Tuesday, September 16, 2014

Spectrum reform is more than closing community television

Reports of Communications Minister Malcolm Turnbull’s Radcomms2014 address focussed on the plan to force community television off the airwaves and onto the internet.

As with all spectrum discussions attention soon turned to the revenue that might be raised by a sale of the spectrum that would be cleared.

But the speech was far more informative of the Government’s plans for spectrum reform, and not all of it is consistent.

Currently there are four different licence types for spectrum use. Television and radio broadcasters are licenced to use spectrum through the transmitter licences issued under the Broadcasting Services Act. All other spectrum is licenced as either apparatus, spectrum or class licences.

Class licences are sometimes referred to as unlicensed - they include the 2.4 and 5.8 GHz bands used for WiFi. As class licences, so long as a use meets licencing parameters, there is no need to separately register the devices.

Spectrum licences revolve around the allocation of a specific “spectrum lot”, meaning a frequency range and geographic area to one user. However, there are still significant restrictions placed on the user to avoid interference.

Finally apparatus licences are very specific about the location of transmitters and receivers and specific frequencies. In practice most of these licences are issued from a template of licences designed for various bands.

The Minister identified three areas of potential reform. The first, under the guise of creating “a clearer and simplified policy framework to ensure transparency and accountability in decision-making” foreshadows a new regime where the Minister will be more empowered to give policy directions to the ACMA in the administration of spectrum.

The second is “to explore with industry is moving to a single licensing framework where there is flexibility available on licence parameters.” In particular this move is designed to improve flexibility.

One difficulty with the existing regime, for example, is that once a spectrum licence has been issued the ACMA is unable to licence another use, even if that use will have no impact on the spectrum owner’s application.

These moves together spell the end from the very simplified version of spectrum licences that have been pursued over recent years. The history of spectrum licencing stretches back to a paper by Ronald Coase in 1959 on The Federal Communications Commission.

Coase claimed that the FCC regulation of the content of broadcasting was not warranted by the “scarce” resource argument, as all resources are scarce butt are allocated using price based mechanisms.

(A similar argument had actually been made by Leo Herzel in 1951, though his focus had been on the standards for colour television rather than the content regulation).

The idea of spectrum licencing as an alternative to regulation gained more widespread interest in the property status of airwaves followed a 1964 article by Ayn Rand.

While the focus of all three had been on the licencing of spectrum used for broadcasting, the use of spectrum licencing in Australia has largely been restricted to the auctioning of bands that have previously been designated by the ITU as bands for mobile telecommunications.

The major exception was the actioning of MDS (2.3 GHz) licences that were used for subscription television. Interestingly those frequencies are now used by NBN Co and Optus for a mobile technology - TD-LTE.

It is unclear exactly how the Minister envisions a simplified regime working, but it presumably will look like a hybrid of spectrum and apparatus licencing. It is also unclear how the class licences fit in such a regime.

It was the third proposal relating to broadcast spectrum that drew the most attention. As well as announcing that community television would be moved off the sixth digital channel in 2015, the Minister confirmed he is staying with the Labor policy of not licencing a fourth commercial channel.

The Minister was encouraging the networks to move to MPEG4 encoding, but seems to miss the point that the networks have no incentive to do so. FTAs had to dragged kicking and screaming to complete the digital switchover.

A move to MPEG4 is potentially just as traumatic, because to be successful every receiver needs to be capable and not all would be.

Announcing that networks can have flexibility in channel use (except for subscription) is presumably designed to encourage the use of MPEG4. But it was actually the reverse, the ability of government to mandate use, that made conversion to digital possible.

The size of the prize could be considerable however. The current frequency restack plan divides the country into five zones, each with six adjacent 7 MHz channels for television. Two additional channels are reserved for digital radio. The decision to not use the sixth channel frees up 5*7 Mhz, while a move to MPEG4 with shared transponders could clear another 2 channels in each zone.

Thats a total of 21 channels. To fully utilise it would require a further restack. That is more than the 18 channels cleared for the Digital Dividend. So not rushing to release the spectrum for the sixth channel and managing an MPEG4 upgrade can pay off well.

Of course there is even more if the Minister thinks linerar television is truly dead and everything moves to the Internet.

Reforming spectrum laws is never easy. Ultimately the Government has to retain sufficient control to coordinate different industry and consumer participants to achieve efficiencies that the market alone will not deliver.

That’s a balancing act that extends well beyond the decision on community television.

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