Use of the 1781.7-1785/1876.7-1880 MHz Bands for the Provision of GSM 1800 Telecommunications Services Response of: Summary of Vodafone’s position 1.1. The RA has identified three basic scenarios for the use of 2X3.3MHz of 1800MHz spectrum that currently serves as a guard band between GSM and DECT services. Vodafone believes that any decision on the use of the 2x3.3MHz is premature because: (a) Future policy decisions on the introduction and form of spectrum trading will fundamentally affect the value of spectrum. Premature assignment in the absence of clarity on the policy environment may result in inefficient assignment and unhappy winners (and losers) because prospective purchases are unable to value accurately the spectrum. Vodafone therefore suggests that a decision about the guard band between GSM and DECT is postponed until there is sufficient clarity about the introduction and form of spectrum trading; (b) The level of future availability of 1800MHz spectrum will be considered when determining the band plan for the 2.5GHz 3G extension band. The UK should not take any action now that might restrict its ability to implement the 3G band plan. The introduction of spectrum trading that permits change of use and/or technology will significantly meet Vodafone's concerns on this point by allowing industry to acquire the spectrum dynamically and use it in a way consistent with its preferred band plan. Introduction 1.2. Vodafone is a strong advocate of spectrum reform. The RA has also indicated a strong desire to reduce rigidity in the spectrum market. In the near future Vodafone hopes that Ofcom will take the first steps in the introduction of a secondary market in spectrum. The effect will be to change the dynamics of supply and demand for spectrum in a manner that will be determined by the nature of trading permitted. Until that time, Government and industry operates in an environment of administrative allocation and assignment of spectrum, which has been effective in the management of interference although it has not necessarily put spectrum in the hands of those who value it the most. 1.3. Vodafone's approach to spectrum regulation is to emphasise the need for change while supporting the symmetric application of current rules. This means that while we support the introduction of secondary markets, until that time we would expect the current administrative system to be implemented properly and without favour to any one player. It is important, however, that regulators remain cognisant of intended or expected changes in spectrum policy and endeavour to smooth the passage of new spectrum management mechanisms. Vodafone answers to specific questions Question 1 Given the other potential uses outlined in this document, do you consider it most appropriate to make the spectrum available for wide-area public use? Question 2 If your answer to question 1 is yes, do you consider it most appropriate for the spectrum to be used to supplement the spectrum of the existing GSM operators, or to be made available for potential new GSM operators on a regional or national basis? Question 3 If your answers to questions 1 and 2 are yes, do you consider it most appropriate for the spectrum to be awarded via an auction process? 1.4. Vodafone believes that it would be entirely appropriate to make the spectrum available, in due course, for wide-area public use. Spectrum in the same band is already used by mobile operators for this purpose. 1.5. The critical issue is the timing of any allocation and assignment process. Vodafone believes that it is premature to consider allocation and assignment matters until a decision is reached on spectrum trading as it will have an important function in shaping the future spectrum market. In the absence of any decision on trading, valuation is difficult and prone to significant "error cost". Question 4 Given the other potential uses outlined in this document, do you consider it most appropriate to make the spectrum available for short-range, low-power GSM use on a licence-exempt basis? Question 5 If your answer to question 4 is yes, what kinds of application do you anticipate will develop? Estimates of potential market size and anticipated penetration would also be useful. 1.6. Vodafone does not consider it appropriate to assign the spectrum to low- powered, licence-exempt use except where an economic evaluation suggests that this is the most efficient use of the spectrum. It is far from clear that there is a need for more licence-exempt spectrum. The WRC-03 has just allocated 450MHz of additional licence-exempt spectrum for short-range services, such as W-LAN. The cost of licence-exempt spectrum is effectively paid for by licensed users as they face higher charges for their spectrum as a consequence of overall reduced supply of individually licensed frequencies. 1.7. If the Government believes that there is a value to be derived from licence- exempt use, it should make the spectrum available for licensed use. The Government could use an auction, setting the reserve price at a level commensurate with the Government's estimation of the value of the spectrum if assigned for licence-exempt use. If no individual licensee outbid the reserve price, then the Government could assign the spectrum to licence-exempt use. Question 6 If your answer to question 4 is yes, should the use of this spectrum for the provision of public services be allowed? Question 7 If your answer to question 6 is yes, specifically what kinds of public-service offerings do you anticipate will develop? Estimates of potential market size and anticipated penetration would also be useful. 1.8. Vodafone does not believe there is a case for further additional licence- exempt spectrum. Should a case be adequately made, it would seem to be overly proscriptive to impose different rules on one licence-exempt band from another. This suggests that public use should be permitted, which would be consistent with the current treatment of the 2.4GHz licence-exempt spectrum. 1.9. Submissions will doubtless be made to the RA, some more extravagant than others, to suggest that licence-exempt use will bring forth many varied and successful new services. Vodafone would stress the need for caution when considering these cases. Costless access to an important resource is always likely to encourage fanciful prognostications. W-LAN at 2.4GHz is a well developed technology and yet there is only limited market penetration and real service usage at the moment. Voice-related offerings, such as DECT, have not been a great success because viability is not solely dependent on technology. Management, distribution, branding and development are also critically important. Question 8 Do you consider it prudent not to release the spectrum at this stage but to keep it unassigned, thus assisting future migration to 3G and facilitating T&D work? Yes. 1.10. Vodafone has already explained its concern that assignment of spectrum ahead of a decision on spectrum trading will create substantial error cost risk. Vodafone is also concerned that a premature decision on the use of 1800MHz spectrum may adversely effect the migration of the band to 3G. A band plan for the 3G extension band at 2.5GHz is under discussion now and unlikely to be resolved before the end of next year. The speed at which any decision will be taken reflects the difficulty of assessing future demand for 3G spectrum and predicting the asymmetry of services to be provided when the 3G market is still nascent. However, it is possible, under some proposals, that the 1800MHz band could be linked to the 2.5GHz band. While administrative management of the radio spectrum is still practised, Vodafone cautions against early assignment of the 2x3MHz of spectrum available lest this create a rigidity in the supply of spectrum for 3G in the future. 1.11. The implementation of spectrum trading – particularly where change of use is permitted – will substantially reduce our concerns in this area. Question 9 Do you consider it necessary to limit future use of the spectrum for a set period, to ensure that future migration to 3G is not hindered? Question 10 If your answer to question 9 is yes, what period do you consider is appropriate? 1.12. Vodafone does not support the concept of time limited use in the way described by the consultation paper. It will be nigh on impossible for the RA to enforce any switch-off date where the band has been used for licence-exempt GSM use. The consultation paper seems to be confused when it suggests that migration of licensed operators to 3G service provision will create a natural limitation on the life of licensed-exempt 2G use. A private licence-exempt operator may still operate its own 2G network for internal voice calls, relying on wide-area, outdoor coverage to be provided by public 3G operators. The presence of dual-mode handsets will make this a practical proposition for some years after 3G public operators have turned-off their 2G networks. (The handset market is international. While UK consumers may be expected to adopt 3G relatively quickly, other markets will require dual-mode handsets for many years longer so licence-exempt users will still be able to source handsets and network infrastructure). Question 11 Is it desirable and practical to make the spectrum available in a technology-neutral way, either for wide-area public use or for short-range, low- power, licence-exempt use? 1.13. It is desirable for the economically efficient use of spectrum that allocation is technology-neutral. The extent that technology-neutrality is possible is a fundamental question for the spectrum trading consultation and not one that should be addressed separately here.
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