Expertise in spectrum management

1
Expertise in spectrum management
Introducing Analysys Mason

• Amit Nagpal and Lee Sanders

Q2 2007
2
The role of spectrum management is becoming
increasingly important due to the rapid
development of wireless services

• Due to the fast development of wireless
  technologies and applications and the finite
  amount of spectrum available, spectrum managers
  are required to make tough decisions around the
  use of their spectrum
• We have assisted many spectrum managers and
  associated organisations with a wide variety of
  issues
• studies are often high profile (e.g. spectrum
  trading study for the European Commission) and on
  controversial matters (e.g. liberalisation of
  spectrum for mobile services in the UK)
• Our approach includes
• rapid diagnosis of key issues
• industry consultation where appropriate
• rigorous and robust technical and economic
  analysis
• quantitative models to support qualitative
  arguments
• clear presentation of project recommendations
• Analysys Mason is ideally placed to identify the
  most appropriate solution(s)
• unique combination of commercial, economic and
  technical expertise
• detailed understanding of impact of regulatory
  decisions on spectrum users

Summary of benefits and costs of spectrum trading
in 28 European countries

EUR million per annum

Option A
Option B
Option C

Trading and
Trading only

Restrict
liberalisation

liberalisation

Benefits





39
(a) Static efficiency




19

(12)

(b) Transparency

Included in (a) and (c)

(c) Competition


697

18

(343)

(d) Innovation


8070

860

(2410)

(e) Scale economies in regulation

Probably small

Gain (loss) relative to status quo


8806

897

(2275)

Costs





(f) Regula
tory costs


9

4

(3)

g) Regulatory innovation

Can be mitigated by appropriate co-ordination

(h) Interference co
-
ordination


83

4

(49)

(i) Standardisation

Probably non-existent

(j) Other national policy goals

Unquantifiable, mainly political

(k) Con
centration

Can be mitigated by appropriate competition policy

Loss (gain) relative to status quo


92

8

(52)

All welfare benefits and costs shown relative to
the status quo
Source Analysys Mason
3
We offer a range of spectrum management services
to both regulators and users of the spectrum
Allocation/assignment options
Spectrum demand forecasts
Economic costs/benefits
Our range of spectrum management services
Spectrum allocation and assignment
Spectrum framework review
Future spectrum demand
Services for users of the radio spectrum
Spectrum award advice and support

• Policies and procedures for licensing spectrum
• Recommendations for allocation of spectrum
• Assessment of demand/economic benefit from
  spectrum uses
• Recommendation of appropriate assignment
  mechanisms (e.g. first come first served, auction)

• Forecasts of future spectrum requirements,
  including
• forecasts of future service demand (e.g.
  cellular)
• forecasts of future technologies and performance
• calculation of resulting spectrum demand

• Review of spectrum management strategies,
  including
• spectrum trading and liberalisation
• licence-exempt spectrum
• Strategy implementation
• development of processes and roadmaps

• Marketing of licences
• Recommendation of award parameters, including
• number of licences
• spectrum packaging
• usage rights
• licence obligations
• reserve price

• Spectrum strategy advice
• Spectrum licence acquisition support
• Valuation of spectrum assets
• Introduction to spectrum trading
• Consultation process support

Source Analysys Mason
4
Some of our high-profile spectrum management
assignments are presented in the following slides
Case studies Client type Summary
Case study 1 NITA (Danish regulator) Support with the successful award of a 3G licence to SONOFON
Case study 2 Ofcom (UK regulator) Advice on the award options for the L-Band (14521492MHz)
Case study 3 UMTS Forum Calculation of spectrum demand from 2010 to 2020 given existing mobile traffic forecasts
Case study 4 The Independent Audit of Spectrum Holdings Forecast commercial spectrum demand in the UK up to 2025 for a major government review of spectrum planning
5
In 2005, we supported the Danish regulator with
the successful award of a 3G licence to SONOFON
Case study 1
Business challenge

• In January 2005, one of the Danish 3G licences
  was returned to the National IT and Telecom
  Agency (NITA) following TeliaSoneras acquisition
  of Orange
• Whilst the objectives were identical to the
  original award (to promote competition), this
  award presented some unique challenges ensure
  that the existing 3G licensees viewed the process
  as fair develop licence terms that were
  realistic to a new entrant, yet were not
  discriminatory and create a process that
  facilitated competition given the presence of one
  incumbent non-3G operator (SONOFON)

Approach

• Interview programme of the existing 3G licensees
  to gain their view on the award process
• Extensive marketing of the licence. This included
  identifying potential bidders both within and
  outside Denmark, within the mobile sector and
  also in related industries
• Valuation of the licence for different types of
  bidders (see illustrative chart to the right).
  This indicated the likely bidders in an auction
  and helped set the appropriate reserve price
• Recommendations on the appropriate licence terms,
  including the licence duration, coverage
  obligations, etc.
• Recommendations on the award design (auction) and
  assistance in developing the associated documents

Value to potential bidders of winning auction vs.
alternative strategic options
Illustrative
NPV
Wins auction
Temporary
Waits for
Permanent
MVNO
expansion
MVNO
band
Benefits and results

• The auction was won by the incumbent non-3G
  operator (SONOFON), which has since begun the
  rollout of its 3G network
• The award process and result was accepted by the
  three existing 3G licensees
• The NITA hailed the award to have been a
  significant success

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We advised Ofcom on the award options for the
L-Band (14521492MHz)
Case study 2
Business challenge

• Ofcoms standard process is to award spectrum on
  a service- and technology-neutral basis by means
  of an auction so that the market can determine
  both the best use and best user of the spectrum
• The L-Band has particular importance and
  represents a challenge for award design as it is
  of interest for a number of diverse applications
  T-DAB, S-DAB, mobile multimedia (e.g. DMB,
  DVB-H), broadband wireless access, or audio links

Incoming international interference
Approach

• We used our tried and tested methodology for
  such awards, working with our partners DotEcon
• detailed market assessment, encompassing a review
  of the candidate uses of the band, an extensive
  interview programme with potential users of the
  band and equipment manufacturers, and detailed
  modelling of the value to individual users
• award process design, including recommendations
  for spectrum packaging, licence design (e.g.
  usage rights, minimum term) and design of the
  award process (assessment of candidate auction
  formats)
• In conjunction with our sister company Mason, we
  also conducted analysis to understand the
  international interference restrictions on future
  users of the L-Band

Valuation of spectrum for individual users
Benefits and results

• Ofcom consulted on the L-Band award in Spring
  2006 based on the recommendations of this study.
  Its intention is for an award to take place by
  the end of the financial year 2006/07
• Analysys/DotEcon/Mason are well established as
  key advisors to Ofcom on spectrum policy and
  award assignments. This work built on a number of
  spectrum studies undertaken for Ofcom. Other
  high-profile studies have included 2G spectrum
  liberalisation, award design for the 2.6GHz band
  and digital dividend spectrum (both ongoing)

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By considering options for mobile operators
facing increased traffic demands, we produced a
long-range forecast of spectrum demand in Europe
Case study 3
Business challenge

• In preparation for the World Radio Conference
  (WRC) 2007, the UMTS Forum wished to understand
  the spectrum that would be required by Western
  European mobile operators to 2020
• Analysys was asked to calculate this spectrum
  demand from 2010 to 2020 given existing mobile
  traffic forecasts (from the UMTS Forum and the
  European Commission)

Approach

• Our approach was to understand the spectrum
  requirements from an operators perspective
  operators face a trade-off between the amount of
  spectrum they have and the number of base
  stations they need to deploy
• We developed a model that calculated the cost
  savings that an operator can make from obtaining
  additional spectrum, through needing to deploy
  less base stations
• If this saving was significant, we assumed that
  the operators would demand more spectrum
• We included a variety of scenarios regarding
  proportion of traffic which occurs during the
  peak hour, improvements in spectral efficiency,
  and competing mobile technologies

Spectrum requirements for cellular operators
201020
6000
6000
5000
5000
4000
4000
Total spectrum requirement (MHz)
3000
3000
2000
2000
1000
1000
Spectrum currently identified for cellular use
0
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
FMS constant change
FMS smooth development
FMS economic stagnation
Magicmobile future
Benefits and results

• We concluded that, given the traffic forecasts
  used, operators may require at least double the
  spectrum currently identified for mobile use
• The credibility of our results was enhanced by
  our wide experience in cost modelling of mobile
  networks
• The UMTS Forum has published the report on its
  Web site in order to encourage discussion of
  spectrum requirements and harmonisation among
  operators and regulators ahead of the WRC 2007

Source Analysys, 2006
8
We forecast commercial spectrum demand in the UK
up to 2025 for a major government review of
spectrum planning
Case study 4
Business challenge

• The Independent Audit of Spectrum Holdings (IASH)
  in the UK required forecasts up to 2025 of
  expected spectrum demand below 15GHz
• We were contracted to determine potential
  commercial uses for the spectrum and to predict
  spectrum demand for each service

Approach

• We identified five services which account for
  over 80 of current spectrum use below 15GHz
  cellular, fixed links, broadband wireless,
  terrestrial TV and satellite
• The key drivers for each service were identified,
  and their projected evolution until 2025 modelled
• We used methodologies tailored to each service to
  calculate demand for spectrum, based on the
  evolution of the key drivers
• Demand was modelled for low-, medium- and
  high-demand scenarios for each service, with the
  most likely scenario for each being incorporated
  into a base case

Urban spectrum demand 200525
Benefits and results

• We predicted that, in the base-case scenario,
  extra bandwidth would be required from 2012.
  Total demand in 2025 is likely to exceed current
  allocations by 2.5GHz
• Our report identified the sub-1GHz and the
  6-15GHz ranges as requiring the most careful
  planning
• The results, made available on the IASH Web site
  (www.spectrumaudit.org.uk), formed a critical
  part of the final report delivered to the
  government and will help guide Ofcoms future
  international spectrum allocation work

Source Analysys, 2005
9
In addition to supporting spectrum managers
around the world, we also regularly advise users
of the spectrum on a wide range of issues 1
Category Recent relevant experience Our achievements
Spectrum framework review EC spectrum trading study Ofcom mobile spectrum liberalisation Detailed set of recommendations and action plan for the European Commission to take forward raised awareness of spectrum trading and liberalisation issues across the European Union Assessment of the impact of allowing spectrum not currently used for mobile services to be used for mobile services, and the impact and options for liberalising existing 2G spectrum
Spectrum allocation and assignment options and approaches Ofcom Band III/L-Band Ofcom Digital Dividend Review Dutch approaches to assignment Latin America mobile licence award Asian 3G assignment options Developed recommendations on allocation of spectrum to T-DAB, PMR and other uses, based on an assessment of economic benefits and other constraints Currently advising Ofcom on the award process for UHF spectrum, to be released following the switch-over to digital television Approach for determining optimum choice of assignment mechanism (first come, first served, comparative selection, or auction) Policies and procedures for licensing of new mobile operators Quantitative economic assessment of approaches to awarding 3G licences
Spectrum auction advice and support Ofcom 2.6GHz band Danish 3G auction 2005 Second GSM licence in the Middle East Bid evaluation Belgium/Czech Republic For UMTS expansion band, assessment of interest from potential bidders, estimated value of spectrum, recommendation of key auction parameters including spectrum packaging Development of financial valuation models, preparation of an information memorandum, marketing of the licence and design and management of the auction process Recommendations on the number of licences, valuation and supporting regulatory policies Development of selection procedure review of bids leading to successful licence awards
10
In addition to supporting spectrum managers
around the world, we also regularly advise users
of the spectrum on a wide range of issues 2
Category Recent relevant experience Our achievements
Future spectrum demand UK spectrum demand below 15GHz Assessed future demand for spectrum below 15GHz from the commercial sector from 200525 on behalf of the UK Government (Independent Audit of Spectrum Holdings)
Studies for users of the radio spectrum Introduction of spectrum trading 3G licence acquisition support Consultation process support Valuation of spectrum in USA Identification of opportunities and threats arising for major mobile operator from potential introduction of spectrum trading in a major West European market Detailed 3G business plans for operators in Hong Kong, Malaysia, Taiwan, Ireland, Morocco and Egypt and support during auctions (where relevant) leading to licence acquisition Detailed submission for Asian mobile operator for key government consultation Valuation of 800MHz spectrum for client to ensure it got market value in major transaction
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Industry commentary
Leading Ofcoms UHF spectrum project consortium
Analysys Mason is pleased
to announce that a consortium led by Analysys,
including Mason Communications (Analysys Mason
Group's technical consulting arm), DotEcon, Aegis
Spectrum Engineering and Dr Damian Tambini, has
completed its study to further Ofcom's
understanding of UHF spectrum and its possible
uses.
Further details of the scope of the study can be
found on Ofcom's Web site (http//www.ofcom.org.uk
/radiocomms/ddr/) Amit Nagpal, Principal
Consultant, December 2006
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Amit Nagpal and Lee Sanders amit.nagpal_at_analysysma
son.com lee.sanders_at_analysysmason.com Analysys
Mason Limited Bush House, North West
Wing Aldwych, London WC2B 4PJ, UK Tel 44 (0)20
7395 9000 Fax [phone] www.analysysmas
on.com