Examination of Witnesses (Questions 1719
WEDNESDAY 11 JANUARY 2006
Professor Martin Cave and Dr David Cleevely
Professor Cave and Dr Cleevely, welcome. You will know that we
have already produced one report and we are now producing another.
One thing we are interested in is very much this issue of spectrum.
We have known for some time that you, Professor Martin Cave, were
coming. Dr Cleevely, I think you are a fairly recent addition
to the cast list.
Dr Cleevely: I think you can put that down to me
not responding to emails.
I have great sympathy. We have your biography, so we will not
ask you to repeat that. Professor Cave, obviously we have your
report. Could you explain why you were asked to make this report
in the first place?
Professor Cave: Certainly. I have in fact done
two reports: one in 2002 was a general review of spectrum strategy
for the UK, which covered the whole range of spectrum use, both
public sector and private sector; the second report, which the
Treasury commissioned at the end of 2004, was specifically to
address the question of what could be done to improve the efficiency
of spectrum employed for public purposes. It was characterised
as an audit of major spectrum holdings, up to 15 GHz, which includes
the most valuable spectrum. In fact, a large part of that is used
by organisations such as the Ministry of Defence and the Civil
Aviation Authority for public purposes. There was a focus upon
that. As you may know, it specifically excluded broadcasting,
which had been dealt with by other means. I think the concern
behind it was that whereas, as far as private spectrum users are
concernedmobile phone operators and people of that kindthey
have a strong incentive to use their spectrum efficiently because
they have had to pay for it in many cases, and ordinary commercial
pressures impose a kind of operational discipline on the way in
which it is used, on the other hand, with the public sector, a
lot of the spectrum is just allocated free of charge for them
to use; therefore, they have an incentive to ask for a lot of
it and they have a further incentive not to give any up if they
do not necessarily need it to use it very intensively in the future.
So the question then becomes: how do you try to challenge their
holdings of spectrum and how can you introduce a regime which
imposes some kind of financial discipline upon them which actually
gives them a continuing incentive to cut back on their spectrum
use and return unwanted spectrum.
That is very clear. I am always very suspicious when I hear that
the Treasury want to set up a review to improve efficiency. It
always seems to me that that might be another way of saying raising
Professor Cave: I am not really in a position
to do anything except take their motives and their remit at face
value. I must say that personally I have always regarded it as
a huge mistake to use spectrum as a way of raising money, just
simply because in order to raise the money you have to restrict
its use, and by restricting its use, you are depriving consumers
of lots of benefits. I have always been very strongly opposed
to that particular approach. Indeed, I believe it is contrary
to European legislation to do that, although identifying what
is happening is of course rather difficult.
You say, as of course we knew, that broadcasting was excluded
from your review. Why was that?
Professor Cave: Most of the focus of the work
was on public sector, unexplored aspects of spectrum use, particularly
involving the Ministry of Defence. It was, to a considerable extent,
pretty virgin territory as far as investigations of this kind
are concerned. There may have been a feeling that it was quite
a big pay-off to making a start with drilling down into those
areas. On the other hand, the broadcasting issues have been subject
to very considerable debate following my earlier report and the
Government's response to it, which allowed it to introduce spectrum
charging for broadcasting under certain conditions. No doubt,
there was a feeling that quite a lot of work had been done on
that and, moreover, we had now got to the stage where analogue
switch-off was being imminently decided. Presumably any advice
that I could give them on this rather difficult issue was superfluous.
I think that is why it as not included.
Explain to us for the purposes of the minutes of our report the
importance of radio frequency spectrum for broadcasting.
Professor Cave: It used to be of absolutely
fundamental importance because in the world before 1980 all telephone
calls went on wires and all broadcasting went over the airways.
What we have seen since then is the development of a range of
multi-purpose platforms, which are capable of providing services,
such as telecommunications services and broadcast services, some
of them wireless and some of them using wired methods. As a consequence,
we now have a much greater degree of choice over how broadcasting
services should be delivered to households. You can obviously
rely upon analogue terrestrial transmission or digital terrestrial
transmission or satellite, which uses much higher frequencies.
Obviously all of these are spectrum using technologies. Then,
in addition, there are cable TV networks, and also increasingly
the use of a telecommunications network upgraded to provide broadband
services, which is capable of providing video on demand. In a
sense, the importance of spectrum for broadcasting has diminished
to some degree by the introduction of these other alternatives
but that, of course, makes it particularly important that we devise
ways in which pressure can be put upon people providing communication
services to provide those in the right way. There are some services
which have to be provided using spectrum, like mobile communications.
There are many services like broadcasting where you actually have
a choice. In a sense, the introduction of these degrees of freedom
and the existence of these multiple platforms makes the issue
of spectrum management much more difficult and it is much more
important to get it right, just simply because the demand for
spectrum has increased in so many different ways.
Dr Cleevely, have you anything to add to that?
Dr Cleevely: No, not really; I think I would
agree with Martin on this but say in particular that there is
enormous economic potential value, not in the sense that you were
talking about with the Treasury, in spectrum. It is a significantly
under-exploited resource, both for broadcasters and for other
potential users of spectrum. It is very important that over the
next 10 or 20 years, in a world where we are talking about broadcasting
that is going to move to multiple platforms, we get the economic
incentives correct so that then people can take the right kinds
of decisions and innovation can take place. That is where we are
going to create the greatest amount of economic growth and the
greatest benefit for the people of the United Kingdom.
Q1725 Lord Armstrong of Ilminster:
As I understand it, the spectrum is the property of the Government.
I believe our access to it is controlled by international agreement.
I would be grateful if you could confirm that. The other question
is: to whom is the BBC now accountable for its use of spectrum?
Is there any process by which their use of it is reviewed and
Professor Cave: I will try to deal with those
points in order. I think there still may be some residual uncertainty
about precisely to whom the spectrum belongs. Clearly it belongs
in the Government camp, or it is to be disposed of by government.
The Government has committed itself through a United Nations treaty-based
organisation, the International Telecommunication Union, to respect
certain rules concerning the use of spectrum. Broadly speaking,
these rules say that particular tranches of spectrum under this
international treaty should be used for particular very broadly
defined purposes, such as broadcasting or telecommunications or
things of that kind. That does not, however, necessarily impose
very strong restrictions on what happens within the United Kingdom.
It obviously leaves it open within the United Kingdom for the
Government to assign spectrum to particular firms and organisation
in order to fulfil the very general functions which are set out
in the international treaty. As far as the BBC is concerned, I
think I am right in saying that the BBC holds a wireless telegraphy
licence, which permits it to have access to spectrum. That spectrum
is, to a large extent, planned by the BBC in conjunction with
the Radiocommunications Agency previously and subsequently Ofcom,
and decisions are made in conjunction with other broadcasters
about how precisely spectrum should be used in order to maximise
Q1726 Baroness Bonham-Carter of Yarnbury:
Pursuing the questions from a point of real ignorance, you mention
the fact that cable does not use spectrum. Is that correct?
Professor Cave: That is broadly correct. It
is a wire-based technology
Q1727 Baroness Bonham-Carter of Yarnbury:
Who owns/controls the cable access to channels?
Professor Cave: Companies like Telewest and
NTL hold franchises to run cable networks and then they decide
which channels they want to admit to those cable networks.
Q1728 Baroness Bonham-Carter of Yarnbury:
Is there an infinite number of potential channels?
Professor Cave: No. They would have something
of the order of 250 channels on an upgraded cable system, whereas
of course the limitations for DTT are in a 50 to 60 level at the
moment, depending upon technological developments, whereas satellite
is 500 plus, very large numbers.
Q1729 Baroness Bonham-Carter of Yarnbury:
Is the fact that spectrum is so important because the Government
has decided to do analogue switch-off and the BBC and so on will
be using spectrum?
Professor Cave: As I have said, spectrum has
traditionally been the foundation of all broadcasting. Twenty
years ago, just about every broadcast was delivered by spectrum.
What has happened now is that people have moved, first of all,
to other frequencies, which are satellite frequencies, so we have
both terrestrial and satellite delivery using spectrum, and also
both cable companies and telecommunications companies like BT
are now capable of delivering broadcast services to homes using
wire5 rather than using spectrum.
Q1730 Baroness Bonham-Carter of Yarnbury:
The television channels could pursue an alternative way of getting
channels, other than through spectrum?
Professor Cave: Yes, they certainly can but,
of course, whereas satellite is available to just about everybody,
even though only about 10 million households take it up, cable
networks are only available to two-thirds of the population of
the country and have a relatively low take-up level. Analogue
terrestrial and in the future digital terrestrial will be available
universally. If you want to get through to everybody, the simplest
way of doing it is by getting on those platforms.
Q1731 Lord Maxton:
I am not contradicting you because you are the expert and I am
not, very far from it. ADSL and DSL technologies surely are potentially
available to anybody who has a telephone line and that, in theory,
particularly in terms of some experiments actually being done
by some companies in London, is already being done and they are
providing television services down the line. Does that not mean
that basically potentially everybody can get broadcasting without
Professor Cave: Yes, that is certainly true
but the number of subscribers to broadband in the UK at present
is, say, 25 per cent of the population. If you actually have a
channel and you wanted to make it available via ADSL only, then
you would have a limited clientele. I believe there are also some
doubts about the capacity of DSL to deliver broadcasts to those
who are located some distance from the exchange.
Q1732 Lord Maxton:
Is not that the mistake that we made in this country and in other
countries they have not made in not ensuring that the country
is properly cabled to take this sort of television?
Professor Cave: I think that is a very difficult
question to answer because the costs of going snap on a particular
technology at any particularly point in time and of laying down
a permanent universal infrastructure are very considerable indeed.
It is very nice once you have done it because you have it; on
the other hand, it may turn out to be a bit of a white elephant.
Q1733 Lord Maxton:
Countries like South Korea and Japan have done it and it has been
very successful in terms of providing television by a different
route. I see Dr Cleevely nodding.
Dr Cleevely: Steam will come out of my ears
presently, if I am not careful!
You may come in at any stage. Do not wait to be asked.
Dr Cleevely: On the issue that was first raised,
which was about whether you can use spectrum or whether you can
use cable, Martin has been quite correct in talking about the
"as is". My view will differ from Martin's because I
will not talk about the "as is" but what might happen
over the next 10 to 20 years. What you will see over the next
10 or 20 years is what is already happening -as you say- in Japan
and South Korea. You can get far more capacity: hundreds and thousands,
if not millions, of channels, if you wanted to, over wire line
or optical fibre systems. If you actually do the calculations
over a greenfield site for the UK, economically that has now started
to make a great deal of sense. You have to ask yourself: why are
we still broadcasting? The answer is that we still have satellites
flying around in the sky and we still have people with television
transmitters. What we are actually looking at is the period of
transition from a point where most of this stuff goes over the
radio waves and is broadcast, to a position where the vast majority
will be accessed by cable systems because ultimately they are
economically a great deal more efficient. Indeed, you can change
the way in which you access the broadcast channel. In fact, broadcasting
over the next 10 to 20 years might start to start to look rather
antique; to be honest, because if I want to watch something, I
want to watch it now. I can do that off a personal video recorder,
if that is what I want to do, but it is a lot more convenient
if the supplier, as in Japan for example, simply allows me to
watch whichever programme I want to at whichever time. Broadcasting
is an incredibly inefficient and wasteful way of doing that. It
is much more cost-effective to do that using other wireless systems.
Why is it inefficient and wasteful?
Dr Cleevely: That is because, as Martin has
said, for example with satellite, you are broadcasting to the
whole of the United Kingdom but only 10 million households take
it up. In the meantime, satellites are using as much spectrum
as the military do, below 15 GHz. There is a lot of fuss made
about the military using a great deal of spectrum. I declare an
interest in that of course. You have to understand that you are
now broadcasting huge amounts of data for large amounts of people,
many of whom do not necessarily want it. Where you have such a
huge amount of information being broadcast, it is probably better
to start to build systems that are directed to the people who
actually want that, as opposed to just about anybody who could
Q1736 Lord Armstrong of Ilminster:
The underling base of this is that the spectrum is a finite resource
and the wire systems are infinite.
Dr Cleevely: Yes, almost, but spectrum is not
a finite resource. Let me justify that very unexpected statement
on the following grounds. If I have a transmitter that is covering
10 or 100 square kilometres of territory, then I need a certain
amount of bandwidth to transmit a certain amount of information.
But if I have a transmitter that is covering 100 square metres,
I can use the same bandwidth to transfer the same information
and a few hundred metres away I can re-use that spectrum. Just
in the same way as mobile telephony chops up the territory into
smaller and smaller pieces in order to be able to carry more and
more traffic in the same amount of spectrum, we could continue
to do that with broadcasting and any other use of the radio spectrum.
It is a very simple piece of arithmetic to do a calculation to
demonstrate that for 2 GHz, (and the audit that Martin did was
for 15 GHz from 0 to 15 -not quite 0 of course), you could give
everybody in this country 100 megabits per second quite economically;
100 megabits per second translates into several simultaneous high
definition TV channels, plus all the mobile telephony they want,
plus all the internet access they want. Of course "infinite"
is a word that is used with precision by mathematicians and very
loosely in a context like this. There is no real shortage of spectrum.
The pricing that Martin has been involved in, for example, is
specifically directed at opening up this resource, so that we
can actually use it more efficiently and more effectively and
not be constrained in the thinking that we have had for the lat
50 to 100 years.
Professor Cave, do you want to respond to that? I read from your
report here that spectrum is a finite resource. That seems just
to have been slightly challenged.
Dr Cleevely: I was using the term loosely.
Professor Cave: I think David has used the term
"infinite" rather loosely. At any point and with any
given set of technologies, there is only a certain amount that
you can do with it. Just jumping over that point, if I may, I
have tried throughout to avoid taking a position about what is
the most efficient or the most desirable way of delivering services
to people. As far as I am concerned, I am somebody who advises
governments and regulators, and I do not think they should take
that kind of decision. I think that is a decision that ought to
be taken by people who make the investments.
I do not know if you can, but if you were to take that hat off
and express a personal view, would you have sympathy with the
point that Dr Cleevely has put?
Professor Cave: No, because spectrum is available
free; it is a non-depletable resource. It is going to be there
for ever. We should use it as much as we possibly can because
it is a very valuable input. Subsequently, we may have to resort
to other technologies to achieve different things. Basically,
I think we are going to end up with a quilt of different colours
involving different technologies and providing different services
and also, perhaps most fundamentally, constantly changing as new
technologies come in. For anybody to try to control that process,
except through very general regulatory parameters, I think is
a huge mistake.
May I ask one very obvious question? What determines the range
for a broadcast signal? You said that you could use the same bandwidth
for 100 kilometres or for a much small range. What is the other
variable, as it were, which determines whether it is going to
be 100 or 10? Is it the strength of the signal?
Dr Cleevely: It is the strength of the signal;
it is the amount of power that somebody uses. Your mobile phone,
for example, which transmits generally over relatively short distances
and is very sensitive to how far it has to get to the transmitter,
and actually transmits at extremely low power so as to conserve
your battery, for example. The BBC transmitters for broadcasting
can be transmitting in hundreds of watts; they are very powerful
and go over a very long distance. May I also add that Martin and
I may appear to be slightly at odds but we are coming at exactly
the same point but just from slightly different directions? The
real issue here is that in the directing of spectrum pricing,
particularly as applies to broadcasting in this case, I share
Martin's view that that will then generate this innovation, which
will, in the end, determine, through people's preferences and
the operation of the market, without any single regulator or any
central body determining what technology is best; a whole series
of things, many of which we have no idea about yet, apart from
vague ideas that are sitting around in laboratories and in people's
heads. I am absolutely at one with Martin on that.
Chairman: I hear what you say. I would like
to move on to the world as it is, which I think was the point
that you were putting, Professor Cave, and the impact of spectrum