Spectrum - Culture, Media and Sport Committee Contents

Written evidence submitted by Intellect


Intellect is the trade association for the UK technology industry. In 2007, the industries Intellect represents accounted for 8% of UK GDP, £92 billion of Gross Added Value and employed 1.2 million people.

Intellect provides a collective voice for its members and drives connections with government and business to create a commercial environment in which they can thrive. Intellect represents over 750 companies ranging from SMEs to multinationals. As the hub for this community, Intellect is able to draw upon a wealth of experience and expertise to ensure that its members are best placed to tackle challenges now and in the future.

Our members' products and services enable hundreds of millions of phone calls and emails every day, allow the 60 million people in the UK to watch television and listen to the radio, power London's world leading financial services industry, save thousands of lives through accurate blood matching and screening technology, have made possible the Oyster system, which Londoners use to make 28 million journeys every week, and are pushing Formula One drivers closer to their World Championship goal.

In the past 12 months 14,500 people have visited Intellect's offices to participate in over 550 meetings and 3,900 delegates have attended the external conferences and events we organise.


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

Intellect response: The methods adopted by regulators for releasing spectrum range between a "beauty contest" approach and the holding of auctions. The beauty contest methodology involves the regulator publishing a detailed call for proposals (including business plans) and selecting the successful licensees by scrutinising the various bids. In the past this has laid the regulator open to criticism and challenge. Auctions have not completely removed the threat of challenge. However on balance, Intellect believes that the most appropriate methodology lies nearer to the auction method as it enables the market to determine the licence outcome based on the perceived economic and commercial value. However, experience from previous auctions suggest that auctions may not always deliver all public policy objectives such as on competition (number of licensees) and facilitate new entrants. Lack of sufficient spectrum and perceived market potential also limit these objectives. Ensuring that the spectrum to be released is ideally harmonised (common channel plan but no restriction on use) at a European level is important. However other available spectrum should not be held back and made available to the market as early as possible.

The methodology for releasing spectrum for non commercial applications (e.g military, emergency, public safety etc.) also requires specific consideration. In these cases the end users are often public sector organisations who may not be in a position to bid for spectrum. The potential suppliers will not be able to seek spectrum without certainty of customer contracts. In these cases the pragmatic alternatives are for Government to set aside spectrum for such public service applications or to enable spectrum sharing between public service and commercial applications. While there obviously needs to be spectrum for such societal applications we believe that more innovative ways to share spectrum should be considered before allocating spectrum to a particular use.

Whilst mobile broadband is a particular priority currently, there is a diverse range of important wireless applications which also rely on spectrum availability. Space applications have a particular reliance on internationally harmonised spectrum. Any properly integrated spectrum strategy needs to ensure that all have reasonable access to spectrum.

Intellect recognises the difficulties and conflicting factors faced by Ofcom. The Government's plans to update the Communications Act is a useful opportunity to conduct a dialogue between Government and industry to develop a set of principles to balance these various factors in future spectrum releases beyond that already in place for the 800 MHz/2.6 GHz award in 2012.

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

The ultimate objective of spectrum releases should be to ensure that the benefits of innovation in services, applications and technologies can reach consumers as quickly as possible and provide them better (commercial or social) value. It should not be focussed on narrow and short term revenues for the Treasury/Government. The benefits (and indeed revenue) from the long-term sustained used will far outweigh the short-term revenue gain from its actual release.

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

Mobile internet and data volumes are escalating. In its Communications Market Report (Aug. 2010), Ofcom estimates that mobile data traffic increased by 240 %, in the UK over 2009. This trend is likely to continue for the foreseeable future, with the increasing uptake of smart devices and tablets. Even the least optimistic forecast shows very strong Compound Annual Growth Rates (CAGR) of worldwide mobile broadband traffic (ranges from ~40% to ~100% CAGR).Thus there is certainly considerable demand for the 800 MHz and 2.6 GHz spectrum. Spectrum license auction delays are costly to a nation's economy (billions of pounds in lost revenue for each year of delay) and without additional spectrum, congestion will eventually creep in, curtailing growth. The experience of recent auctions in these bands conducted in Europe and elsewhere tends to suggest that the 800 MHz spectrum (with better coverage characteristics) is currently valued higher (per MHz, per population) but with increased demand for broadband services this could be subject to readjustments into the future.

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

The coverage characteristics (ie need for smaller number of base stations due to the larger cell sizes) of 800 MHz band is well suited to provide rural coverage in sparsely populated rural areas. However the limitation in the amount of spectrum available to operators will severely limit the data speeds and numbers of users that can be accommodated in a given location.

The 2.6 GHz band while offering potential for rural coverage has two important limitations: the need for a larger number of base stations and reduced in-building penetration. That said, the 2.6 GHz band is better suited for urban broadband deployments where 800 MHz band becomes capacity constrained due to the same propagation characteristics which enable greater cell sizes.

The delayed timescales (Q1 2012 at the earliest) for the 800 MHz/2.6 GHz auctions will complicate matters for any operators wishing to use these bands for wireless solutions as part of the Government/Broadband Delivery UK's initiative to enable superfast broadband infrastructure in rural areas. This is because the availability of these spectrum bands will be uncertain within the timeframe of some of the broadband project bids.

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

Intellect understands that Ofcom plans to review, following the 800 MHz and 2.6 GHz auction, the licence fees for mobile operators using other, nearby spectrum bands for similar mobile broadband applications with a view to ensuring equitable charges. Whilst understanding the need to review spectrum fees periodically and the requirements of the Government direction, Intellect wishes to reiterate that such fees are in place to incentivise operators to use spectrum efficiently and should take into account other policy objectives including ensuring effective competition and should not be used as a tax on operators. In reviewing such spectrum however, Ofcom should recognise the different usage conditions that are present in the existing bands to be reviewed. Thus the review of fees should take into account a number of factors including the legacy usage (such as voice telephony) in the existing bands as well as the impact of the prices paid in the auction.

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

Many of our counterparts in Europe as well as US, China, Hong Kong, India, Brazil etc have already conducted their release of spectrum for mobile broadband. Having been at the forefront of previous developments in mobile allocations, UK is now lagging our counterparts. Intellect believes that the Government/Ofcom should ensure that no further delays occur.

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

In preparing for the deployment of mobile broadband services in the 800 MHz and 2.6 GHz spectrum, there will be a need for consideration given to the protection of existing services (TV broadcasting and radars) in adjacent bands. Intellect is disappointed that Ofcom has not concluded the necessary considerations and arrangements sooner and with greater clarity.

Finally, whilst recognising the importance of (terrestrial) mobile broadband and the Select Committee's reasons for focussing on the auctions at this time, Intellect wishes to highlight the demands for spectrum from a range of other uses, from satellite communications applications to emergency services. Ensuring suitable access to these crucial services is also important and Intellect hopes the Committee will give due consideration to the wider applications of spectrum (and the relevant regulatory challenges) also.

June 2011

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Prepared 3 November 2011