18 Nov 05. The FT reported that an Audit is to propose civil aviation and military pay fees for what they use. Military and civil aviation should pay fees for the radio spectrum they use, an independent report will say. The independent audit of spectrum holdings will recommend in a paper to be published with the pre-Budget report on December 5 that the public sector should face sharper economic incentives to make efficient use of the spectrum. It will also tell Gordon Brown the public sector should be allowed to sell its current allocations to commercial users in order to increase their incentive only to hang on to the spectrum needed for their operations. Separate analysis for the review indicates rapid growth in commercial demand for many parts of the spectrum over the next 20 years. Much of this spectrum is occupied and little used by the public sector. The implication is the government could raise large sums from the sale of this spectrum, although it is unlikely to generate as much as the £22.5bn from the sale of third-generation mobile phone licences in 2000. The audit, led by Professor Martin Cave, is not looking at the broadcasting spectrum, which is being dealt with by Ofcom, the telecoms regulator, under its digital switchover programme. The report is likely to receive a mixed response from commercial and public bodies. In responses to the audit’s interim consultation, BT, the telecommunications company that no longer ownsa third-generation mobile phone licence, welcomed the document. Vodaphone andO2, mobile phone companies that hold licences which might lose value if more of the spectrum came on to the market, were more cautious.
Similarly, public sector bodies such as National Air Traffic Services felt it was not a “practical option” to begin to charge for the spectrum it has been allocated.
The chancellor set up the audit last December with a remit of “releasing the maximum amount of spectrum to the market”.
After publication, the government will consider its response, including the issue of how it will allocate the proceeds of any sales or sharing of the spectrum between the Treasury and the departments that own the spectrum, particularly the Ministry of Defence.
Charging could be set up in this parliament but trading could take longer as international agreements are needed to change the use of aspects of the spectrum.
The audit will conclude that although there are some pressures for the military and others to increase their use of the spectrum in decades to come, there is great scope for more efficient use. It will say the needs of the public sector should be judged against the potential private sector uses. Bandwidth should be assigned, by default, to the public sector only in “exceptional circumstances”.
To increase the efficiency with which the spectrum is used, the audit will recommend the MoD and Civil Aviation Authority be charged for what they currently hold. Much of this is subject to charges already but, if accepted, fees would extend to military radar and aeronautical communications.
In return, the audit will propose the rules on sales be relaxed. Currently, public sector bodies can only give up the spectrum if they no longer need it; they cannot benefit directly from its sale.
The private sector, by contrast, will soon have the right to trade the spectrum under Ofcom’s liberalisation plans.
The audit will recommend that the MoD, in particular, which holds much of the prime spectrum, be allowed to gain directly from making unused or little-used spectrum available to the market. Under current practice, the Treasury gains from the sale of any spectrum given up by the public sector.
Another part of the review will focus on sharing. Much of the spectrum employed by the military, for example, is used in specific locations such as Salisbury Plain. Those parts could be shared with commercial users outside these areas, releasing more of the spectrum to the market and securing revenue