Thursday 9 September 2010

Contents of module

Interference and Efficiency

There are two types of efficiency which regulators have to take into account when considering spectrum management.

First, technical efficiency, which principally refers to the requirement that different users and different uses of radio frequencies should not interfere with each other.

It also refers to the need to tackle a host of related problems, such as the use of faulty or non-standard equipment, the unauthorized or illegal use of frequencies, spillover signals effects from neighbouring jurisdictions administrations, the use of inappropriate levels of power, finding the optimum location for antennae, and so on, all of which can effect affect the attenuation, successful transmission and reception of signals, the problems of cross-talk and the general problem of channel radio interference.

These problems are what economists call ‘negative externalities’ which means that the use of one channel can have an adverse impact on those that are external to it. Achieving technical efficiency is really the work of the engineers inside the regulatory body.

The second type of efficiency is economic efficiency. This is a much wider regulatory issue because it involves a judgement regarding the allocation of relatively scarce spectrum among alternative uses to provide different, in some cases competing, types of services.

How is the regulator to allocate spectrum? On a first-come-first-served basis? Using purely administrative criteria? Using some form of spectrum pricing, possibly an auction, so the market will influence the choice?

Markets will change over time, and so will the prices consumers are willing to pay for different categories of services delivered by radio, and therefore so will the value a service provider places upon the spectrum they use. If the economic value of spectrum is to be included in the allocation decision, then it follows that there should also be some mechanism to allow spectrum to be reallocated as market valuations change over time.

Because both types of efficiency are required of a modern telecommunications regulator there needs to be good coordination between the engineering and the policy wings of the regulator’s office.

Usually the policy wing will take its lead from the policy-making bureau of government and translate those policy objectives into regulatory instruments. In practice the regulator, as a consequence of her/his expertise and depth of knowledge of the industry, will be the primary advisor to the government policy-making bureau. This is certainly the case in Hong Kong, where the regulator, the Telecommunications Authority (TA), provides key input into policy formulation.

The Hong Kong Government and the TA are also influenced by events outside Hong Kong. The most important influence is the work of the International Telecommunications Union (ITU)1 World Radio Conference (WRC)2 which convenes every two to three years to make worldwide recommendations on the allocation of spectrum for various of radio services.

Other influential bodies include the World Trade Organization (WTO) and the Asia Pacific Economic CooperationCouncil (APEC), who act to facilitate the direction and pace of liberalization of telecommunication services. The Asia Pacific Telecommunity (APT) located in Bangkok, close by the regional head offices of the ITU, is another body that plays a constructive role, especially in the area of equipment standards issues and type approval procedures.

The ITU and WRC

When a government signs the Instruments of the ITU it actually agrees to only a limited commitment. It agrees to abide by the Radio Regulations (RR) of the ITU which have been agreed by successive WARCs and WRCs, and which require Member States to abide by spectrum allocations that do not cause interference with the radio stations of other Member States.3 Military uses of RF are excluded from this consideration.

Member States will draw up their own national frequency tables which follow closely WRC’s tables, (see Part 2), but they have flexibility to vary spectrum allocations according to local circumstances. For example, WRC allocates spectrum in frequency bands that in many cases can be shared between different services, and local allocations may therefore vary considerably.

Thus, spectrum allocated to mobile services could be allocated to public cellular mobile services, to private mobile services or to paging, while mobile and fixed services may also share frequency bands. National frequency tables will also identify future allocations planned to meet forecast demand, and this process often involves the re-allocation of spectrum among existing users to free up certain bandwidths.

WRC divides the world into three regions, and Hong Kong is part of Region 3, as is the whole of China and South East Asia.

Because the world is divided into separate jurisdictions and regions, the issues of technical standards and standardization of spectrum allocation are crucially important. If the world acted as a single marketplace, it is conceivable that the economic pricing of spectrum would allow large companies with a global interest to buy spectrum internationally and harmonize its use, so that, for example, everywhere in the world used the same wavelengths for broadcasting and for cellular telephony, and that consumers could use the same television set or cellphone wherever they roamed in the world.

That is not how the world is organized, so governments and regulators have to decide how far they will go in harmonizing their allocation of spectrum with other jurisdictions and in adopting the same standards of equipment, as well as how far they will go in opening their markets to foreign service providers and equipment manufacturers.

In the past many economies in all regions chose to pursue their own spectrum allocations and standards, sometimes just because the demand was immediate and urgent, sometimes as part of a national industrial policy and strategy. Today, on both the trade front, for example the WTO, and on the industrial standards front, for example the ITU and even commercial pressures, the tendency is strongly towards global harmonization.

The most obvious recent example of this is the development towards the International Mobile Telecomunications 2000 (IMT2000), Universal Mobile Telecommunications Service (UMTS) third generation cellular mobile standard. It takes time to achieve, and the equipment manufacturers have major investment decisions to make with technologies that remain uncertain and constantly evolving.

Under these circumstances regulators have to keep abreast of events as best they can. They have to be sensitive to the technological and commercial dilemmas of the manufacturers and service operators if regulation is to reach the right balance between incentives to investment in spectrum-hungry applications, and the public’s interest to have the best possible services at the most competitive prices.

The economic efficiency issue is therefore very important, but once a certain spectrum allocation has been decided the technical efficiency issues determine whether the services on offer guarantee the quality of service the public demands. The ‘public interest’ is not just a matter of consumer interest, it also reaches out to foreign investors who will be attracted by a well managed allocation and operation of spectrum, and in that sense spectrum management in Hong Kong also contributes to Hong Kong’s role as a regional hub for telecommunications.

In fact, because Hong Kong is such a densely populated city and urban area, and so clustered with high-rise buildings, it is seen as a major challenge by equipment manufacturers and service providers to offer radio services. There is a view that says, “if it can be made to work in Hong Kong it can be made to work anywhere”, and that could also apply equally to spectrum management: “if it can be managed in Hong Kong, it can be managed anywhere.”