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Resources Allocation for UMTS

Master's Thesis Project report

Supervisor: Morten Falch

Technical University of Denmark (DTU)

Center for Information and Communication Technologies(CICT)

Mohamed Abdullahi Hussein, [email protected]

March 7, 2008

Abstract

This Master's thesis report introduces the frequency spectrum resourceallocation for UMTS and assignment methods for European operators. Thereport analyzes the auction methods used in European countries and theories(economic and auction) particularly related to the sector. The report shedslight on the results and gained experiences by these countries and the world.The report concludes with recommendations best auction design methodsand predictions of their outcomes in the future.

ii

Contents

Contents iii

List of Tables v

List of Figures vi

1 Introduction 21.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.2 Structure of the Thesis Report . . . . . . . . . . . . . . . . . . 41.3 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

2 Background Information 62.1 The Meager Resources of Spectrum . . . . . . . . . . . . . . . 62.2 Wireless Communication Technology and Evaluation of Wire-

less Telephony . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.3 The Global System for Mobile communication (GSM/2G) . . 112.4 The Universal Mobile Telecommunication Systems (UMTS/3G) 132.5 Unlicensed spectrum . . . . . . . . . . . . . . . . . . . . . . . 152.6 Software De�ned Radio (SDR) . . . . . . . . . . . . . . . . . . 20

3 Frequency Spectrum Resources Management 223.1 Introduction to Regulation and Regulators . . . . . . . . . . . 23

3.1.1 International Information and Communications Regu-lator . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

3.1.2 Regional Regulators . . . . . . . . . . . . . . . . . . . 253.1.3 National Regulators . . . . . . . . . . . . . . . . . . . . 25

3.2 Frequency Spectrum Assignment Methods in Telecom . . . . . 263.2.1 Non-market based Approach . . . . . . . . . . . . . . . 273.2.2 Beauty Contest . . . . . . . . . . . . . . . . . . . . . . 273.2.3 Market based Approach . . . . . . . . . . . . . . . . . 283.2.4 Auctioning Models . . . . . . . . . . . . . . . . . . . . 28

iii

3.2.5 Ascending-bid Auction (English auction) . . . . . . . . 293.2.6 Descending-bid Auction (Dutch auction) . . . . . . . . 303.2.7 Sealed-bid Auction . . . . . . . . . . . . . . . . . . . . 313.2.8 Simultaneous multi-round bid Auction . . . . . . . . . 313.2.9 Spectrum Trading . . . . . . . . . . . . . . . . . . . . . 323.2.10 License Duration . . . . . . . . . . . . . . . . . . . . . 33

3.3 The European Experience . . . . . . . . . . . . . . . . . . . . 333.3.1 Great Britain . . . . . . . . . . . . . . . . . . . . . . . 343.3.2 The Netherlands . . . . . . . . . . . . . . . . . . . . . 373.3.3 Germany . . . . . . . . . . . . . . . . . . . . . . . . . . 383.3.4 Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403.3.5 Austria . . . . . . . . . . . . . . . . . . . . . . . . . . 423.3.6 Switzerland . . . . . . . . . . . . . . . . . . . . . . . . 423.3.7 Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . 433.3.8 Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . 44

3.4 Comparison and Analysis . . . . . . . . . . . . . . . . . . . . 45

4 Evaluation 494.1 Vickery's auction . . . . . . . . . . . . . . . . . . . . . . . . . 514.2 License-free Spectrum . . . . . . . . . . . . . . . . . . . . . . 51

5 conclusion 53

6 Bibliography 57

7 Appendix 59

iv

List of Tables

2.1 Europe 2G Market Entry[2] . . . . . . . . . . . . . . . . . . . 11

3.1 First UMTS auctions in EU 2000-2001[2] . . . . . . . . . . . . 343.2 UMTS License, UK, 2000[2] . . . . . . . . . . . . . . . . . . . 353.3 Bidding patterns for 3G licences, UK, 2000[2] . . . . . . . . . 363.4 UMTS License, Netherlands, 2000 . . . . . . . . . . . . . . . . 383.5 UMTS License, Germany, 2000 . . . . . . . . . . . . . . . . . 393.6 Italian 3G bids 2000 . . . . . . . . . . . . . . . . . . . . . . . 413.7 Europe UMTS auction 2000-2001[2] . . . . . . . . . . . . . . . 46

v

List of Figures

2.1 Overview of the public frequency spectrum . . . . . . . . . . . 72.2 Evolution of wireless technology[3] . . . . . . . . . . . . . . . . 82.3 Introduction of analogue cellular systems in Western Europe

1981-1990[2] . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.4 WRC 2000 IMT2000 frequencies[4] . . . . . . . . . . . . . . . 102.5 3G mobile and complementing technologies[5] . . . . . . . . . 142.6 Video conferencing bandwidth capacity on 3G mobile[6] . . . . 152.7 3G mobile and other wire[7] . . . . . . . . . . . . . . . . . . . 162.8 The frequency spectrum[1] . . . . . . . . . . . . . . . . . . . . 172.9 Licensed and Unlicensed Frequency Spectrum[10] . . . . . . . 182.10 Radio frequency spectrum[11] . . . . . . . . . . . . . . . . . . 192.11 60GHZ use for [12] . . . . . . . . . . . . . . . . . . . . . . . . 202.12 Software De�ned Radio Diagram [13] . . . . . . . . . . . . . . 21

3.1 3G subscribtion, UK, 2006 . . . . . . . . . . . . . . . . . . . . 373.2 Total mobile revenue by service, German example, . . . . . . . 403.3 Europe UMTS auction 2000-2001[2] . . . . . . . . . . . . . . . 47

vi

Acknowledgment

First and foremost, I thank very much Prof. Morten Falch for his adviceand guidance during this period of my master thesis project. I very muchappreciate his feed back to preliminary work and his �nal consent to go aheadwith the topic I picked for my master thesis.

I am very much indebted to the professors of the department of CICTand COM which I belong to and all other sta� for their endless support andteaching during my whole Master's study. I am specially thankful to AnnetteHolck Mørk from CICT library for her tireless work of searching and selectingmaterial from the fast resource of knowledge and research material in theCICT library.

I have to mention my eternal gratitude to my parents: my father Ab-dullahi Hussein and my mothers Aisha Somow (biological) and Madina M.Ali(Upbringing and education) for unmeasurable generosity and kindness ofbringing me to being in the �rst place and then bringing me up with kindnessand respect.

I, last but not least, owe great thanks to my wife Asli A. Botan for hergreat support during this period. She, constantly, stood beside me with herencouraging remarks and unforgettably took over my role in the family on topof her own duties to relief me of the great burden of family task during thisperiod of time. I, also, have to with heart-feeling thank my kids: Maryama,Abdirizaq, Marwa, Abdirahman and Abdullahi M. Hussein for their patience,waiting for dad to �nish his work. I am very proud of them. I am, de�nitely,thankful to my mother-in-law, Dheeh M. Ibrahim for her great support.

Chapter 1

Introduction

1.1 Introduction

Radio frequency spectrum is a natural and �nite resource which is gettingscarce owing to innovations and evolution of wireless communication technol-ogy and a signi�cantly growing demand for communication medium by thepublic. E�cient use of it is, therefore, quite crucial. The development of afast growing number of applications for parts of the radio spectrum is makingthe available resource scarcer. This signi�es the importance and inevitabilityof coming up with e�cient ways of managing the radio frequency spectrumand allocating the resources in order to meet up the growing demand andensure good quality of service.

The radio spectrum is divided up into portions of frequencies in orderto avoid interference and frequency jamming resulting from overcrowdingimportant bands and thus avoid poor or bad quality of service as well asensuring good use of the available scarce resource. The di�erent portions offrequencies are allocated for di�erent wireless services and uses. The conceptis known as frequency allocation.

Now that di�erent frequency portions are allocated for di�erent appli-cations and services, the service providers get sub-portions of allocated fre-quencies assigned to them for the services they commercially provide. Theservice providers further assign the frequency band they are assigned to (li-censed for), to their mobile phone network cells. The process is known asfrequency assignment.

1.1 Introduction 3

Spectrum resources are managed by the International TelecommunicationUnion (ITU) a United Nations body for telecommunication, some regionalauthorities and authorities in di�erent countries which manage and assignfrequencies at country level. The ITU holds annual meetings known as WorldRadio Conferences (WRC) where issues around communication medium likefrequencies are discussed and proposals and recommendations put forth. TheRadio Regulations are intended to allow for the use of a frequency band, whileminimizing the risk of interference to the users of the band in the territoriesof other countries[1].

Wireless communications, with mobile telephony and wireless broadbandin the forefront, is the most demanding technology for radio frequency spec-trum in late 20th and early 21st century with the development of, so far,the 2nd and 3rd generation mobile communication systems known as GlobalSystem for Mobile communication (GSM) and Universal Mobile Telecom-munication Systems (UMTS) respectively. Certain frequency bands wereallocated for GSM after its emergence in 90s. Furthermore, the introduc-tion of the UMTS later had entailed more frequencies to be allocated forthe services o�ered by that technology. This was the task of internationalregulating bodies like ITU.

At national level the frequency spectrum resources have to be furthermanaged. This is, for instance, that in a certain country any service providerwhich has to use a wireless technology must obtain a license for a legitimateuse and assignment of spectrum. Depending on the country level policy inwireless communications, di�erent countries use di�erent policies and waysof providing licenses with service providers. The European Union memberstates have used auctioning methods, beauty contest or a mixture of the twoin order to award licenses to the mobile telecom service providers in Europe.Unlike the beauty contest the auctioning method has generated revenue ofbillions of Euros in the EU. The UMTS licensing has experienced wide useof auctioning method for license provision and thus generated larger sums ofmoney than could build separate UMTS networks in Europe.

It is questionable whether the market based method like auctioning andthe billions of Euros (e) paid for the sole use of frequencies (license) was thebest design of method of distributing UMTS frequency resource or whetherbeauty contest was an e�cient method of giving the licenses. What do eco-nomic theories say about that? What experiences have Europe obtained?The project report investigates and evaluates the di�erent approaches. Theproject further discusses other technical and regulatory problems related to

4 CHAPTER 1. INTRODUCTION

the UMTS roll out.

1.2 Structure of the Thesis Report

This thesis report is structured in chapters and contains 7 chapters in total.The �rst chapter covers introduction to the report which contains three sec-tions: section one give the overall introduction to the report. Section twobriefs the structure of the report. Section three introduces the methodologyused in constituting this report.

Chapter two goes through the background information of the topic cov-ered in this report. This chapter contains �ve sections. The �rst sectionintroduces spectrum as a meager resource. The second section covers wire-less communication technology and the evolution of the mobile telephony.The third section sheds light on second generation (2G) mobile systems - theGlobal System for Mobile Communication (GSM). The fourth section dealswith the third generation (3G) mobile communication systems - the Univer-sal Mobile Telecommunications System (UMTS). And the last sixth sectionis about the unlicensed spectrum and their uses.

Chapter three deals the main topic of frequency spectrum resource man-agement. This chapter contains four main sections. Each of these sectionscontains further subsections. The �rst section in chapter three introducesregulation and regulators role in society, particularly in the communicationsector. This section contains three main subsections dealing with interna-tional, regional and national regulators. The second section in chapter threeis about frequency spectrum assignment methods in telecom. This sectionhas ten subsections dealing with market based and non-market based ap-proaches of spectrum assignment, spectrum trading and UMTS/3G licensedurations. Section three covers the European experience of methods used toassign UMTS/3G spectrum to operators. Countries covered by the reportare listed separately in subsections. The fourth and last section of chapterthree will compare the EU countries covered in the report.

Chapter four is concerned with the evaluation of spectrum assignmentmethods and theories pertaining to them. The chapter sheds light upon thepros and cons of assignment methods and further analyzes the market-basedmethod and its models in order to facilitate a conclusion to be drawn in thefollowing chapter.

1.3 Methodology 5

Chapter �ve of the report rounds up the analysis and draws a conclusionas to the �ndings of the study of the report. This is the conclusion chapterof the report so to say.

1.3 Methodology

Methodology used in this report is that a problem formulation is made re-garding Frequency spectrum allocation for 3G networks. Preliminary studyof the fast material available in the sector about 3G is made. Analysis of thedata collected follows and �nally conclusion are drawn from the analysis ofthe information produced by the study and analysis.

Materials studied include country speci�c reports regarding how UMTS/3Gmarket came to being. How frequency spectrum resource was distributedamong interested parties. And how e�cient this distribution mechanismswere. The analysis then draws potentials lessons from the di�erent ap-proaches.

The report sets a conclusion and highlights main and important �ndingsin the study which paves the way for interested readers to their own approachto solving the same recurrent or similar problems in the �eld of wirelesscommunication and other sectors which share resource scarcity problems.

The analysis and conclusion are solely based on the author's own per-spective of all matters pertaining to the sunrise for the UMTS/3G market,spectrum assignment methods and lessons that can be learned from the dif-ferent approaches, models and design. Author's standpoint can be inlinewith or in contrary to others' points of view.

Chapter 2

Background Information

Radio frequency management ultimately ensures the e�ective use of spectrumas well as the assignment of bands for use of di�erent technologies. NationalSpectrum Management bodies can opt using either market-based economicmethods or administrative methods in distributing the precious natural re-source of radio frequency spectrum for the e�ective use of the medium bysome technologies like the wireless communication.

2.1 The Meager Resources of Spectrum

The wireless communication technology revolution has created gold rush eratype of frequency rush in the world, particularly in the developed world. Withthe invention and introduction of wireless communication technologies, theuse of frequency spectrum bands was getting more common until it �nally gotto a level certain bands were overcrowded or everybody was using every bandfor everything. Standardization and co-ordination of frequency spectrum usewas, therefore, seen as very vital.

All frequency spectrum bands are not equally good enough for di�erentcommunication technologies. Frequency characteristics and behaviors areimportant in type and nature of communication technology. For example,transmission characteristics frequencies below 60 MHz are strongly in�uencedby the way the signal is re�ected and/or absorbed by the various layers ofthe ionosphere, which depends on the time of day, the season and the solarweather linked to the sunspot cycle. Higher frequencies (above 60 GHz) su�er

2.2 Wireless Communication Technology and Evaluation ofWireless Telephony 7

from excessive absorption by water particles in the atmosphere. In addition,the attenuation (weakening) of signal with distance from the transmitter sitevaries inversely with frequency, so that for a given transmitter power andantenna gain, lower frequencies will 'travel' further than higher ones[1].

Frequencies best suited to the type of communication most interested andvery viable in the world today lie in range of 250MHz - 2.5GHz. Naturally,these are also the ones that have already been allocated to existing appli-cations. However, they are not necessarily the most heavily used, and thisbrings us to the second type of ine�ciency. In order to secure frequencies andallow new services to be developed, regulators have e�ectively had to guesswhich, among a number competing services, are most likely to be successful,or more deserving of spectrum in other words, to pick winners.

2.2 Wireless Communication Technology and

Evaluation of Wireless Telephony

Wireless communication is di�erent from wired in the mode of communica-tion medium. Wireless communication uses electromagnetic �eld and fre-quency spectrum for sending and receiving voice and data signals. TV andradio also use the same medium but di�erent frequencies. Voice communi-cation was very popular in wired networks but later emerged in wireless astechnology evolved.

Figure 2.1: Overview of the public frequency spectrum

8 CHAPTER 2. BACKGROUND INFORMATION

Wireless communication has revolutionized communication in a way thatit simpli�ed outreach and instant access in voice communication �rst anddata later. In wireless communication of modern age everything is converginginto multimedia. This includes voice, data, TV, radio and video streaming.Internet is getting mobile. Business is on the move and no more dependenceon land line telephony. This development of wireless communication hascreated a fast growing market.

Figure 2.2: Evolution of wireless technology[3]

As wireless technology evolved, there was frequency rush and innovationswere shooting o�. As a result, regulators are indispensable in managing theresource of spectrum, which is not �nite and limitless in itself. The regulator'smanagement objective aims at[2]:

1. Granting of exclusive rights.

2. Ensuring e�cient use of a limited resource.

3. Promoting competition.

Granting exclusive rights ensure quality of service by discouraging in-terferences and overcrowding certain areas of spectrum. This is done byregulator through licensing spectrum use. The subset of frequency spectrum

2.2 Wireless Communication Technology and Evaluation ofWireless Telephony 9

between 3 KHz and 300 GHz is known as the 'radio spectrum'. It is thisrange that is in question when it comes to wireless or radio communication.

Ensuring e�cient use of spectrum resource is another main goal of aregulator. In this case, the regulator makes sure that licensees use the meagerresource as optimally as possible. This policy also makes sure that those whovalue highest get spectrum.

The last but no the least, promoting competition is a main goal of ensur-ing economic growth, quality of service, a�ordability of product, etc.

Figure 2.3: Introduction of analogue cellular systems in Western Europe 1981-1990[2]

In its infancy, the mobile wireless market was predominantly voice-orientedwith no data services. At this point of time, wireless communications waspure analogue and it was resource ine�cient and had not good quality of ser-vice. This technology was known as the First Generation mobile commu-nication systems (1G). Wireless communication then evolved to the secondgeneration (2G) known as Global System for Mobile Communication (GSM).This time data transfer were possible in the form of short messaging service(SMS). Further steps were taken towards improved capacity in the wirelesscommunication and in mobile communication in particular with the discov-


eries of GPRS1, EDGE2, UMTS3, HSPA4. In parallel, Wireless Local AreaNetwork technologies like WiFi and WiMax, were also developed. Figure 2.1shows the trends of wireless communication technology evolution.

Figure 2.4: WRC 2000 IMT2000 frequencies[4]

Figure 2.4 shows the portions and use of telecommunication frequencyspectrum in the world zones where communication has matured. Unlessstandardized thing would have being messy and compatibilities could havebeen zero thus making roaming not achievable. The �gure show the Inter-national Telecommunications Union (ITU) has allocated frequency rangesfor International Mobile Telecommunications of which UMTS is a part andoccupies frequency range around 2GHZ.

Cellular communication came �rst to light in 1980s in the Nordic coun-tries. The technology spread like a wild �re in western Europe mainly the bignations of France, Germany, Italy and UK. Each country had its own systemand compatibility was not and issue except in the Nordic countries whichwere using one common system known as Nordic Mobile telephone Systems(NMT). All countries would later united under one system the of mobilecommunication the Global System for Mobile communication systems.

1GPRS: General Packet Radio Service2EDGE: Enhanced Data Rate for GSM Evolution3UMTS: Universal Mobile Telecommunication Systems4HSPA: High Speed Packet Access

2.3 The Global System for Mobile communication (GSM/2G) 11

2.3 The Global System for Mobile communica-

tion (GSM/2G)

Global System for Mobile Communication (GSM) is the most popular stan-dard of the second generation (2G) mobile communication systems. In 1982,the European Conference of Postal and Telecommunications Administrations(CEPT) created the Groupe Spécial Mobile (GSM) to develop a standard fora mobile telephone system that could be used across Europe. That were theacronym GSM �rst came from but later the name was changed to re�ect onthe technology rather than the group.

Table 2.1: Europe 2G Market Entry[2]

In fact, digital cellular has been in commercial existence since 1992. Table2.1 shows in in alphabetical order rather in chronological order. The secondcolumn also shows the number of 2G �rms that came to market. Third andfourth columns show the type of GSM whether 900MHZ or 1800MHZ andthe dates of entry.

GSM is technically cell based system known as cellular network. Thisreally means that the operator divides its coverage area into small patchesof land each covered by the radio network signals from antennas on a mast


erected up into the air each served by a �xed base station. The operators' as-signed spectrum bands are alloted among the cells in away that neighboringantennas operate on di�erent frequencies in order to avoid signal interfer-ences.

Customers' cellular or mobile phones get connected to these cells bysearching for the immediate vicinity cells and get connected to the one closestto it by identifying the signal power. This process is automatic and dynamicas the user changes location or on the move cells change and calls are changedto the nearest antenna or cell. This process is known handover. The detaileddeep technical structure of the wireless communication network includingGSM network is beyond the scope of this report.

GSM networks operate in four di�erent but standardized frequency bands.Today's most common GSM networks operate in the bands of 900 MHzand/or 1800 MHz. There are, though some countries mainly in the Americasincluding Canada and the United States, that use the 850 MHz and 1900MHz bands because the 900 and 1800 MHz frequency bands were alreadyallocated.

The There are also some countries mainly the Scandinavia that use fre-quencies in the range 400 and 450 MHz. These frequencies were used in the1G mobile communication systems which these countries spear headed.

Cellular networks of which GSM is the �rst of its kind o�ers three mainadvantages. First, increased capacity in the way that freqeuncies are reusedafter a certain number of cells. and on the other hand, frequency spectrumbands for GSM are organized in pairs of uplink and downlink. In the 900MHz band the uplink frequency band is 890-915 MHz, and the downlinkfrequency band is 935-960 MHz. Up and down link ranges are 25 MHz bandseach. These band ranges are further subdivided into 124 carrier frequencychannels with spaces of 200 kHz in between channels. Speech is carried inthese 124 carrier frequency channels in a way that each frequency channel istime divided and multiplexed. This time division is based on either eight full-rate or sixteen half-rate speech channels per carrier frequency channel. Thenthere are eight radio timeslots or in other words eight burst periods which aregrouped into what is called Time Division Multiple Access (TDMA) frames.Half rate channels use alternate frames in the same time slot. The channeldata rate is 270.833 kbit/s, and the frame duration is 4.615 ms.

Secondly, the transmission power in the handset is limited to a maximumof 2 watts in GSM850/900 and 1 watt in GSM1800/1900. This is because each

2.4 The Universal Mobile Telecommunication Systems(UMTS/3G) 13

base transceiver is aimed at covering and concentrating on a small portionof area - the cell. So this is economical and less interfering as the outreachis limited by the power and orientation of the antenna.

Thirdly, good coverage as a quite good number of cells are patched overa large area with frequency resource reuse after a number of cells in alldirections. The number and size of cells will depend on the landscape andthe number of users in a particular area. As it needs to mount more cellsin the city center where the number of users is big and coverage can behampered by tall buildings.

2.4 The Universal Mobile Telecommunication

Systems (UMTS/3G)

3G Systems are intended to provide an increased data transmission rate anda global mobility with wide range of services including telephony, paging,messaging, Internet and broadband data. A new range of frequency spectrumwas allocated for the new technology. According to "WARC-92 frequenciesfor IMT-2000" resolution: "The bands 1885-2025 MHz and 2110-2200 MHzare intended for use, on a worldwide basis, by administrations wishing toimplement International Mobile Telecommunications-2000 (IMT-2000)[4].

Frequency bands allocated for UMTS which is a part of the IMT-2000are 1920-1980 and 2110-2170 MHz for Frequency Division Duplex (FDD, W-CDMA). Frequencies are divided into 12 uplink and downlink channel pairswith each channel having a bandwidth of 5 MHz and a channel spacing of200 kHz. An Operator needs 3 - 4 channels (2x15 MHz or 2x20 MHz) to beable to build a high-speed, high-capacity network. 1900-1920 and 2010-2025MHz Time Division Duplex (TDD, TD/CDMA) unpaired. Both uplink anddownlink share the same frequency channels in a timely order. In this range,channel bandwidth is also 5 MHz and and channel spacing is 200 kHz. 1980-2010 and 2170-2200 MHz Satellite uplink and downlink. See �gure 2.2 foran overview of IMT-2000 spectrum allocation of which UMTS is a part of.

The ITU has accepted �ve systems for the family of IMT-2000 standardsthat satisfy technical requirements to provide 3G services. Three of them arebased on CDMA and two on TDMA. Only those based on CDMA are ex-pected to �nd widespread adoption[2]. UMTS is based on wide-band CDMA(W-CDMA).


Figure 2.5: 3G mobile and complementing technologies[5]

UMTS is favorable for its high speed data transfer in the form of mul-timedia. One can expect huge data transfer not only while stationary byalso while on the move. Figure 2.7 compares di�erent network access modesincluding wired in general. The �gures shows that wired is basically for in-doors while also some wireless technologies are not ideal for the person onthe move as well.

Figure 2.5 shows that 3G network in an interface for a wide variety ofmedia technologies. With the new features of 3G networks, capacity, in-ternational roaming, quality and new opportunities for business applicationmake consumers longing for it. 3G breaking barriers and crossing borders bymerging di�erent technologies together. 3G paves the way for convergenceof telephony, TV, video streaming, data among others. The potential busi-ness opportunities make �rms and customers visualize a bright future forUMTS/3G network services.

As shown in �gure 2.6, because of 3G network bandwidth capacity lotsof services are available for customers to enjoy. Video conferencing is one ofthe most important promises 3G networks can o�er businesspeople on themove as well as other ordinary people to enjoy.

2.5 Unlicensed spectrum 15

Figure 2.6: Video conferencing bandwidth capacity on 3G mobile[6]

2.5 Unlicensed spectrum

Crowded frequency bands are those best for long range communication out-reach. The lower the frequency the longer the length and outreach. This doesnot just mean that we need to use the lowest frequency bands for wirelesscommunication. But rather the selection of best and commonly used bandssuch as those with the range of 20MHZ and 2.5 GHZ. Wireless communica-tion is making use of medium reach high frequency bands where frequenciesare still can manage to bend around corners of buildings and other blockadesand less a�ected by natural factors like water particles and sun rays (atten-uation). These are frequency bands whose use exclusive rights (licenses) areoften sought. Exclusive right is the best solution to overcrowding and thuscausing disturbing interferences in these commercially used frequency bands.

However, there are some frequency bands in the best communicationrange which are not licensed. These license-free bands support technologieslike WiFi which widely used for Wireless Local Area Networks (WLAN). un-licensed spectrum can be an ideal testbed for innovation: WiFi has grown tobe a major new technology precisely as a result of using unlicensed spectrumto experiment[1].

WiFi exists at 2.4 GHZ together with lots of other technologies for dailydomestic use like microwave ovens. 2.4GHz WLANs have regulatory accep-tance throughout most of the World for WLAN use; however, the use of5GHz for WLANs is also possible but somewhat limited. For example, the


Figure 2.7: 3G mobile and other wire[7]

U.S. allows operation of 5GHz WLANs, but other countries (e.g., China) donot[8].

Figure 2.8 indicates that from 10KHZ to 30GHZ are highly regulatedand controlled. In fact this is the range frequency spectrum most used forwireless technologies owing to low signal path loss or attenuation. This is therange for long and medium wireless signal outreach as natural phenomena.Organizing and allocating uses of frequency spectrum in this range can beseen as important for e�cient use of spectrum thus making co-ordinatedregulation crucial.

There has so far being less usage of spectrum range from 30GHZ to around300GHZ and regulations are less strict in this area. There is, in fact, a greaterbandwidth in this range. The setback in this range is that higher frequen-cies are suitable only for very short distance wireless communication. Thegood thing about them is that they are less susceptible to interferences in acon�ned area like rooms as such carrier frequencies cannot penetrate walls.Therefore, shifting WLAN and domestic appliances to these frequency spec-trum bands would free alot of space wireless telecommunication technologies.

Using a number of techniques makes sharing of spectrum in terms ofbandwidth capacity and reasonable signal power to mitigate interferences


Figure 2.8: The frequency spectrum[1]

achievable. These techniques include spread spectrum which implies insteadof transmitting a signal at high power over one frequency, it transmits at lowpower across a wide band of frequencies. sing a number of di�erent technolo-gies - more communications capacity can be eked from the same amount ofspectrum. A smart receiver is able to distinguish the very low power trans-mission from other low power transmissions and render the message encodedin it. This has the e�ect of allowing many users to use the same frequencies atthe same time, thus increasing the communications capacity of spectrum[9].This is specially extremely bene�cial in the unlicensed spectrum.

Time Division Multiple Access (TDMA), Frequency Division Multiple Ac-cess (FDMA), Wide-band Code Division Multiple Access (W-CDMA) andothers are technologies which dramatically improved the optimization of wire-less data and telecommunication medium.

Unlicensed or license-free spectrum like those used for network accessas shown in �gure 2.9 have rules pre-de�ned for both the hardware anddeployment methods of the radio. Such equipment are intended to makesure the common and optimal use of the license-free spectrum in a way thatonly interference is mitigated rather than giving exclusive rights to for useof spectrum by only one licensee.

In �gure 2.9 the mobile equipment is equipped with transmitters andreceivers which are capable of connecting to and abiding by the ruling oftransmission power in both networks - the licensed cellular radio access net-


Figure 2.9: Licensed and Unlicensed Frequency Spectrum[10]

work (RAN) and the unlicensed mobile access network (UMAN).

So there is always the advantage of having some unlicensed frequencybands for all purposes from innovation to easy access of home networks orshort range indoor network access with limited or restricted power level de-vices. Having unlicensed frequency spectrum is not the same as deregulatingfrequency spectrum which itself implies the use of any frequency by any-body for anything at any time and place. The report discusses this in theevaluation section.

The advantage of unlicensed spectrum can be maximized by moving themover to the spectrum zone of above 60GHZ which the natural limitation of thefrequency spectrum is very advantageous in mitigating interferences. The useof resource optimizing techniques like frequency hoping and spread spectrumwill add up to the viability using such spectrum range for domestic appliancesand very short range network access.

Figure 2.10 shows an overview of spectrum range up to 30GHZ and theallocated usage of the segmented frequency spectrum in the range from verylow frequencies to 30GHZ.

Figure 2.11 shows how using higher frequencies can replace wires for do-mestic wireless use with great ease and bigger bandwidths wires can notprovide. The �gure also indicates the high security of such local access asaccess is geographically con�ned to single room due to low wall penetrationsuch frequencies. Wireless Personal Area Networks or (PANs) as shown inthe �gure can be used to interconnect various electronic devices. Such a


Figure 2.10: Radio frequency spectrum[11]

high speed network could be used for free roaming with our laptop inter-net connection via docking stations as well as interconnecting other domesticelectronic devices like cameras (digital and video), PDAs, and high de�nitionDVD-players and TV-monitors.

Streaming data from one device to another is an application which ben-e�ts from the high data rates achievable at 60GHz. For example, a digitalcamera with one gigabyte of memory (2�33 bits) will take 159 seconds todownload its contents over a 54 Mbps WiFi connection, but 13.5 secondsto download over a 630Mbps 60-GHz connection (this calculation blissfullyignores all of the overhead required in a wireless link-hand-shaking and thelike)[12]. This actually shows how valuable such frequency range can be do-mestic use. The other advantage of using these bands is that we free somelicense-free lower frequency bands used for these purposes today which can


Figure 2.11: 60GHZ use for [12]

be more ideal and useful for other types of wireless communication that su�erfrom scarcity and close to su�ocation today.

2.6 Software De�ned Radio (SDR)

Software De�ned Radio is a radio communication or broadcasting methodwhich is relies more on software for modulation, transmission and recep-tion of signals than hardware as used by traditional radio communicationmethods. It is software-run computer device which is connected to hardwaretransmission device which can change radio signals by reducing or increasing.

The concept of SDR is that a computer running di�erent software usingprotocols to convert audio input to digital, manipulate and process it, gen-erate bit streams and interweave in carrier frequencies by converting themto analogue and transmit through and antenna. The SDR receiver uses theopposite of the same tactic by antenna receiving a radio signal by detect-ing the pre-con�gured frequency. The antenna is an analogue device butan attached digital converter will convert the received signal into digital bitstreams. Because it computer based, a processor will read the bit streamsfrom the converter and will pass on to software application which will process

2.6 Software De�ned Radio (SDR) 21

and decode it and �nally play back the sound or other multimedia informa-tion embedded on the sound devices or screen.

Figure 2.12: Software De�ned Radio Diagram [13]

This sophisticated, untraditional radio transmission technology has cre-ated a bit of a concern for the radio frequency spectrum regulators. SDRcreates a number of regulatory challenges, especially when it comes to fre-quency allocation and management. For regulators, SDR has the potentialto bring radical changes to how spectrum is used, and therefore to the reg-ulations that apply to radio communication systems. In the SDR era (likePCs) one can acquire hardware from one �rm, software from another andthe operative system from a third �rm. Which one of these must be regu-lated? What if somebody modi�es the software, for example, to change thepower level? These questions and uncertainties show that even though thereare many possibilities and �exibilities connected to the SDR development,there are also a number of challenges from the regulatory side to make thisrevolution take place.[14].

It is an emerging technology which going to have a great impact on theregulation and can cause radical change in radio spectrum regulation as thistechnology can evolve further to a greater extent. Figure 2.12 shows thediagram of the technical structure of SDR devices.

Chapter 3

Frequency Spectrum Resources

Management

Radio frequency management is the method of regulating frequency spec-trum resource at international, regional and national levels. Radio frequencymanagement ensures the e�ective use of spectrum by allocating spectrumfor purposes bene�cial for mankind and further involves assigning spectrumbands to users like operators in the cases of radio, TV and telecommuni-cation. A mobile telephone service provider must obtain a license for thelegitimate use of spectrum. It is, in fact, the speedily increased demand offrequency spectrum use that made spectrum management very important.

Spectrum management involves regulating the e�cient use of the radiospectrum which includes the methodology and processes for allocating, allot-ting, assigning, and licensing the scarce resource of spectrum. It also involvesthe establishment and enforcement of the rules and regulations associatedwith spectrum use.

It is the government of a country which eventually gives exclusive rights inthe form of license. Licensing system is the primary tool for governments tomanage spectrum. National Spectrum Management or National Regulatorybodies use a number of ways in licensing the precious natural resource of radiofrequency spectrum for the e�ective use of the medium by some technologieslike the wireless mobile communication.

The major tasks involving in frequency spectrum management at all lev-els can be summarized as: allocation of spectrum to certain applications andservice or use at international level, service rules in terms of quality of ser-

3.1 Introduction to Regulation and Regulators 23

vice at national or regional level, assignments of frequency spectrum bandsand providing licenses at national level, compliance of rules and regulationsand enforcement of such rules and regulations at international, regional andnational levels and �nally international coordination starting from next doorneighbor to over the world countries.

3.1 Introduction to Regulation and Regulators

Regulation in general is like guiding with rules. Regulations favor certainthings while disfavoring certain things too. There both good things andbad things about regulation. The opposite is deregulation which is feel freeand limitless. It is a body with authority which regulates and the regulatedconform to that.

Regulations are intended for the producing certain predicted results. Whilegiving positive results in certain issues, regulations can have negative back-lash on other relevant issues as side e�ect. It is one reason why those whoadvocate for deregulation in certain sectors argue for deregulation.

Regulating human related issues have the intention of contributing to orserving for the advantage of human being. Areas common to regulation ofteninclude Business, health, energy, transport and communication industriesamong others. Our focus in this report and particularly in this section isregulation in the communication industry.

In the communication industry, regulation is considered to be vital. Themain reasons for regulations in this area are �rst that radio spectrum isuniversally considered to be a valuable, limited public resource for which itsdemand is far greater than its availability and therefore, there is the need forgovernment regulation.

It was not until recently, when privatization and liberalization of telecommarkets were conducted that regulation of the same market became neces-sary. in many countries, a single Ministry or other government administrativeunit performed the roles of telecommunications policy maker as well as ownerand operator of the national telecommunications network[15].

Transferring telecommunication sector from the monopolist hands of government-owned operators to a number of private telecom operator �rms has made theneed of separate regulators. One thing very important in the regulators is

24CHAPTER 3. FREQUENCY SPECTRUM RESOURCES

MANAGEMENT

its independence from government in�uences. This independence is impor-tant for fair and qualitative decision making in the sector. But it must beclear that 'independence' of the regulator does not mean independence fromthe laws and policies of a country. The mandate of an independent regu-lator should be clearly spelled out in national laws. Regulators should beaccountable to legislatures or other government bodies.

In most countries, separation of regulators from the general governmentadministration also provides an opportunity to pay higher salaries to regula-tory o�cials. This can be important in developing and transitional economieswhere extremely low government pay scales can make it di�cult to attractand retain highly quali�ed and non-corruptible sta�.

3.1.1 International Information and Communications Reg-ulator

International Telecommunications Union1 (ITU) is the United Nations agencyfor information and communication technologies. ITU is based in Geneva,Switzerland, and its membership includes 191 Member States and more than700 Sector Members and Associates.

ITU helps the world communicate and represents the communication in-terests of governments and the private sector. Therefore, ITU is the globalfocal point for all relation of communication. Governments and the pri-vate sector work together at the ITU to adopt international regulations andtreaties governing all terrestrial and space uses of the frequency spectrumas well as the use of all satellite orbits, and to manage the radio frequencyspectrum[16].

ITU works in three main area or sectors of communication and informa-tion technology: radiocommunication, standardization and development.

The Telecommunication Standardization Sector,ITU-T, is the most im-portant developer of the global standards on which the world's telecommuni-cations networks are based. ITU organizes World Telecommunications Stan-dardization Assembly (WTSA) once every four years.

The Radiocommunication Sector, ITU-R, regulates the use of the radio-

1ITU: Formerly International Telegraph Union was Founded in Paris in May 1865 butbecame a UN specialized agency in 1947

3.1 Introduction to Regulation and Regulators 25

frequency spectrum for both terrestrial and space (satellite) radiocommu-nication. ITU organizes World Radio Conference (WRC) once every threeyears.

The Telecommunication Development Sector, ITU-D, ITU assists devel-oping countries in improving their telecommunications capabilities. ITUsgoal is to work toward universal access to telecommunications for all coun-tries. As a UN specialized agency, ITU assists developing countries in im-proving their telecommunications capabilities.

ITU is the place where all countries get together to agree on commonstandards with regard to spectrum allocation for worldwide services.

3.1.2 Regional Regulators

Regional telecommunications regulator are set for co-ordinating telecommu-nications standards and other related issues over a certain region which is apart of the global community and liable to international regulations as well.Regional regulators represent states in that certain region and are set upby constituent states. Continental regulators are regional regulators. Suchregulators include:

African Telecommunications Union, The European Conference of Postaland Telecommunications Administrations (CEPT), Caribbean Telecommuni-cation Union, Inter-American Telecommunication Commission, Latin Ameri-can Forum of Telecommunications Regulators (REGULATEL), West AfricanTelecommunications Regulators Association (WATRA), TelecommunicationRegulators Association of Southern Africa (TRASA) and Asia Paci�c Telecom-munity are quite a good example of regional regulatory bodies.

These regional organizations have major roles in telecommunication reg-ulation at level they represent and globally as well.

3.1.3 National Regulators

Almost every country in today's telecom markets has a national regulator.The roles and duties of national regulators in di�erent countries slightly vary.But objective is the same. National regulating authority is responsible fortaking care of and regulating radio, communication and information technol-


MANAGEMENT

ogy issue with resource distribution and related regulation abidance.

National regulators were either not needed or their independence wasnot of great importance before the introduction of free market, based oncompetition and liberalization in the telecommunication markets worldwide.The starting point here was to privatize the state-owned telecom monopoliesand to pave the way for competition through regulation.

National regulators are often and, of course, supposed to be independent.This is to make sure a high quality of work in many respects of their work anddecision-making. Impartiality is crucial in such a competitive market wherenon-discriminatory regulatory decisions are necessary. Reasonable salary forsta� and hiring the quali�ed sta� for the job in the institution are importantissues which can only be made sure through independence of the regulatorsfrom state in�uence. Of course, the regulators are accountable to the coun-try's law and policies and to some superior government institution but shouldbe independent for its area of work within the context of a prede�ned areaof work.

National regulators have also to conform to international agreementswhich they have to take into account when taking decisions on domestic is-sues of regulation such agreements will provide guidance but can other timesconstrain domestic policies of communication regulation and frequency spec-trum management at national level.

3.2 Frequency Spectrum Assignment Methods

in Telecom

After spectrum resources allocations have been made at international level,national regulators work further in assigning spectrum bands to operators.National Spectrum Management or regulatory bodies can opt using eithermarket-based economic licensing methods or non-market-based administra-tive licensing methods. The two methods are discussed further in the follow-ing sections.

3.2 Frequency Spectrum Assignment Methods in Telecom 27

3.2.1 Non-market based Approach

Traditionally, governments often allocated spectrum to particular applica-tions and then assigned parts of the spectrum to entities to use for speci�cpurposes. This process is non-market based method known also as commandand control administrative method. In this method spectrum price and valueare determined by the Authority rather than the market itself. Three ways oflicense awarding can exist under this method, namely, �rst-come �rst-served,comparative selection also known as "Beauty contest" and lottery.

First-come �rst-served is the approach in which the National Regulatoryor Radio Frequency Management Authority administratively awards the fre-quency bands in question to the applicant operators in the order they applyfor frequency use licenses. This is a less common approach today and wasmainly used in the early days when radio frequency demand and use werenot so wide spread and wireless telecommunication was in its infancy.

Comparative selection also known as "Beauty contest" is the approachin which the National regulatory or Radio Spectrum Management Authoritygrants frequency usage licenses on the basis of a merit-based assessment of thecompeting applicants. A preset list of selection criteria is used to determinethe winning applicant(s). With this approach quality of service and otherissues related to communication needs of the society are focus points. Thisapproach is very common in today's modern telecommunication frequencyspectrum licensing.

Lottery is an approach in which the National regulatory or Radio Spec-trum Management Authority will award a radio frequency use license to awinner of a randomly drawn ticket lottery.

3.2.2 Beauty Contest

Beauty contest is the most famous non-market-based method of assigninguser licenses in telecommunication sector. It was the dominant method usedin distributing frequency spectrum resources to the second generation mo-bile communication systems (2G). In beauty contest licenses are awardedaccording to some preset standards and conditions applicant �rms have tomeet up. It is like who is the best to provide such a service and who thebest infrastructure or who is �nancially best �t to make sure they could havequick roll out etc.


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Beauty contest is considered to be an ine�cient way of distributing thevaluable resource of frequency spectrum comparing market based method ofauction discussed below. Economists like P. Klemperer argue that, by con-trast [to auctions], can give away valuable assets at a fraction of what they areworth (Klemperer, 2000b). Some countries which conducted beauty contesthave charged some basic administrative fee while others made reserve prices.Beauty contests are said to be prone to lobby are political interest groupsin�uences. Therefore, the e�ciency needed in such a resource distribution isvery blurred.

3.2.3 Market based Approach

In this approach the market valuations of spectrum and other economic fac-tors determine the license awarding procedure. The licenses are auctionedand interested operators compete for obtaining the license by bidding andoverbidding the other competitors in the auction. The license goes to thehighest bidders. The aim is to derive as much economic bene�ts as possiblefor the Authorities. Other reasons of economic e�ciency are given. We'lldiscuss them in the following sections.

Economic methods are quite excellent tools for the management of radiofrequency spectrum. The economic method of market-based approach hasmore signi�cant advantage over the non-market based methods. Economice�ciency is created through auction by creating a competition. Those, whovalue the spectrum highest and feel it more valuable than others will paythe highest for it. This makes the buyer optimally use assigned spectrumbands and make highest revenue turn-in possible by investing and creatingnew services provided over the medium in question. So basically, an auctionawards a license to the operator in the competition which bids highest. Andsecondly, auction turns in an excessive pro�t to the government, if properlymanaged. The generated revenues will be used for funding social developmentprojects. This is an indirect way of taxation as end users have to, in the end,pay for license through services.

3.2.4 Auctioning Models

Auctions can be in either of two forms: a sealed bid or an open outcrybid(English ascending bid auction type or Dutch descending bid auction


type) all discussed in the following subsections. The model and design ofthe auction really matters. Timing, market economy, demand and supplypower are also in�uential factors in conducting a successful auction and turn-ing in signi�cant revenue. The seller does not have much information aboutthe buyers value of the item being sold. Auction is, therefore, a process ofdiscovering the right value and buyer of the scarce item for sale.

Auctions can be conducted sequentially or simultaneously. In the case ofsequential auctioning, items (frequency spectrum in the case of telecom) areauctioned one at a time. Theories teach revenue drop or value diminishingas later rounds are reached and thus economic e�ciency is weakened. In theother case of simultaneous auctions, items are auctioned in bundles.

Auction theory, which models each auction as a non-cooperative game,can provide some useful guidelines[2]. Simulations of such a game are usedto design the best formats of auctions. Vickrey's (1961) 'revenue equivalenttheorem' (RET) is one of the most important in this regard. This is discussedunder Vickery's auction in the evaluation section.

In the following subsections we discuss and analyze the di�erent auctiondesign models and discuss further success and failure stories in the EU coun-tries which conducted their auctions using such auction models. We'll alsosee if the RET and its assumptions hold the subsections and in the evaluationsection below.

3.2.5 Ascending-bid Auction (English auction)

Ascending bid auction also known as English auction is a multi-round biddingprocess in which bidders submit increasing bids over successive rounds. Eachbidders if fully informed about the bids made by all other bidders. Theauction closes when no new bids are forthcoming. The bidder who bids lastand highest is awarded with the license. In the ascending bid auction thelicense price is set to the lowest acceptable price also known as (reserve price).

Ascending bid auctions are considered to be more e�cient in frequencyspectrum resource distribution as economists argue that the spectrum goesto those who value them most. Winners are considered to be the �rms whovalue them most and will make use of them most e�ciently as they have paidhigh prices for them.

on the contrary, ascending bid auctions are said competition ine�cient


MANAGEMENT

prone to collusion. Therefore, ascending bid auctions do not encourage newentrants. Klemperer (2002) argues that ascending-price auctions are partic-ularly vulnerable to collusion and likely to deter entry[2]. There can also benegotiations and before-auction agreement among auction participant �rms.Such under-the-table agreements can negatively a�ect auction outcome interms of who revenue turn-in and who gets what. In such cases pressure isput on those �rms who do not conform to the agreements in the form ofretaliation bids.

If such a situation emerges in a case where the number of licenses isequal to the number of incumbent �rms no chances are left for new entrantsand that hampers competition in the auction and the market. The e�ectof pre-auction agreements can be minimized adopting some tactical auctiondesign, for instance, concealing bidder identities. Mechanisms such as 'click-box bidding', where the bidder indicates in a click box the bid increments,also reduces possibilities for code bidding[2]. Where code bidding impliessignaling in the auction following in advance agreements by �rms (auctionparticipants). All methods can contain hole and bugs but clever and carefullythough-about auction design could lead covering up such weaknesses. Thatis why and where auction design really matters.

But despite all these, market-based frequency resource distribution shouldbe most e�cient and preferred to administrative methods which are basedon biased administrative judgments. Auction is a market-based method andgives a very close approximation of the really value of spectrum in the mar-ket compared to administrative methods of beauty contest, �rst-come-�rst-served and lottery.

3.2.6 Descending-bid Auction (Dutch auction)

The Descending-bid Auction known as the Dutch auction sets the reserveprice to highest level possible which might not attracts buyers. The auc-tion then gradually reduces the item price in order to attract buyers. Thiscontinues until a bidder pronounces her bid and the round stops with beingawarded to the bidder that o�ered the current price which is the highestprice. This type of auction has an ending similarity to the sealed bit auctiondiscussed in the following subsection.


3.2.7 Sealed-bid Auction

Sealed bit auction is the auction in which participants submit their valuefor the portion of spectrum for sale in a sealed envelope. In the sealed bitauction, no bidders has any information about other bidders participating inthe auction. The winner is the bidders with the highest price o�er. There aretwo types of sealed bid auction which are �rst-price and second-price sealedbid auctions. The process of the two types is the same except that in the�rst-price sealed bid auction the pays the highest bid price o�ered whereasin the second-price sealed bid auction the winner pays the bid price o�eredby the second highest price bidder.

Sealed bit auction has proved to be successful for telecommunicationsspectrum licenses and is most e�cient when combined with ascending bidauction.

Sealed bid auctions are less complex and less costly both feasibility andadministrative wise. The simple reason for this is that bids are handed insealed envelopes in a preset date. Bid envelopes are opened and the highestbidder is the winner. That is it! Sealed bid auction is also bene�cial for newentrants as its collusion-free unless it is multi-rounded which is not often thecase. information asymmetry in very crucial for sealed bid auction's overallsuccess.

On the contrary, sealed bid auction is risks less e�ciency in spectrumresource distribution. As the values o�ered in the sealed bid auction are notnecessarily the highest values of bidders. concerns about �winner's curse�force bidders to moderately bid while in the open ascending bid auction,bidders can be predicted to bid higher with disclosure of other bidders valueinformation. This makes the RET argument weak. Advantages and disad-vantages? Why sealed?

3.2.8 Simultaneous multi-round bid Auction

A format for auctioning multiple items, commonly used for telecommunica-tions spectrum licenses. The items are auctioned simultaneously, and theauction does not conclude for any individual item until it concludes for allitems. Each bid comprises a single item and an associated price. Bidding isconstrained by a minimum bid increment and by an activity rule that limitsa bidder's new bids based on his past bidding activity. The auction concludes


MANAGEMENT

when no new bids are submitted, and the standing high bids are then deemedto be winning bids.

3.2.9 Spectrum Trading

Frequency spectrum is one of the most important and valuable assets oftelecommunication operators. Frequency spectrum licenses have two maindesign characters resulting from the initial license design at the spectrumauction. The licensed frequency band can only be used solely for the purposeand the licensee speci�ed on the license by the regulator or the licensee hasthe option of letting a third party use a part of the licensed frequency bandby either selling or hiring them to a third party. The �rst case type of licenseis known as a non-tradable license. Whereas in the second case type, thelicense is a tradable license. Spectrum trading is mechanism of transferringthe some or all of the rights and associated obligations of using spectrum tothird parties[17].

Spectrum trading contributes more e�ciency to spectrum managementby bene�ting both license holder and innovative entrants who are non-license-holders. Spectrum trading lets licensees or license holders to further let othersuse a part or all of their unused licensed spectrum in exchange of �nance.This no doubt contributes to economic e�ciency. It also let to entrants tohire spectrum and launch a business without their hands being back-tiedby the unavailability or lack of spectrum. This makes both economical andtechnological e�ciencies.

Spectrum trading is of course voluntary and all parties are liable to theterms and condition of spectrum license. This allows license holders to eitherhire or sell a part of the spectrum in their hands which they do not need or useto third parties freely and to their comfort while creating all time spectrum-available-market for innovative �rms of both incumbents and mainly newentrants.

Licenses for frequency spectrum are so far for the exclusive use of licenseholders, therefore, spectrum trading is not fully allowed by license agree-ments. Italy is the allows partial spectrum trading between license holderswith the same technology in use. But in the European Union, the EuropeanCommission has proposed a target of having about one third of a majorspectrum holding tradable and �exible by 2010.

3.3 The European Experience 33

3.2.10 License Duration

The life of 3G licenses awarded to operators in Europe specially countriesunder the light of this report slightly vary. The auctions were held in the years2000/2001 and that is the starting year of the licenses. Most of these countrieshave opted to give 3G/UMTS licenses with a lifetime of 20 years that is to sayuntil 2020/2021. These countries include UK, Germany, Denmark, Belgiumand Austria. The other countries like Italy, The Netherlands and Switzerlandchose to limit the 3G/UMTS lifetime to 15 years until around the year 2015.

Some later auction of 3G/UMTS held as a result of returned licenseswere also limited to the same expiry date like in the case of Denmark whichauctioned one returned 3G/UMTS license by former operator after mergingwith another 3G/UMTS operator in 2005. Another operator bought thatlicense with its same original expiry date. See under Denmark in the followingsection for details.

The other European countries not covered in this report which either con-ducted auction or used beauty contest to award 3G/UMTS licenses are alsovaried between 15 and 20 years in license duration with exception of Norwaywhich has further limited the license duration to only 12 years starting fromlate 2000.

After expiry date licenses are returned to authorities for re-auction. Butsome countries like Italy have a di�erent policy. Italy, for instance, hasgiven a chance of renewal to the operators right after or before licenses haveexpired.

3.3 The European Experience

After the success of the 2G network and services in Europe, the Europeansnow wanted to shoot up the 3G network In technical terms, the auctionconcerned the assignment of a total spectrum range of 2x60 MHz (one rangefor upstream and one for downstream), as de�ned by the regulators. To makethe service viable, a �rm had to have a license of at least 2x10 MHz.

1. Four equal licenses of 2 x 15MHz each.

2. Five licenses: two licenses of 2 x 15MHz each and three licenses of 2 x10MHz each.


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3. Six equal licenses of 2 x 10MHz each.

4. Twelve frequency blocks of 2 x 5MHz each, with each �rm requestedto win either two or three blocks. This would lead to four, �ve, or sixlicenses[2].

Table 3.1: First UMTS auctions in EU 2000-2001[2]

Figure 3.1 shows the main European UMTS/3G auctions in the contextof this report. The countries are listed in the order of the auction dates. The�gure shows the countries, the auction dates, the number of incumbents andentrants, the number of licenses, number of bidding rounds and number ofdays the auction lasted.

The number of licenses is set to be at least one more than the number ofincumbents theoretically in order to educe competition. One observation onthe table is that all countries have ful�lled this requirement except Belgiumwhere number of bidders have fallen under the number of licenses in auction.

3.3.1 Great Britain

United Kingdom was the �rst country in Europe to conduct spectrum auctionfor UMTS licenses in the year 2000. There were four 2G incumbents in the


UKmobile telephony, namely Vodafone, BT Cellnet2, Orange and One2One3.

The UK regulator (Radiocommunication Agency) was conducting theauction decided to auction 5 licenses with the aim of increasing competi-tion and thus revenue turn-in. The idea was to o�er one more license thanthere are incumbents. This would attracts entrant bidders who could rely ongetting at least one license from the o�ered 5 licenses. The new entrants thatwould compete for at least the extra license, have seemed to have threatenedthe licenses that would go to incumbents. This makes the incumbent to bidaggressively for their share of 3G licenses against the entrants. Entrants inreturn bid aggressively to ensure the extra licenses for them. This behaviorwould escalate heated competition and ensured high revenue turn-in.

Table 3.2: UMTS License, UK, 2000[2]

The �ve UK license were organized as A,B,C,D and E. A and B were twobig licenses of 2 x 15MHZ paired frequencies with A having 5MHZ unpairedfrequency. The other three B, C and D were of 2 x 10MHZ paired blockswith 5MHZ unpaired frequency blocks. License was for new entrants andincumbent were not allowed to bid for it. The other four were for everybodyincluding and mainly incumbent.

Thirteen bidders have participated in the UK 3G auction - four incumbentand 9 potential entrants. All participants were required to pay ¿50 millionfor deposit. The UK auction opened on March 6, 2000 and closed April 27the same year. The initial increments of the license bid was 5% but was in

2BT Cellnet later became mmO23One2One later became and now is T-mobile


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Table 3.3: Bidding patterns for 3G licences, UK, 2000[2]

the later rounds reduced to 1.5%. The auction lasted for 150 rounds.

The UK 3G/UMTS auction is considered to be the most successful auc-tion in Europe. The auction generated a revenue of e37.5 billion and a percapita of e630.

Table 3.2 shows they license type, the amount of spectrum paired andunpaired, the total spectrum per winning �rm, the minimum price or re-serve price per license, the winning bid and �rm and the cost per MHZ foreach winner �rm. It is interesting to note that license A is the biggest li-cense with total amount of spectrum being 35 MHZ of 15MHZ paired and5MHZ unpaired. Even though license A was the biggest license it had thesecond highest price in the UK auction and the lowest cost per MHZ. Thislicense was only allowed to the new entrant �rms to bid. So it took manyrealities surrounding a new entrant into account including their capital andmotivation.

With the mobile phone market going through the familiar stages of start-up, expansion and maturity, �gure 3.1 shows the gradual increase amongsubscribers for 3G services in UK. The �gure shows that nothing much hap-


Figure 3.1: 3G subscribtion, UK, 2006

pened in the �rst couple of years as the market was at star-up stage. Thiscan be the role out period of 3G services. However, steady increase in thenumber of subscribers has occurred from 2004 after the �rst role out of 3Gtook place and market into an expansion stage before it �nally came to ma-turity. It is notable that 3UK4 was the �rst �rm to role out their 3G servicesin 2004. 3UK kept its course of leading 3G market in the subsequent years.

See the appendix for a sample draft of the UK 3G license, which gives alldetails of rights and obligation of the license holder in the UK.

3.3.2 The Netherlands

The Netherlands was the second EU country to auction UMTS licenses. TheNetherlands have followed suit of UK auction model of ascending bid auctionwith the only di�erence of Netherlands having �ve incumbents whereas UKhad four. The Netherlands have auctioned �ve licenses; two big licenses of 2x 15 MHZ and three small licenses of 3 x 10 MHZ.

The Netherlands' UMTS auction design had little to o�er to new entrantsas the number of licenses was equal to number of incumbents. Incumbentshave a stronger position and, therefore, an advantage over entrants in mobilecommunication as incumbents already have network infrastructure in placeand therefore lower �xed and variable costs. On top of that, incumbentshave an already existing customer base in the 2G network which is easier to

4former TIW and the only new entrant in UK UMTS/3G market


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Table 3.4: UMTS License, Netherlands, 2000

[2]

transfer them to 3G and get new 3G customers especially in the case of newentrants.

The Netherlands UMTS auction did not attract many new entrants. The�rm Versatel was the only non-incumbent participant in the Netherlands3G auction. The incumbent bidders in the Netherlands 3G auction wereLebertel, KPN, Dutchtone, Telfort and Ben. Versatel quit the auction afterreceiving a legal treat letter of being sued for intentionally raising the licenseprices by bidding higher and higher. from one of the incumbent as only

3.3.3 Germany

The Geman auction is one of the most successful 3G/UMTS auctions inEurope was held in the period between 31 July 2000 and 17 August. Theauction lasted 173 rounds of bidding and generated DM98.8 billion or e50.8billion.

The reserve price for bid was DM100 million with a minimum 10 per centincrease with each bid (reduced to 5 percent at a later stage). Seven biddersparticipated: T-Mobil5, Mannesmann-Vodafone, E-Plus and Viag Interkom,which were all incumbent mobile telecommunications �rms; Mobilcom andDebitel were already in the mobile market as virtual mobile network operators(�rms that acted as resellers of airtime of incumbent operators, with theirown customer base and billing system); �nally there was the �rm 3G (who

5a subsidiary of Deutsche Telekom


assumed the trade name Quam) as truly new entrant.

Table 3.5: UMTS License, Germany, 2000

[2]

The German auction design was a unique design where the number oflicenses and who would receive them were left for the market to decide. Alicense was provided a winner who wins at least two frequency blocks of2 x 5 MHZ. Each bidder was allowed to get at most 3 of those frequencyblocks. In the German design one can note that there can be between 0 to 6winners and if all licenses are sold there are at least 4 winners which are thefour 2G incumbents. In fact the auction ended with 6 �rms (four incumbentand 2 entrants) each winning two block of 2 x 5MHZ. This was the resultof Debitel withdrawing from the auction at round 126. But interestinglybidding continued bitterly apparently with the intention of �rms trying toget more than 2 blocks of auctioned frequencies instead of each �rms settlingfor two block at the price in round 125 which was e2.5 billion.

In addition to �rst main auction of 12 pairs of 5MHZ, the Germans auc-tioned unpaired 5 x 1MHZ and the left overs from the �rst auction whichthe frequency bands not sold in the �rst main auction. The reserve price forthe unpaired 1MHZ was DM 50 million. The licenses are 20 year life longand non-tradable. The bidders could win as many of the additional 1MHZblocks as were available but on condition that the participating bidder won


MANAGEMENT

at least two block or 2 x 5MHZ from the previous auction.

The German auction lasted 173 rounds and ended with the provisionof six small (2 x 10MHZ) block licenses. The German UMTS/3G auctiongenerated a revenue of DM 98,807.2 million or e615. The German UMTS/3Gauction is considered to be very successful in terms of e�ciency, competitionand revenue turn-in.

Figure 3.2: Total mobile revenue by service, German example,

[18]

Figure 3.2 indicates how 3G network data and voice are speedily takingover those of 2G in Germany. The �gure gives comparison and an overviewof German 2G and 3G data and voice revenue turn-ins. Prediction of thefuture data and voice revenue turn-ins until 2010 is also included.

3.3.4 Italy

Italy was the fourth European country to auction 3G spectrum. The licensewas �rst and foremost designed to auction paired 2 x 10 MHZ licenses forincumbent �rms and paired 2 x 15 MHZ for new entrant �rms. The di�erenceof the two license models was that the new entrants enjoyed the privilege ofgetting an extra 5 MHZ paired frequencies while the most an incumbent �rm


could win was 2 x 10 MHZ. However, to ensure competition among bidders,there was the provision that if there were fewer than six bidders the actualnumber of licenses to be auctioned would be reduced that so that the numberof licenses would be one fewer than the number of bidders[2].

In the Italian 3G auction, six �rms were quali�ed for the auction partic-ipation of which four of them were 2G incumbents (Telecom Italia Mobile(TIM), Omnitel Pronto6, Wind and Blu) and two new entrant �rms (Ipseand Andala7). Therefore, �ve licenses were available for auction three forincumbents and two for entrants.

The auction started on the 19 of October 2000 and lasted for about fourdays until the 23 of October. The auctions started with the reserve priceof 4000 billion Italian Lira or e2.1 billion. With Blu quiting the auctionat round 10, the auction ended with successful bidders winning at a priceof around 4700 billion Italian Lira or e2.4 billion. The revenue generatedwhich was in total e12.2 billion was not as high as anticipated by the Italianauthorities. The �rm Blu was given the blame for failing the auction and theItalian government though about disqualifying the auction but investigationshave failed to prove that and government chose to accept the auction result.

Table 3.6: Italian 3G bids 2000

[2]

6a subsidiary of Vodafone7shares: Hutchison Whampoa, Tiscali


MANAGEMENT

Table 3.3 shows the bidding process and rounds it went through oneinteresting point is that Blu bids highest at round 7 and that is the last roundBlu bids and that is the last it bids. This made Blu the �rst incumbent thatwas not able to acquire 3G licenses in the EU.

The Italian 3G/UMTS auction was a total failure. It generated a revenueslightly higher (e3 million) than the reserve price and a e210 per capita.The withdrawal of Blu is an apparent cause of the failure on top of the initialdesign weakness.

3.3.5 Austria

The Austrian UMTS/3G auction design was similar to the German designwhere the market is let to decide the number of license with some marginsas well as who would receive them. The Austrians have made twelve times 2x 5MHZ paired frequency blocks. As in Germany every �rm was limited tobuy at least 2 block and at most three blocks.

The auction could, in principle, have been concluded immediately if thebidders had agreed to bid for two blocks each, avoiding the aggressive biddingfor three blocks by some bidders as observed in Germany. Mobilkom appar-ently made statements ahead of the auction that it would not bid aggressivelyif others would do the same (Klemperer, 2002a). This message seemed tohave been observed as the auction ended after 16 rounds with each bidderreceiving two blocks and paying on average e118 million per block[2].

The statement of Mobilkom has, indirectly, revealed information of oneincumbent's behavior in the auction and signal of its private value of thelicenses and thus made �rms relaxed and less aggressive in competition.

3.3.6 Switzerland

Switzerland planned to auction 4 UMTS/3G licenses 13 of November 2000.Four UMTS/3G licenses were on auction. There were initially three 2G in-cumbent �rms in the Swiss market, namely, Swisscom, Orange and diAx.Everything looked very promising when the Swiss Federal O�ce of Com-munications screened prospective bidders for the upcoming UMTS auction.Altogether,10 applicants quali�ed to bid for 4 identical licenses. This seemedlike ample competition[22].


The auction design chosen was open ascending bid auction. However,despite great hopes of good competition as a result of the number of new en-trants and the willingness of the incumbents to compete and get a 3G/UMTSlicense, things have unprecedently changed in the short period before the auc-tion date. There started what to be a sudden and unexpected drop down ofinterested �rms in the participation of the auction following the withdrawalof many entrant �rms. At the date of auction only four bidder �rms haveshown up for auction, the three incumbents and one 3G entrant (Team 3G8).

The auction was postponed and eventually held on 6 December with onlyfour participants in the auction. There can be no or less competition in anauction where 4 licenses are being competed by four �rms. To increase bid-der participation in such circumstances, Klemperer (2000), for instance, pro-posed switching from an open, ascending-price auction to a one-time sealedbid[2]. The sealed bid auction would eliminate or minimize the advantageof incumbent in an open ascending bid auction. A new entrant has a higherprobability of wining in a sealed bid auction. Sealed bid auctions have, the-oretically, by themselves weaknesses in e�ciency and winner's curse. Thisissue is discussed later in the report.

The Swiss auction did not last long. This was the expectation of auc-tion and economic analysts. Each of the four bidders paid the reservationprice of SF50 million, apart from Orange which paid an extra SF5 millionto ensure a particular block of frequencies to match those in a neighboringcountry(France)[2].

The Swiss auction generated a revenue of SF 205 million or around e20per capita.

3.3.7 Belgium

The Belgium authorities initially planned to hold auction for UMTS/3G li-censes. There were three incumbents in the Belgium telecoms market. Likethe majority of other European UMTS/3G auctions, the government plannedto auction 4 licenses which is one more license than incumbents. The inten-tion was to create competition. Unfortunately, no new entrants were inter-ested in participating the auction. Therefore, the Belgium authorities werepushed to hand out the licenses to the incumbents on 2 March 2001.

8A subsidiary of Telefónica


MANAGEMENT

License recipients (incumbents) have paid the license reserve price of e150million which in total makes the UMTS/3G generated revenue e45o millionand a per capita of e44, the lowest in Europe.

3.3.8 Denmark

Denmark is one of the success stories of the European UMTS auctions. Theauction was held 19 September 2001. Four 3G licenses were o�ered for sale.There were four 2G incumbents in the Danish telephone market at the time.The Danes opted a sealed bid auction for competition e�ciency and avoidingcollusive behavior. The sealed bid auction was designed in a way that thewinners paid a price equivalent to the fourth largest bid.

Because of information limitation by sealed bid auction design wherebidders had the least information about other bidders value of the licenses,all bidders competed to bid highest possible. Theoretically it seemed thedanish approach - four 2G incumbents and four licenses, would not encouragenew entrants as theory teaches.

Assuming that �rms are otherwise comparable, we obtain that, in any

feasible market constellation, incumbents place higher values on licenses than

entrants do. Hence incumbents are willing to bid higher than entrants, and

we should expect that all GSM incumbents get licenses if at least one new

entrant is licensed [20].

To overcome the problem, some main design policies have ensured com-petition, zero collusion, satisfactory revenue turn-in and simplicity in theDanish UMTS auction. Limiting the number of licenses to four was itselfturned to an advantage and creating a favorable competitive condition forentrants by introducing a simultaneous sealed bid auction pressured bothentrants and incumbents to �ercely compete for licenses.

Setting a reserve price for the licenses to halv billion Danish Krones(DKr), which is the minimum acceptable price the State wants to sell thelicenses was intended to make sure satisfactory revenue turn-in of at least 2billion DKr. TDC9, Telia, Orange10 and HI3G11 won the four licenses. The2G incumbent Sonofon was outbid. Each winner paid 120 million EURO[2].

9Former State owned land line monopoly - TeleDenmark10Which later merged with Telia11The only new entrant, now known as 3

3.4 Comparison and Analysis 45

The Danish auction was, therefore, a success.

After Telia's acquisition of Orange in January 2005. The Danish regulator- National IT and Telecom Agency(NITA), got the Orange UMTS licenseback and held an auction on 2 December 2005 to resell the license. The sameauction method - sealed bid auction, was held. Sonofon submitted its bidbased on the reserve price of the license which was DKK 533,000,000.86[].The license was eventually awarded to Sonofon, which became the fourth 3Goperator in Denmark taking the place of Orange.

3.4 Comparison and Analysis

It is clear that the market based spectrum resource distribution in terms ofrevenue generation for the state, economic e�ciency in terms of who receiveslicenses as well as promotion of competition. However, design really mattersto ensure satisfactory results.

Table 3.6 gives and overview of the EU UMTS/3G spectrum assignmentamong operators. The �gure shows also the number of incumbent, planned3G licenses, granted licenses, the left over licenses, the assignment methodsand license revenue per capita.

The administrative method is more complicated and prone to lobby andbias than market based method. It is also less economic e�cient and doesnot ensure competition. Table 3.6 shows 15 European countries of which halfhave conducted market based approach while the other half have used non-market based approach with common and control administrative method.As last column of the table - license fee/population in Euro. The per capitaof UMTS/3G license revenue shows that countries which used the markedbased approach have highest per capita with Italy which combined the twoapproaches among highest.

The highest per capita UMTS/3G license revenue among countries whichused command and control is due to the reserve or minimum price set forthe licenses after assignment. Otherwise its notable in table 3.6 that licenserevenue per capita is 0.

Looking at non-assigned licenses column, it appears four of the countrieshave got one license not assigned each - two from each market based approachgroup and three from non-market based approach. This can be explained in


MANAGEMENT

Table 3.7: Europe UMTS auction 2000-2001[2]

two ways. In the case of marked based approach, it was due to unsuccessfulauction design that not enough number of �rms were willing to participatein the auction and only incumbent �rms got the licenses. In the case ofnon-market based approach, �rms were either not qualifying for the beautycontest. And in both cases the one-more-than-incumbents approach wasused.

On the other hand, ten out of the �fteen have assigned all put-forwardlicenses. All countries have tried to assign at least one license more thanincumbents with the exception of the Netherlands, which planned to assignexactly the same number of licenses as incumbents. This can be consideredone of the main causes of failure to this auction as this approach discouragesentrants from participating the auction and thus hindering competition.

United Kingdom and Germany are the highest in UMTS/3G license rev-enue e634 and e615 respectively. Three factors can be the cause for thishigh revenue. First, the timing of the auction as these auction coincided witha so called UMTS/3G fever. The technology was new and the market expec-tation of UMTS/3G services were predicted to be very high. So they enjoyedthe �rst mover advantages. Although this later turned out to be not as highas initially predicted. This has created the market rush and competition inthe UMTS/3G. Second, telecom markets in this two countries are among thelargest in Europe and a potential business and cash. This created an interestfor telecom �rms to compete for. The last and really important is the designof the auction in these two countries which the main two auction models usedthroughout the European countries which opted to give UMTS/3G license

3.4 Comparison and Analysis 47

on market based prices.

Table 3.1, gives a bit in depth information on the countries in focus in thisreport, regarding the dates auctions were held, the number of bidders whichincludes both incumbents and entrants, the type of auction and the numberof rounds of the auction. An interesting thing to note on the table is threecountries had only one round of the auction before licenses were awarded.This can be explained as the fact that Denmark used a single round sealedbid auction which is considered to be a success in terms of the successes.While in Belgium and Switzerland the cause was a failure caused by theauction design. Belgium could not even entice a new entrant to the marketwhereas Switzerland managed to get one new entrant to market.

Figure 3.3: Europe UMTS auction 2000-2001[2]

One more thing to note on the table 3.7 is the number of days the auctionlasted. The duration was from one day to 52 days. UK auction lasted thelongest (52 days), German auction lasted 19 days, the Dutch auction was�nalized in 14 days. Italy and Austria took 2 days to assign the licenseswhile it took only one day for Belgium, Denmark and Switzerland.

Some interesting observation can be made looking at �gure 3.3 and table3.7. Denmark which was one of the last countries to hold the UMTS/3Gauctions shows quite a good result in terms of license revenue per capita.The timing of the Danish auction could be seen as critical. At this point oftime the willingness of telecom �rms to pay as high for UMTS/3G license asin earlier auction was signi�cantly lowered owing to experiences from preced-ing auctions which created serious credit problems for �rms among others.


MANAGEMENT

But the Danish performance was fabulous, compensated with careful auctiondesign as a result careful and well-thought-of consultations, the Danish madetheir UMTS/3G auction a success. The Danish design of auction encouragednew entrants and created competition which led one incumbent to returnhome empty-handed and one new entrant walks away with a UMTS license.

Chapter 4

Evaluation

Market based approach of frequency spectrum assignment is more e�cientthan non-market based approach. Theory tells us that those who value fre-quency bands pay most for them. In practice, auctions decide who valuesthem most and award bands to those who pay highest, although auction haveto be designed carefully and properly for e�cient output results. Binmoreand Klemperer(2002) claim that economists have been advocating for theauctioning of spectrum since the late 1950s, following the pioneering contri-bution by Coase(1959).

However, there can be arguments against the market based approach.For instance, the high costs of spectrum licenses paid by �rms who winlicenses are eventually paid by customers through wireless service charges.This can feeble market growth specially the penetration rate among lowerincome consumers. There is also the argument that the investment capital of�rms is badly wounded by the high license fees as a result of the auction. Sucha big hole in the �rm's capital will at least delay role out and improvementnetwork infrastructure and thus signi�cantly a�ect eventual quality of service.Some might also argue that high auction can create market concentrationwhich will lead to monopoly and ultimately very high customer prices bydiscouraging smaller �rms which are not able to swim in such an ocean ofdebt and investments that follow the auction.

But the fact is that, a well-�nanced �rm is able to stand such costs. It ispossible that telecom �rms do not have investment cash of their own but thisis not always necessary particularly in this era of globalized economy whereinvestments from banks and other interested investment �rms can be drawn

50 CHAPTER 4. EVALUATION

to this blooming market. With regard to high license cost being passed tocustomers, it is worthwhile to remember that license duration is two decadelong particularly in the countries which assigned UMTS/3G licenses throughauction. This is a good long time to let customers pay this debt with theirsatisfaction of enjoying mobile services with good quality.

Coming now back to auction itself, type and design methods have provedto play a big role in outcome. Klemperer(2002) argues that ascending-bidauctions are particularly vulnerable to collusion and likely to deter entry.Sealed-bid auctions are therefore better in this respect, but have two otherdrawbacks: �rst, an ine�cient �rm may win; second, a 'winner's curse' mayoccur. Sealed bit auction does not ensure e�ciency in the spectrum resourcedistribution as the incumbents do not bid their true values in a sealed bid auc-tion. This is because of e�cient �rms concern of winner's curse. Therefore,the winning probability of e�cient and non-e�cient �rms are symmetric.Ascending-price auction does not share this phenomena of winner's cursebecause the winner shares the valuation information of the item with otherbidders and eventually knows that his/her winning price is a good price asthe highest non-winning bids are not very far below.

Ascending bid auction is very e�cient as licenses go to those who see themas more worth. Licenses are awarded to those who bid highest. And they arethose who will make most use of spectrum. However, collusion is more likelyto occur in such a type of auction, specially when number of licenses is equalto the number of already incumbents(2G) in the market. number of licensesbeing equal to number of incumbent is killer of competitions because it doesnot encourage new entrants. Because of asymmetries in economic powerand entrants predicting aggressive bidding of incumbent, entrant may mostprobably stay out of the auction or at least drop out early. These phenomenasare more likely to occur and discourage competition which is the whole goalof implementing market based spectrum resource distribution.

However, in order to increase bidder participation in such circumstances,Klemperer (2000), for instance, proposed switching from an open, ascending-price auction to a one-time sealed bid. Here the incumbent might not bidas high as they would in ascending auction in order to avoid 'winner's curse'and therefore the new entrants bid could be higher. So there is a tradeo� inthe model of auction regulators want to use for e�ciency and competition.

While ascending auctions are particularly vulnerable to lack of entry,other auction forms can result in similar problems if the costs of entry andthe asymmetries between bidders are too large.

4.1 Vickery's auction 51

4.1 Vickery's auction

De�ciencies in sealed bid auction (mainly the �rst-price sealed bid auction)include bidders not bidding their true valuation of the licenses. Although thepositive side of it is that it creates equal winning chances for both incumbentsand entrants. However, the general weakness of �rms not bidding the truevaluation of licenses and their worry about winner's curse can be eliminatedby compensating with some incentive.

American Nobel Prize winner and economist William Vickery, suggestedthat second price auctions entices bidders to bid their true valuation of itemsin auction, in this case radio frequency spectrum. This bit similar to openascending bid auction (English auction) but is of course a sealed bid auctionin which the highest bidder wins. The winner pays the price highest non-winning bidder bids in other words the price of the second highest bidder.

Vickery's auction is bene�cial due to the revenue equivalence theory(RET) which states that all four standard single unit auction forms (theEnglish auction, the Dutch auction, �rst-price sealed-bid auction, and thesecond-price sealed-bid auction.) having the same e�ective reserve price yieldthe same expected revenue on condition that all bidders are risk-neutral andhave independent private values for the auctioned items. Reserve pricing isalso an e�ective device for mitigating collusion, since it limits the maximumgain collusion can reap[23].

The only problem with Vickery's auction is that if winning bid is highand the second bid price so low that it is close to zero then the whole thingwill be a failure. The approach to this type of problem is to set a reserveprice in order to safeguard the basic value of the item in auction.

Denmark was closest to using the concept in auction except that Denmarkused the fourth non-wining price. The Danish auction had a reserve price tooand reaped a major revenue and e�ciently distributed UMTS/3G licenses.

4.2 License-free Spectrum

2.4GHz or 5GHz have the same characteristics as those of used for mobiletelephony. So because of the exhaustion of frequency spectrum for mobiletelephony, today's license-free spectrum should be used for that purpose. The

52 CHAPTER 4. EVALUATION

current technologies and applications of that spectrum should be transferedto 60GHZ.

Certain unique characteristics a�ect such frequency spectrum. For ex-ample, water particles in the air attenuate 60GHz signals, a property that isunique to the 60GHz spectrum. The advantage of such a character is that itcontributes to security by limiting the distances that 60GHz-based networkcoverage can reach. 60GHZ is also less interference-prone than other wirelesstechnologies. Oxygen absorption makes connections at 60GHZ frequenciesvery immune to interferences of radio connections at the same frequencyranges. Therefore, it only takes slightly changing the signal or connectionpath to avoid interferences between links in the range. And because of thatnatural phenomena, signals at this range do not propagate to far and diesout immediately beyond its target, making it less threatening of interferenceto signals along the same path or trajectory.

The same above mentioned characters of the signals at the 60GHZ fre-quency spectrum range would make the signals secure enough. Sni�ng andother types of spying on the signals would be almost impossible as one needsto place an interceptor along the line of sight and on the exact same trajec-tory, and also very close enough to the transmitting source. On top of thatplacing the spying device on the way for the would-be receiver device willblock or degrade the signal it would receive thereby generating some networkerror (message) of network device or peripheral disconnection or poor connec-tion and alerting the network administrator. This clearly signi�es the extraadvantages gained by moving the license-free spectrum to 60GHZ range.

Chapter 5

conclusion

We can conclude that market based methods of assignments of UMTS/3Gfrequency spectrum is more e�cient than that used in GSM/2G in termsof economic e�ciency as auctions would decide the true value of the item(Frequency spectrum) in the market. Experiences that were gained fromauction, as a method of UMTS/3G frequency spectrum assignment, showthat those who valued most got what they valued most in the EuropeanUMTS/3G frequency spectrum auctions that swept through Europe in theyears 2000-2001 and after.

Such Auctions have also shown that design of auction really matteredin proving e�ciency. In plain and straightforward ascending-price, strongerbidders (incumbent �rms in most cases in telecom market) are more likelyto win than entrant �rms. In sealed-bid auction on its side, it is equallylikely for a weaker bidder or new entrant to win as for an incumbent. Butin fact there is not �one size �t for all� the nature and characteristics ofdi�erent markets be decisive in auctions of UMTS/3G frequency spectrum.Each market will need at least some if not radical change of auction designfrom previous auctions in other markets because of the mentioned di�erence.

The main reason for the failure of the Dutch auction was the designof the auction. The Dutch regulator planned to auction 5 licenses whichis exactly the number of incumbents. This design of the auction left nochance of winning for new entrants and thus discouraged them from enteringthe auction in the �rst place. No particular design was put in place inprotecting or encouraging entrants, mainly, from the local but rather therewas an assumption that some foreign �rms would participate in the auction.

54 CHAPTER 5. CONCLUSION

The Italian auction was a failure owing to the abrupt stop of the auctionprocess after one of the participating �rms immediately quit the auction.The design of the auction was weak because it was designed in a way thatthe number of licenses in auction was one less than the number of auctionparticipating �rms and auction would stop when one participant quit. Theworst case scenario would be that one participant quit too early. And that iswhat happened in Italy. The generated revenue was not far above the reserveprice. On the other hand, the Italian auction did not consider new entrants.

The Austrian UMTS/3G auction was similar to the unique German auc-tion design. Weak point was of this auction design in Austria was numberof participants was equal to the maximum possible licenses already at thestarting point of the auction. An the other major set back which was notpredicted was the signaling from one of the major incumbents indicating itsnon-aggressive bidding in the auction if others did so. This also relaxed theothers and was thus a major cause of early �nish of the auction almost atthe beginning.

Switzerland and Belgium were unsurprisingly the same failure as an auc-tion, owing to, �rst and foremost, the type of auction. The type and design ofauction did not match the telecom market nature in Switzerland. A sealed-bid auction could have produced a di�erent and better result. Both endedin reserve price revenue turn in.

The Danish auction was a success and was one of the most successfulUMTS/3G auctions in Europe as a result of the auction type and designused. The Danish auction being one of the last auctions in Europe followedcontinuous UMTS/3G frequency spectrum auction failures. But implementa-tion of the fourth-price sealed-bid auction is to be attributed to the success ofthe Danish UMTS/3G auction. A di�erent type and design of auction wouldhave most probably not achieved such a result in Denmark. Denmark didnot only conduct a sealed-bid auction but further shaped its design as winnerpaying the fourth unsuccessful bid. This policy encourages the participantsto bid as high as possible knowing that their bidding price is not their payingprice. Encouraging new entrants as sealed-bid auction and maximizing rev-enue by enticing bidders to bid higher than they would really pay as winners.The outcome was a success but the revenue re�ected on the market economyan power as both were not as big as some other markets like in Germany,UK and others.

So generally, auction is the most e�cient method of distributing the mea-ger frequency spectrum resource. But the devil is in the detail. The type of

55

auction and its most importantly its design have to be speci�c for a speci�cmarket in order to produce the desired result. Therefore, constituting thedetailed design of an auction after selecting the type of auction to be used, isvery crucial and decisive for the outcome of the auction. Some famous eco-nomic and auction theories proved not to have held grounds in UMTS/3Gauction. This includes the revenue equivalent theory (RET) as revenue equiv-alence does not hold for the di�erent auction procedures. Not even the sameauction method will be revenue equivalent with di�erent detail designs.

Frequency spectrum trading policy in Europe was well-thought of andneatly implemented when UMTS/3G licenses limited such further trading.This is because of that introducing spectrum trading at that time wouldhave relaxed many participants of auctions as they could save capital andlater just buy or hire portions of spectrum from �rms who got licenses. Thiscould have cost less for mainly new entrants than competing for auctionand getting a license at such a high cost or at least raising the license costfor winner �rms and later paying such high prices when buying or hiring aportion frequency spectrum from winner �rms. Therefore, early introductionof spectrum trading would have not enticed new entrants in participating inauctions and thus reduce competition in auction and eventually reduce itsturn-in revenue. The other consequence would be that market competitionwould be limited because it would be incumbents who own the tradablespectrum and it would be them that would decide who came into the marketif they at all wanted other competitive �rms to join them, thereby creatingabsolute monopoly. This would be very back-breaking for liberalization andfree market based on competition.

Taking the issues above into account and spectrum re-auctioning in twentyyears after date of issue of licenses, then spectrum trading can not be idealnow either because of the concern of discouraging participation of spectrumauctions and market monopoly as a result.

Unlicensed spectrum should be moved to higher frequency of around60GHZ. There are all good reasons to have free or moderately regulatedspectrum specially for wireless LAN and PAN like WiFi. This spectrum isalso good for the use of innovative wireless researches. The higher the fre-quency the more sensitive are they to natural particles like sun rays, waterin the air and other blockages like walls, trees etc. Such high frequency spec-trum is more secure as frequencies are limited to a short range area and cannot be accessed from a distance away and behind the walls of premises.

Moving to and using the 60GHZ spectrum is also a good idea because

56 CHAPTER 5. CONCLUSION

such migration empties lower frequencies now used for this purpose. Theunlicensed frequencies used today are more suitable for technologies suchas 2G and 3G mobile communication systems, which need further outreach.Such technologies today su�er from su�ocation resulting from shortage of thespectrum that would cope with the increasing demand of such productive andevolving market.

Regulation does not mean blocking the way for competitive and liberaltelecom market. In the contrary, it is the intervention of such regulatorsthat has paved the way for competitive and liberalized market. But it isimportant for regulators to regulate in favor of more open and developedmarket with the least possible restrictions. The concept of exclusive rightsand limitation of the use of assigned spectrum for the earmarked purposewill remain very important in the foreseeable future. Reason for this is thatcompatibility of technologies and roaming services of telecommunication willbe badly weakened because other technologies might �ood into the spectrumallotted to mobile telephony. The license-free frequency spectrum will beenough for innovations. The introduction of new valuable technologies willbe seen as they emerge by the regulating authorities. And new allocationwill be made accordingly, depending the importance and potentiality of suchemerging technology.

Chapter 6

Bibliography

[1] 'Communication the Next Decade: A collection of essays pre-pared for the UK O�ce of Communications' , (November2006) Edited by Ed Richards, Robin Foster, Tom Kiedrowski'http://www.ofcom.org.uk/research/commsdecade/'.

[2] Harald Gruber (2005), Cambridge University Press, ISDN-13 978-0-511-11564-6. 'The Economics of Mobile Telecommunications,' Communica-tions of the ACM 41 (7): 78-80.

[3] John Hoadley, (Sep 19, 2005), 'Building fu-ture networks with MIMO and OFDM,''http://telephonyonline.com/wireless/technology/mimo_ofdm_091905/'.

[4] 3G, UTRAN frequecy map. 'http://www.umtsworld.com/technology/frequencies.htm',date last retrieved 12 Feb. 2008.

[5] 'http://www.fujitsu.com/global/services/telecom/archive/cdmamsc/mobile/'.

[6] 'http://www.mirial.com/solutions/3G_enterprise_videoconfer.html'.

[7] 'http://cordis.europa.eu/infowin/acts/ienm/bulletin/11-1996/umts.html'.

[8] 'http://www.wi-�planet.com/tutorials/article.php/1569271'.

[9] Jerry Brito (2007). 'The Spectrum Commons in Theory and Practice',Standford Technology Law Review, http://stlr.stanford.edu/pdf/brito-commons.pdf last seen at 22 February 2008.

58 CHAPTER 6. BIBLIOGRAPHY

[10] 'http://www.umatechnology.org/overview/'.

[11] http://www.britannica.com/eb/art-62280?articleTypeId=1

[12] 'http://domino.research.ibm.com/comm/research_projects.nsf/pages/mmwave.apps.html'.

[13] 'Technology Research Program: Research and Development at OfCom',(2004/5) by O�ce of Communications, UK.

[14] ICT Regulation Toolkit: New Technologies and Impact on Regualtion'http://www.ictregulationtoolkit.org/en/Section.1874.html'

[15] Hank Invten, McCarthy Tétrault (2000), World Bank, ISDN 0-9697178-7-3. 'Telecommunications Regulation Handbook'.

[16] 'The Brie�ng Book for International Organization in Geneva', (2004)by the United States Mission to the United Nations in Geneva'http://www.genevabrie�ngbook.com/chapters/itu.pdf'.

[17] 'http://www.ofcom.org.uk/consult/condocs/spec_trad/statement/'.

[18] Booz, Allen, Hamilton . 'Delivering on the promise - Turning WirelessData into a Success', (October 2001), CGI Hering Schuppener.

[19] Morten Falch*, Reza Tadayoni (2004). 'Economic versus technical ap-proaches to frequency management', Center for Tele-Information, Tech-nical University of Denmark, Building 371. 2nd Floor, Lyngby DK-2800,Denmark.

[20] Jehiel, P og Moldovanu, B (2001), 'The European UMTS/IMT-2000License Auctions. 2001'.

[21] Paul Klemperer (2002b). �Using and abusing economic theory�, OxfordUniversity, mimeo.

[22] Elmar Wolfstetter (May 2001),Institut f. Wirtschaftstheorie I, HumboldtUniversitát zu Berlin, 'Swiss UMTS Auction Flop: Bad Luck or BadDesign'.

[23] Lawrence M. Ausubel and Peter Cramton (revised version: May 5,2003). �Vickrey Auctions with Reserve Pricing*�, Department of Eco-nomics, University of Maryland, College Park, MD 20742-7211, USA.

Chapter 7

Appendix

[Insert Company Name] - 3G Licence Company Registration no.

First Issued: [Insert Issue Date] - Licence Number: [Insert Licence Number] - Rev: X - xx/xx/xx

1

NB. This draft is a representation of a 3G licence, accounting for changes that have taken place since issue in 2000, such as the coming into force of the Communications Act 2003 and the formation of Ofcom. The original licence may be viewed in the Information Memorandum on the legacy Spectrumauctions website at: http://www.ofcom.org.uk/static/archive/spectrumauctions/Information%20Memorandum/index.htm Wireless Telegraphy Act 2006Office of Communications (Ofcom) THIRD GENERATION MOBILE LICENCE This Licence replaces the Licence issued by the Secretary of State on [Insert date] to [Insert Licensee’s name]. Licence no. [Insert Licence Number] Date of issue: [Insert Date] 1. The Office of Communications (Ofcom) grants this licence to [Insert Licensee’s Name] [Insert Company Registration No] ("the Licensee") [Insert Registered Company Address] Xxxxxxxxxxxx Xxxxxxxxxxxx Xxxxxxxxxxxx Xxxxxxx

to establish, install and use radio transmitting and receiving stations and/or radio apparatus as described in the schedule(s) (herein after together called "the Radio Equipment") subject to the terms set out below.

Licence Term 2. This Licence shall continue in force until 31 December 2021 unless earlier revoked

by Ofcom in accordance with paragraph 3 of this Licence or surrendered by the Licensee.



2

Licence Variation and Revocation 3. (1) Pursuant to Schedule 1 of the Wireless Telegraphy Act 2006 (the “2006 Act”),

Ofcom may not revoke this Licence under schedule 1 paragraph 6 of the2006 Act save at the request or with the consent of the Licensee except:

(a) in accordance with schedule 1 paragraph 8 (5) of the 2006 Act;

(b) if there has been a material breach of any of the terms of this Licence

or the schedule(s) hereto; (c) if the Licensee is found, to the reasonable satisfaction of Ofcom, to

have been involved in any act, or omission of any act, constituting a material breach of the rules and procedures as set out in the Wireless Telegraphy (Third Generation Licences) Notice (the “Notice”) issued by the Secretary of State pursuant to regulation 4 of the Wireless Telegraphy (Third Generation Licences) Regulations 1999 (the “Regulations”);

(2) Pursuant to schedule 1 of the 2006 Act, Ofcom may not vary this Licence under

schedule 1 paragraph 6 of the 2006 Act save at the request or with the consent of the Licensee except:

(a) in the circumstances specified in paragraphs (a) to (c) of sub-

paragraphs (1) of this paragraph; or

(b) in relation only to paragraphs 7 and 9 of Schedule 1, if Ofcom has reasonable grounds for concluding that use of the Radio Equipment in accordance with either or both of these paragraphs is causing, or is likely to cause, undue interference to other authorised radio equipment.

(3) For the avoidance of doubt and without prejudice to sub-paragraphs (1), and

(2) above, Ofcom may only revoke or vary this Licence in accordance with Schedule 1 paragraph 7 of the 2006 Act.

Changes 4. This Licence may not be transferred. 5. The Licensee must give prior or immediate notice to Ofcom in writing of any changes

to the details of the Licensee and/or address as recorded in paragraph 1 of this Licence.



3

6. If the Licence is surrendered or revoked, no refund, whether in whole or in part, of the

fee which was paid by [Insert the Licensee’s name], will be made, except at the absolute discretion of Secretary of State in accordance with regulation 5 of the Regulations.

Radio Equipment Use 7. The Licensee shall ensure that the Radio Equipment is constructed and used only in

accordance with the provisions specified in Schedule 1 of this Licence. Any proposal to amend any detail specified in Schedule 1 of this Licence must be agreed with Ofcom in advance and implemented only after this Licence has been varied or reissued accordingly.

8. The Licensee shall ensure that the Radio Equipment is operated in compliance with

the terms of this Licence and is used only by persons who have been authorised in writing by the Licensee to do so and that such persons are made aware of, and of the requirement to comply with, the terms of this Licence.

Access and Inspection 9. The Licensee shall permit a person authorised by Ofcom:

(a) to have access to the Radio Equipment; and

(b) to inspect this Licence and the Radio Equipment, at any and all reasonable times or, when in the opinion of that person an urgent situation exists, at any time to ensure the Radio Equipment is being used in accordance with the terms of this Licence. Modification, Restriction and Closedown 10. A person authorised by Ofcom may require the Radio Equipment or any part thereof,

to be modified or restricted in use, or temporarily or permanently closed down immediately if in the opinion of the person authorised by Ofcom:

(a) a material breach of this Licence has occurred; and/or

(b) the use of the Radio Equipment is, or may be, causing or contributing to

undue interference to the use of other authorised radio equipment. 11. Ofcom may in the event of a national or local state of emergency being declared

require the Radio Equipment to be modified or restricted in use, or temporarily or permanently closed down either immediately or on the expiry of such period as Ofcom may specify. Ofcom may only exercise this power by a written notice served on the Licensee or by a general notice applicable to holders of this class of Licence.



4

Geographical Boundaries 12. This Licence does not authorise the establishment and use of the Radio Equipment

on the Isle of Man or any of the Channel Islands. Interpretation 13. In this Licence:

(a) the establishment, installation and use of the Radio Equipment shall be interpreted as establishment and use of stations and installation and use of apparatus for Wireless Telegraphy as specified in section 8 of the 2006 Act;

(b) the expression "undue interference" shall have the same meaning that it has

under the 2006 Act;

(c) the expression "inspect" includes examine and test;

(d) the schedules and Annex form part of this Licence together with any subsequent schedule(s) which Ofcom may issue as a variation to this Licence at a later date; and

(e) the Interpretation Act 1978 shall apply to the Licence as it applies to an Act of

Parliament. Issued by Ofcom Mobile and Broadband Team Office of Communications



5

SCHEDULE 1 TO LICENCE NUMBER: [Insert Licence Number] Licence Class: Third Generation Mobile Schedule date: This schedule forms part of licence no [Insert Licence Number], issued to [Insert Licensee’s name], the Licensee on [Insert Date]. Description of Radio Equipment Licensed 1. In this Licence, the Radio Equipment means the base transceiver stations or repeater

stations forming part of the Network (as defined in paragraph 2 below). Purpose of the Radio Equipment 2. The Radio Equipment shall form part of a radio telecommunications network ("the

Network"), in which User Stations which meet the appropriate technical performance requirements as set out in the relevant Wireless Telegraphy (Exemption) Regulations made by Ofcom communicate by radio with the Radio Equipment to provide a telecommunications service.

Approved Standards for the Radio Equipment 3. The Radio Equipment covered by this Licence shall comply with the appropriate

Interface Requirement and performance standards, listed below in paragraph 10. Special Conditions relating to the Operation of the Radio Equipment 4.

(a) The Licensee shall install, maintain and use Radio Equipment (as specified in paragraph 10 of Schedule 1) in such a way as to enable the provision of, by no later than 31 December 2007, and to maintain thereafter, a telecommunications service by means of the Radio Equipment to an area where at least 80% of the population of the UK live.

(b) During the period that this Licence remains in force and for 6 months

thereafter, the Licensee shall compile and maintain accurate written records of:



6

(i) The following details relating to the Radio Equipment:

a) postal address;

b) National Grid Reference, (to 100 Metres resolution);

c) antenna height (AGL) and type;

d) radio frequencies in operation;

(ii) a statement of the number of customers using the Network; and without prejudice to this paragraph (b), the Licensee shall furnish Ofcom in such a manner and at such times as reasonably requested, information in the form of documents, accounts, estimates, returns and any other information which may be reasonably required for the purposes of verifying compliance with this Licence and for statistical purposes.

(c) The Licensee shall inform Ofcom of the address of the premises at which this

Licence and the information detailed at sub-paragraph (b) above shall be kept.

(d) The Licensee must submit to Ofcom copies of the records detailed in sub-

paragraph (b) above at such intervals as Ofcom shall notify to the Licensee.

(e) The Licensee shall, upon request, supply Ofcom or any person authorised on their behalf with the name and address of any registered users of the Network, or require its agents to provide such information on its behalf.

Site Clearance Requirements

5. A valid site clearance certificate, issued by Ofcom (formerly the Radiocommunications Agency) is required for all the Radio Equipment except base transceiver stations incorporating transmitters radiating not more than 17dBW ERP and/or aerial systems, the highest point of which is less than 30 metres above ground level and which does not increase the height of an existing (site cleared) structure by more than 5 metres.



7

TECHNICAL REQUIREMENTS The Licensee must ensure that the Radio Equipment performs in accordance with the following technical requirements. Frequencies of Operation

6. The Radio Equipment may operate in the following frequency bands:

[Insert frequency bands] MHz – Base Transmit [Insert frequency bands] MHz – Base Receive

[Insert frequency bands] MHz – Base Transmit/ Receive in Time Division Duplex

Maximum Permissible EIRP 7.

(a) Frequency Division Duplex (FDD) The Radio Equipment in Frequency Division Duplex (FDD) is required to conform to the following EIRP limits: Maximum EIRP per carrier Maximum EIRP per MHZ 62 dBm 58 dBm/MHz

(b) Time Division Duplex (TDD) The Radio Equipment in Time Division Duplex (TDD) mode is required to conform to the following EIRP limits: Maximum EIRP per carrier Maximum EIRP per MHZ 62 dBm 58 dBm/MHz

(c) Time Division Duplex (TDD) operated in the base receive or base transmit

frequency bands If the Licensee chooses to operate Radio Equipment in Time Division Duplex (TDD) mode in either the base receive or the base transmit frequency band of operation, the EIRP limits for TDD defined in Section 7(b) also apply as a minimum. In addition to this, the Licensee may be required to take additional measures to ensure that deployment of TDD Radio Equipment in the base receive or base transmit frequency band does not cause undue interference to FDD Radio Equipment operated by a neighbouring licensee.



8

ITU Class of Emission 8. 5M00G7W Permissible Out of Block Emissions 9.

(a) Frequency Division Duplex (FDD)

Out of block emissions from the Radio Equipment in Frequency Division Duplex (FDD) mode must not exceed the following:

Offset from edge of block Maximum permitted

level Measurement

bandwidth 0 to 0.2 MHz - 14 dBm 30 kHz 0.2 to 1.0 MHz - 14 -15 (∆f* - 0.2) dBm 30 kHz Beyond 1.0 MHz - 13 dBm 1.0 MHz

* Note: ∆f is the offset from the edge of the frequency block in MHz.

(b) Time Division Duplex (TDD)

Out of block emissions from the Radio Equipment in Time Division Duplex (TDD) mode must not exceed the following:

Offset from edge of block Maximum permitted

level Measurement

bandwidth 0 to 5 MHz - 23 dBm 1.0 MHz Beyond 5 MHz - 30 dBm 1.0 MHz

(c) Time Division Duplex (TDD) operated in the base receives or base transmits

frequency bands:

If the Licensee chooses to operate Radio Equipment in Time Division Duplex (TDD) mode in either the base receive or the base transmit frequency band of operation, the limits for TDD defined in Section 9(b) also apply as a minimum. In addition to this, the Licensee may be required to take additional measures to ensure that deployment of TDD Radio Equipment in the base receive or base transmit frequency band does not cause undue interference to FDD Radio Equipment operated by a neighbouring licensee.



9

Conformity Assessment Requirements 10. The Radio Equipment is required to comply with the relevant performance standards

applicable at the time of installation or with other requirements in any applicable Interface Requirement, as referred to in article 4.1 of the “Radio Equipment and Telecommunications Terminal Equipment Directive” and issued to the Licensee.

The current relevant performance standards are:

(a) UK Radio Licence Interface Requirement 2019 – Third Generation Mobile; (b) ETSI TS 125.104: UTRA (BS) FDD; Radio Transmission and Reception;

(c) ETSI TS 125.105: UTRA (BS) TDD; Radio Transmission and Reception;

(d) ETSI TS 105.106: UTRA Repeater; Radio Transmission and Reception.

Co-ordination 11. The Radio Equipment shall be operated in compliance with such co-ordination

procedures as are required by any Memorandum of Understanding with another neighbouring administration (including the administrations of the Isle of Man and the Channel Islands) as notified by Ofcom.

Interpretation 12. In this Schedule:

(a) “Maximum EIRP per carrier”. The EIRP (effective isotropic radiated power) is the product of the power supplied to the antenna and the antenna gain in a given direction relative to an isotropic antenna. The maximum EIRP in any direction from the base-station should be below this limit for any transmitted carrier. Power for this limit is defined as the mean modulated carrier power time averaged over any suitable time period in which the transmitter is continuously transmitting at its maximum operational power level;

(b) “Maximum EIRP per MHz”. The EIRP per MHz is defined as the sum of the EIRP radiated by all transmitted carriers in any given direction within any contiguous 5 MHz block within an operator’s spectrum allocation, divided by 5;

(c) The EIRP per carrier and the EIRP per MHz limits are to be considered separately for any deployment and the more stringent is to be complied with;

(d) “ERP” means the effective radiated power. This is the power fed to the antenna multiplied by the maximum gain of the antenna with respect to a half-wave dipole.



10

(e) “Frequency Block” means the frequency band of operation of the licensee defined in Section 6 of this Schedule.

(f) “Out of block emissions” are defined as Radio Frequency (RF) emissions generated by the system operated by the licensee but radiated into the spectrum adjacent to the licensee’s frequency block;

(g) “Maximum permitted level” (of out of block emissions) is the maximum power, integrated over the corresponding measurement bandwidth, that may be supplied by the transmitter to the antenna feeder line. Power is defined as the mean RF power time averaged over any suitable time period during which the transmitter is continuously transmitting at its maximum rated power;

(h) “Frequency Division Duplex (FDD)” operation is defined as bi-directional communication in which one radio frequency carrier is used for transmission, and a separate radio frequency carrier is used for reception;

(i) “Time Division Duplex (TDD)” operation is defined as bi-directional communication using a single radio frequency carrier for transmit and receive, with transmission/reception taking place using discrete time slots.

Mobile and Broadband Team Ofcom

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