role which 800 MHz should play in delivering universal access to broadband, their proposed coverage obligation stops short of actually ensuring that universality would be achieved.

40.  95% population isn't universality. Indeed it is an obligation so unadventurous that an operator could theoretically comply without deploying its 800 MHz spectrum in the whole of Suffolk, Northern Ireland and Cumbria combined.

41.  Using the same spectrum, and infrastructure still in place, Arqiva delivered more than 98.5% population coverage of television. It is clear that at least some of the 800 MHz spectrum ought to achieve far closer to universality than has been proposed by Ofcom.

42.  The 98% population coverage called for recently by MPs following a debate in the House of Commons on rural broadband would almost achieve the goal, but only a 99% obligation would leave so few consumers potentially requiring a satellite solution (slower and more costly) that there would be no need for alternative, far more interventionist means of ensuring wireless broadband could be offered to them.

43.  The proposed coverage obligation should be assessed by Nation, to ensure that the benefits are spread widely. The Committee should note that the French proposal for their 800 MHz is for the 99.6% coverage obligation to be measured regionally.

44.  Only by imposing a 99% population coverage obligation by Nation—and ensuring universal access to broadband, and hence digitised public services—would the projected huge cost savings from slimming down "offline" Whitehall be achieved.

45.  If imposing a 99% population coverage obligation by Nation on one 800 MHz licence reduces the auction proceeds from that licence (which, given that each block of this spectrum has different characteristics, may not be apparent even when the auction has closed), that short-term loss to the Treasury may be dwarfed by the long term economic and societal benefits of providing access to at least hundreds of thousands of homes, schools, and farms and other small businesses, which would otherwise have been left without.


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

46.  Prior to the 3G licences, the licence fees paid by the relevant operators of mobile spectrum was determined by Ofcom without any market benchmarks and with that spectrum being non-tradable.

47.  Only when the outcome of the 800 MHz/2.6 GHz auction is known will it be clear whether those licence fees were set at an appropriate level.

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

48.  Legal proceedings, and then the last government's Digital Britain initiative, delayed Ofcom awarding the 800 MHz and 2.6 GHz spectrum, but equipment is only just becoming available now and neither spectrum band will be available UK-wide until 2014. There are still many countries which have yet to allocate these bands. So, contrary to the views of some commentators, the UK is not obviously lagging behind in allocating and (more importantly) using this spectrum.

49.  In addition, the MOD has given priority to the release of its 2.3 GHz mobile broadband spectrum.

50.  In terms of utilisation, the UK's adoption of smartphones (28% share of total handset users by March 2011[41]) compares favourably with other major European countries, and all of the operators have felt the impact of their subscribers' insatiable demand for data on their mobile broadband spectrum in urban areas.

51.  But meeting the demand for data requires a data connection, and here the UK arguably has sub-optimal utilisation because there are so many data "not spots". The 3G licences contained population coverage obligations of only 80%, a far less challenging coverage target than was placed on 1G and 2G licences, and 3G is unavailable in many rural areas. This strongly suggests that there is little commercial incentive for investment beyond this level.

52.  The UK should learn the lesson of 3G when licensing 4G, where the 800 MHz spectrum is ideally suited to rural coverage and that spectrum will be awarded against a backdrop of a series of public procurements of broadband where up to £830 million of public subsidy identified by Central Government, plus additional funding from the Devolved Assemblies, the EU and industry itself, will be available by 2017 to make access to broadband of at least two Mbit/s downlink universally available.

53.  Unless the 800 MHz coverage obligation is for close to 100% population coverage, with sanctions for non-compliance, there could be no guarantee that the operator would choose to deploy the spectrum to anything approaching that level.

54.  If Ofcom were persuaded to set a coverage obligation of 99% population, measured by Nation, on just one of the 800 MHz licences, then more than one million homes (maybe two million citizens and consumers) wouldn't be left on the wrong side of an ever-widening digital divide.

55.  Any outcome which left all of the 800 MHz spectrum unused across large swathes of the UK could hardly be assessed to have been the optimal use of that precious spectrum—and it is optimal use of spectrum (a Crown asset) which Ofcom is charged by Parliament to achieve, not maximising auction proceeds.

The possible impact of the auction on alternative uses for spectrum.

56.  Decisions taken by Ofcom on auction timing, auction design, technical licence conditions (ie what purchasers would be permitted to do with their spectrum) and methods of payment for purchased spectrum all influence who might be awarded spectrum and what they might then do with it. Technical- and service-neutrality is a goal for spectrum awards, but it can never be achieved.

57.  In determining an auction design and technical licence conditions, Ofcom has regard to what the market tells it is the most likely source of demand, taking account of current and imminent equipment availability. For an 800 MHz/2.6 GHz auction in 2012, that demand is almost certainly going to be to deploy LTE technology. Arqiva believes that Ofcom is right to assume use of LTE for this auction.

58.  Obviously an auction designed with LTE use in mind might then preclude an alternative use, but Ofcom cannot design an auction to accommodate every potential use and, given the potential for spectrum between different uses to have to be left fallow to minimise interference, arguably seeking to maximise different uses could also lead to a sub-optimal use of that spectrum.

59.  One other factor to note is that there is a risk that, in seeking to derive new licence fees for existing mobile spectrum from the auction values achieved for 800 MHz and 2.6 GHz, Ofcom may be tempted to then determine licence fees for other spectrum with very different economic value, such as the spectrum used by Freeview.

June 2011

35   Such as the wireless cameras operated by the BBC and Sky News, and the radio mics used in virtually all television production and many West End shows. Back

36   Long-Term Evolution, the next mobile technology after 3G. Back

37   In addition to technology upgrades and the deployment of more sites (ie more efficient use of spectrum). Back

38   Source: Orange Business Services. Back

39   Source: AppsFire. Back

40   COM(2010) 471 final Back

41   Source: Enders Analysis. Back

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© Parliamentary copyright 2011
Prepared 3 November 2011