This document discusses spectrum trading and lessons learned from the UK experience. It provides context on the growth of commercial applications using radio spectrum. Spectrum management can involve either rationing transactions like auctions or bargaining transactions like spectrum trading. The UK experience found that most trades occurred for business radio licenses, where the buyer and seller were often in the same industry. Business radio had higher trading activity because the equipment is exchangeable, low cost, and interference patterns are well established, making it more like a separate asset that is easier to trade. Spectrum trading works best under limited circumstances when interdependency among users is low and technologies are mature.

1. Spectrum Trading RajenAkalu

2. Outline Why trade spectrum? Perspectives on ‘the market’ Spectrum trading UK Lessons learned

3. Growth in Telecommunications and use of Radio Spectrum Extensive growth in commercial applications -PCS -3G -MMS -Mobile Satellite GPS Environment -Earth exploration -Imaging Internet -Wireless LANs Broadband Digital Broadcasting Short range devices (RFIDs) Growth in commercial usage -Paging -2 way radio -Cellular TV Colour Experimental Radio astronomy Satellite Services Aeronautical Broadcasting FM Television B/W Government MilitaryNavigation Commercial Facsimile Mobile Radio AM broadcast Telex Air to ground Microwave Links Telephone Beacons Weather reports Time signals Telegraph Spark sets continuous wave sets Transistor Internet Microprocessor Vacuum Tube 1900 2000

4. The Art of RF Management

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6. Transactions Rationing transactions: Allocation of use and Primary assignment of rights (Auctions, beauty contests, FCFS) Bargaining transactions: Spectrum trading (secondary market) Bargaining Rationing A B Managerial

7. Market mechanisms Auctions Spectrum Trading License transfers between undertakings Administrative incentive pricing

8. Two Perspectives on Markets Market as objective Aim of spectrum management: ‘Maximization of Output’ understood as economic efficiency Market as tool/instrument Aim: Depends on context – efficiency only one consideration

9. Rationing transactions Apportioning benefits and burdens among market participants Arguments and pleadings (Consultation)

10. Operational goals of Spectrum Management NRA responsible for that which operators are unable to do acting individually: Mitigation of interference Stimulating spectrum users to adopt spectrum saving equipment when not in their economic interest to do so. n.b. also excludes public interest goals

11. Spectrum Trading (UK) s. 168 Communications Act [transposes Art. 9(2) Framework Directive 2002] Transfer Notice Registry Fewer trades of licenses than expected No distinction between trades and license transfers between undertakings Price is not public

12. Spectrum Trading (UK)

14. Transfer Notice Registry

15. Business Radio trades by type Trades Business radio technologies 1. PMO for Public WAP 55.74 – 87.50 (10) 2. PMO public mobile data (non-voice) 136 – 208 MHz (119) 3. PMO for Public Access mobile 450 – 270 MHz (55)

16. UK trade data Most trades occurred for business radio Trades more likely where the buyer/seller of spectrum are in the same service/industry the likelihood of a trade occurring if the buyer and seller are in the same industry is 61.5%

17. Why does business radio have the highest number of trades? Compare traded bands with non-traded bands (e.g. satellite aeronautical bands) High levels of interdependency, inter-operability and high entry costs) Business radio equipment is exchangeable, low cost, well established (i.e. known interference patterns). Regarded as a separate asset class of the firms core operation Limits the scope for bargaining transactions to coordinate innovation as defined.

18. Conclusion Spectrum trading can work but under limited circumstances Interdependency among users low Mature technologies with a heterogeneous user base Radio a separate asset class of firm’s core operations