CommsDay Summit 2017
Westin Hotel, Sydney
Tuesday 11 April 2017
The ACMA’s approach to spectrum reform
Speech by Richard Bean
Acting Chairman, ACMA
Increasing demand for spectrum
The radiofrequency spectrum can only increase in importance as an enabler of economic and social activity and a source of competitive commercial advantage, and today I want to tell you about the ACMA’s approach to important reforms in spectrum management.
Our current Radiocommunications Act is 25 years old and I think it should go without saying that we need to be better able to respond to the pressures already building and develop approaches robust enough to support future innovation and growth in the years ahead.
And there is good news on that front—the new legislative and policy framework being developed by the government will open up significant reform opportunities and I want to tell you about some of the work the ACMA has been doing to prepare for the journey that is ahead of us.
Before reminding ourselves why spectrum management reform is necessary, a few words about what the ACMA has been up to in responding to pressures on a number of fronts for more access to spectrum and for spectrum to be managed more efficiently.
Work underway includes:
the auction of spectrum licences in the 700 MHz band
consultation on future uses of the 1.5 GHz band
optimisation of existing mobile holdings in the 900 MHz band.
And as you have heard from other speakers, the ACMA’s work on the 3.6GHz band is of particular interest in the global move towards 5G, the next generation of mobile technologies.
In response to the rapidly growing interest in this band for early 5G use, the ACMA last year brought forward the release of a discussion paper on the band scheduled for 2017 with a view to determining if the current spectrum management arrangements supports its highest value use.
We received around 70 submissions (which you can read on our website), testimony to the fact that 3.6 GHz is already in wide use to provide a variety of important services to the Australian public.
The ACMA, as always, will look at the issues in an open, transparent and evidenced-informed way to ensure that all interests are heard and that any Authority decision is in the overall public interest.
We’ll do so with dispatch and will be releasing an options paper on the band soon.
We are well aware that adjoining spectrum in the 3.4–3.575 GHz range is also of interest for early 5G and should add that the bulk of this spectrum is already in the market for mobile broadband.
This spectrum was allocated via auction over 15 years ago, with spectrum licences in the band recently renewed for a further 15 years.
The technology-flexible framework of these licences will likely mean that they can be used for 5G with little or no further regulatory intervention.
A further 75 MHz in this band was subject to a ministerial direction in 2014, making it available to the NBN for fixed-wireless broadband.
But to return to the central theme of today’s talk, the limits of the tools available to the ACMA in this kind of work are being tested.
As highlighted in the government’s Spectrum Review, current arrangements can get in the way of timely and efficient results.
For example:
The rigid distinction between spectrum and apparatus licences means we can’t design licences that have the best features of both.
We can’t create a spectrum licence that suits small-scale or shorter term applications or applications with evolving technical requirements.
We can’t design an apparatus licence that extends beyond five years.
While spectrum licences have proved to be durable and flexible, both creation and reissue are unnecessarily complex and time-consuming, with end-of-term arrangements in particular a source of considerable investment uncertainty to spectrum licence-holders.
And the government has decided that instead of amending the current Act, a new legislative and policy framework should be drafted.
Current thinking on a reform ‘agenda’
Once the legislation passes into law, the detailed work of designing and implementing the new arrangements will fall to the ACMA.
This will be a big job. And choices will need to be made in a policy context that is not entirely settled.
That is, the final policy environment will be affected by a number of processes including:
consultation on the Exposure Draft Bill itself and the final form of the government’s legislation
the outcome of related reviews, including the spectrum pricing review
the development and content of Ministerial Policy Statements, which we expect will be a feature of the new regime.
However, the government’s Spectrum Review and the consultation paper released since provide a basis for thinking about possible reform directions.
At a high level, we expect that spectrum management will remain directed at maximising or best promoting the public interest in, and benefit derived from, how spectrum is used.
This suggests that spectrum should continue to be allocated, and encouraged to move to, its highest value use or uses—with ‘value’ including both economic and social value, and ‘use’ broadly encompassing public and private, active and passive uses.
We see the scope for significant change in how we achieve these objectives.
We expect a more permissive and high-level approach to drafting in the new Bill will create the flexibility to do things differently.
As change quickens in markets and technologies, detailed prescriptive rules become more of a hindrance than a help in moving spectrum to its highest value use.
We see the opportunity in front of us now as—among other things—to better enable spectrum users and other third-party actors themselves to maximise the value derived from spectrum use.
We note findings of the Spectrum Review that express a preference for using market principles and mechanisms in achieving efficient allocation and use of spectrum.
They also highlight the advantages of increasing spectrum user and other third-party involvement in spectrum management.
So, bearing these themes in mind, our draft goal for the reform program is a regime in which spectrum users have the freedom, confidence and incentive to maximise the value derived from Australia’s spectrum.
In other words, our intention is to better empower and enable spectrum users to optimise the benefit realised from their spectrum use.
To achieve this, we will need to make:
spectrum trading and sharing easier
the public and private value of spectrum more transparent in decisions about its use
the spectrum licensing and management environment more predictable
spectrum user and other third-party involvement in spectrum management more pervasive
regulatory decision-making quicker, more responsive and more adaptive.
Some of you may be disappointed to hear me say that this is not to suggest that the ACMA already has a fully developed set of reform proposals—but others will be pleased to hear that the content and detail of a transition and reform agenda is something we will work up in consultation with you.
Nor are we suggesting that we will be seeking change for its own sake—rather, we will want to retain and build on what is already working.
…
Now I want to look specifically at a couple of potential areas for reform.
In making these remarks, I want to give a sense of some of the high-level questions that may form part of our future conversations.
Deep dive into potential areas of reform
- Development of secondary markets
First, the development of secondary markets.
Spectrum licences have always been tradable under the 1992 Act, but there has been very little trading activity.
Nor has there been significant ‘re-farming’; that is, change of spectrum use, through market trading. This is also reflected in international experience.
One way to approach this would be by asking what risks or impediments to trading are being unnecessarily imposed through current regulatory arrangements.
For example:
Is there technical prescription which unnecessarily limits uses of licences and hence potential buyers?
Do licence tenure arrangements compromise certainty in the asset to be traded?
What should the regulator’s response be if a purchaser seeks to replace a set of acquired licences with a single new licence—effectively, buying up all the houses on the street—so as to enable a different use? To build a block of flats? Or a factory? Should we encourage this kind of ‘re-farming’? What level of oversight should the regulator retain, if any?
Opportunities for addressing these issues might include:
Designing new licences with greater technical flexibility; for example, by maximising the use of wide-area ‘spectrum space’ licences.
Similar to today’s spectrum licences, these licences would allow a licensee significant flexibility to operate within a wide area defined by a geographical boundary and upper and lower frequency boundaries.
Improving confidence about end-of-term processes for long-duration licences, if not at licence commencement, then, say, five years before the expiry of the licence.
Designing area-based licences which include increased flexibility for licence aggregation (and disaggregation), and greater flexibility to accommodate changes in future use.
Establishing transparent principles under which the regulator will consider requests for a swap of licences acquired on the secondary market for a new alternative-use licence to enable re-farming—with a view to reducing the ‘regulatory risk’ faced by an operator seeking to use secondary markets to initiate their own re-farming exercise.
There are of course other questions about the regulatory framework needed to support trading—for example:
Do we need to beef up our public registers to better track licence trades and provide other market information?
What should the regulator’s stance (and powers) be regarding intervening if a secondary market is failing to deliver a timely re-farming outcome, or delivers or looks like delivering one that isn’t in the public interest?
These considerations reveal that there may be links between ambitious longer term reforms and more incremental reforms with shorter timeframes.
For example, reforms to ‘licence tenure’ may be possible in the short term and also help to encourage more secondary market activity in the longer term.
There are also likely to be benefits from reform to tenure arrangements that go beyond those related to secondary market trading.
In fact, a number of the things I’ve just been referring to may deliver goods other than or in addition to an improved secondary market.
- Maximising the predictability of spectrum access arrangements
Secondly, let’s look at maximising the predictability of spectrum access arrangements.
At the moment, the ACMA can issue spectrum licences for up to 15 years.
But there is a high level of uncertainty associated with re-issue.
The maximum term of an apparatus licence is only five years.
To strain the analogy of real estate—land tenure limited to only 5 years, or 15 years but with the real possibility of resumption, is likely to seriously dampen new development.
Maximising the predictability of spectrum access arrangements is about giving spectrum users more confidence to invest in new spectrum uses as well as to trade spectrum in ways that optimise its use.
Have the current arrangements inhibited investment? It is hard to say. There has certainly been very significant investment in mobile telephony.
Have they been complex, time-consuming and costly? Undoubtedly.
The new legislation is likely to give the ACMA more tools to create greater certainty in relation to licence renewal—both in terms of duration and the predictability of re-issue arrangements.
Greater predictability might involve giving a long-duration licensee the right to renew at a price set by the ACMA, say, five years prior to expiration of the licence.
Or the licence could stipulate an end-of-term process and timetable for settling whether and how the licence would be re-issued.
Greater predictability of process is a very desirable goal—but it should not be confused with certainty of outcome.
For lower value licences, including many location-based licences, it may be important to consider the benefits of simply increasing the duration of the licence, against the option of issuing a licence with a shorter duration but greater predictability of renewal rights than is possible under existing law.
Clearly we will need to grapple with a variety of tenure-related issues.
For example:
In creating licences as technically-neutral as possible, we’ll have to bear in mind the difficulty of predicting—or even allowing for—what will be important when re-issue decisions are pushed out perhaps 10 or 20 years into the future.
Significant improvements in overall efficiency may be possible if existing holdings are ‘de-fragmented’.
Changes in technology and international band use may mean a licence is no longer optimally configured at the time of renewal.
It may well be impossible to estimate the future value of the spectrum when the licence is issued, particularly if the licence is of long duration.
At the end of a licence term, replanning for a higher value use might be the best outcome.
Finally, in seeking to maximise predictability and hence investor confidence, we should not lose sight of the other tools that may be available and some of the obligations that may be imposed on us.
These include the requirement to consult on, and publish, an annual and five-year work program—something many of you will know we already do, but which will be modified and, we hope, made more useful—and the power to make spectrum and band plans.
Transition
I can’t overemphasise how keen we are to seize the opportunities presented to all of us in this process—opportunities that really do only come once in a generation.
However, just as importantly, we will also need to understand what is working well and should be left alone.
And, of course, how to prioritise possible reforms.
This brings me to the issue of transition—how should we take our first steps?
I expect that the process of transition to the new legislation will be the main focus of our early engagement with you.
Our intention will be to avoid disruption to businesses and support continued confidence in spectrum investments as we pursue longer term and substantial improvements to the system.
As reflected in the Spectrum Review Report, the Authority considers that, given its complexity and commercial sensitivity, changes to the licensing system will require a staged approach over a number of years.
Managing the transition of all existing licences is a huge job—even if we just re-made the legal instruments that currently support these licences.
But reform is more than just replicating what we have now, and reform is what we want.
A staged transition will ensure the rights of existing licence-holders are not diminished.
It will allow existing licensees continued security of access to spectrum on familiar terms, while we consult on the design of a new system and look to answer questions like:
What are the real, and most pressing reform opportunities?
Which can be achieved during the transition process?
These questions will also assist in identifying groups of licences likely to yield the most benefit from transitioning early.
Existing spectrum licences represent what are often very high-value, long-term property rights which must be respected.
However, as we continue to aggregate or re-farm bands, it would seem appropriate to give a high priority to the design of new long-duration licences to take the place of spectrum licences.
The ACMA considers a staged migration of the many thousands of existing apparatus licences would permit real improvement over current arrangements while minimising red tape and maximising the public benefit and benefits to individual licensees.
And the licensing system is more complex than just the variety of licences. For example, pricing is central to any licensing system.
I note the government’s review of spectrum pricing is underway and it would be a lost opportunity if we didn’t reform the ACMA’s approach to pricing as part of the transition process.
And reform of the licensing system is not just about legal instruments but the IT systems, administrative arrangements and outsourced third-party assignment and other work that supports it. Depending on the reform priorities chosen, the ACMA’s Spectra system, for example, may need to be upgraded to implement the changes to licensing arrangements.
Prioritising
A word about priorities.
Transition to new legislative arrangements as well as substantive reform work will inevitably require decisions to be made about prioritising activities and resources—both for the ACMA and I expect for some of you as well.
We will be looking to collaborate with you on a process for optimising transition and reform opportunities while continuing to provide our core spectrum management activities.
There is a range of functions that the ACMA provides that we know you rely on, from spectrum auctions to participation in international spectrum-planning processes to field investigations, compliance and enforcement.