Design Elements of institutional framework for Spectrum trading

What is Spectrum Trading?

ITU study material on radio frequency management[[1]]explains spectrum trading as-

“In the traditional administrative approach to assignment and authorization system, spectrum is first allocated specified uses and then assigned to particular firms or public organisations that carry out the authorized use according to specific obligations as are laid down in a licence or permit. Secondary trading of spectrum, or simply ‘Spectrum Trading,’ permits the purchaser to change the use to which the spectrum was initially put while maintaining the right to use.”

Spectrum trading allows parties to transfer their spectrum rights and obligations to another party, in return for a financial or market benefit.  It allows the present user to decide when and to whom the spectrum authorization will be transferred and what sum it will receive in return.  The market, not the regulator, determines the value.  Further, a consultancy report commissioned by the European Commission, the consulting firm Analysys was cited whereby the following methods for transferring rights of use were identified -

• Sale – Ownership of the usage right is transferred to another party.

• Buy back – A usage right is sold to another party with an agreement that the seller will buy back the usage right at a fixed point in the future.

• Leasing – The usage right is transferred to another party for a defined period of time but ownership remains with the original rights holder

• Mortgage – The usage right is used as collateral for a loan, analogous to taking out a mortgage on an apartment  or a house.

Spectrum trading covers a range of possibilities, from straightforward change of ownership of an assignment with no change of use to more advanced variants in which assignments may be divided or amalgamated and use changed.[[2]]

Design Elements of institutional framework for Spectrum trading

The success of spectrum trading depends on appropriate institutional framework that precisely determines how rights of use of spectrum are transferred. In case spectrum trading is to be introduced in a country, the basic design elements that will need deliberation will be –

(a)  Definitionof property rights and liability rules in terms of [[3]] :

(i)           The band which is available for use;

(ii)          The geographical area in which it can be used;

(iii)        The period for which the licence is entitled;

(iv)         The uses to which it can be put;

(v)          The licensee’s degree of protection from other users;

(vi)         The licensee’s obligation not to interfere with other spectrum user’s rights.

(b)  Flexibilityor otherwise with Licensees to determine the services they want to provide with their spectrum, using the technology they deem to be the most efficient.

(c)  Transferabilityof property rights after trade - sale or lease, in whole or in part.

(d)  Terms and conditions of compulsory purchase backs (with compensation) if required by government under some extreme circumstances.

(e)  Need for defining or otherwise of the emission levels, interference limits

(f)   Arbitrationmechanisms in case of disputes.

(g)  Mechanismof putting in place a public register [[4]]to record changes in ownership and to ensure transparency for private users, effectively displaying information on opportunities and easing entry into unoccupied bands. [[5]]

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[1] http://www.ictregulationtoolkit.org/en/PracticeNote.3076.html; The ICT Regulation Toolkit is a joint production of infoDev and the International Telecommunication Union.

[2]Messolonghi, September 2002, REFARMING AND SECONDARY TRADING IN A CHANGING RADIOCOMMUNICATIONS WORLD, Electronic Communications Committee (ECC) within the European Conference of Postal and Telecommunications Administrations (CEPT)

[3]http://www.ictregulationtoolkit.org/en/Section.1704.html

[4] For example the Australian Communications Authority (ACA) maintains searchable register of licences to facilitate trading. - www.aca.gov.au

[5]The ability of regulators and licensees to keep track of current licences is an important component of market-based systems and can be facilitated by a publicly available database. Knowledge of the location of existing Tx’s and Rx’s (where feasible) will allow potential purchasers of rights to accurately model the existing interference environment they are seeking to enter and to enable them to properly assess the rights they seek to acquire. The database :

• should enable regulators if called upon to adjudicate spectrum disputes and to enable them to track and assess the usage of spectrum in differing bands;
• Should include additional tools to analyze, data on spectrum historical occupancy/usage and to interpret alternative propagation models.