Licence Fees

RCC Working Group Meeting

17 October 2003

Pricing as Spectrum Management Tool

• Creates incentives for efficient use of spectrum– Minimise spectrum use– Move to less congested bands– Cancel licences no longer needed

Objectives

• Set out in Radiocommunication Act 1992

• The system of charging for use of spectrum be:– Efficient– Equitable– Transparent

Use of Formula

• Provides a consistent basis for setting licence taxes– Predictable– Equitable– Transparent

Components of Formula

• Spectrum Dimension– Spectrum Location (Si)

• What frequency range is being used

– Bandwidth (Bi)• How much spectrum is being used

• Geographic Dimension– Geographic Location (Gi)

• Where is the transmitter located

– Coverage (Ai)• Size of the area covered

Formula

• Tax = K x (Si, Gi) x Bi x Ai

• Where K is a constant.– Converts relative fee levels between different

licences into a dollar figure

• I will describe each component in turn

Constant

• This is the same for each licence.– It is adjusted by the CPI each year

• Supplemented by adjustment factors– Land mobile licence fees adjusted upwards– Fixed licence fees adjusted downwards

Geographic Location

• High Density– Sydney, Melbourne, Brisbane

• Medium Density– Adelaide, Perth, Newcastle

• Low Density– Elsewhere

• Australia Wide– Device that roams anywhere in Australia

Fee Areas

Frequency Ranges

• 30 MHz and below• 30 to 70 MHz• 70 to 960 MHz• 960 to 2,690 MHz• 2.69 to 5.0 GHz• 5.0 to 8.5 GHz• 8.5 to 31.3 GHz• Above 31.3 GHz

Location Weights

• Determine the relative fee level between licences in different spectrum locations and geographic locations– Based on the density of spectrum use in 1995

(the number of services per km2)

Location Weights

Geographic Location Frequency range Australia

Wide High

Density Medium Density

Low Density

30 MHz and below 2.157 2.157 2.157 2.157 30 to 70 MHz 9.747 3.807 2.025 0.437 70 to 960 MHz 10.000 4.902 2.243 0.421 960 to 2,690 MHz 9.985 2.241 1.036 0.521 2.69 to 5.0 GHz 9.974 1.853 0.751 0.537 5.0 to 8.5 GHz 8.421 1.557 0.725 0.330 8.5 to 31.3 GHz 5.111 1.336 0.316 0.023 Above 31.3 GHz 1.012 0.539 0.117 0.004

Bandwidth

• Fees are based on the bandwidth of a service– the bandwidth of the channel occupied by the

service

• Bandwidth ranges are used to keep the enable fees to be presented in a look-up table

• Fee formula uses the midpoint of the bandwidth range

Bandwidth Ranges

Range Midpoint 0 to 18 kHz 9 kHz > 18 to 36 kHz 27 kHz > 36 to 200 kHz 118 kHz > 200 to 500 kHz 350 kHz > 500 to 2000 kHz 1250 kHz > 2 to 7 MHz 4.5 MHz > 7 to 14 MHz 10.5 MHz > 14 to 30 MHz 22 MHz > 30 to 50 MHz 40 MHz > 50 to 200 MHz 125 MHz > 200 MHz 350 MHz

Coverage

• Intended to provide a lower tax for services that deny spectrum to other users over only a small area

• Discount factor of .1 if– Transmitter power is one watt or less; or– Service is provided only within premises to

which the licence applies

• Discount does not apply to fixed services

Discussion of Issues

• Market Information

• Bandwidth

• Geographic Location

• Spectrum Location

• Flexibility

• Coverage

Market Information

• PC suggested that more information be given to licensees about the formula– All elements required for the calculation of

fees be given to licensees

• ACA would like fees to be as transparent as possible– Acknowledge we don’t always explain well

Market Information

• ACA will review how fees are presented

• Welcome any comments

Bandwidth

• Formula ensures licensees pay in proportion to the bandwidth they use

• However– Bandwidth ranges simplify tables but distorts

proportionality– All bandwidths above 200 MHz are charged

the same fee

Bandwidth Proportionality

Bandwidth Used as a Percentage Paid For

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

25 kHz 12.5kHz

7 MHz 3 KHz 40 MHz 14 MHz 29.65MHz

200 kHz 2 MHz 7.5 MHz 28 MHz 6 kHz 4 MHz 29 MHz 2.8 kHz 1.82MHz

Bandwidth

Ban

dw

idth

as

a %

of

mid

-po

int

of

ran

ge

Bandwidth Proportionality

Bandwidth % of

licences Where Used Bandwidth

Range Midpoint

Bandwidth as a % of mid-point of range

25 kHz 38%

land mobile and fixed licences in spectrum below 1 GHz 18-36 kHz 27 kHz 93%

12.5 kHz 15%

land mobile and fixed licences in spectrum below 1 GHz 0-18 kHz 9 kHz 139%

7 MHz 9% Microwave bands 2-7 MHz 4.5 MHz 156% 3 KHz 4% HF and below 0-18 kHz 9 kHz 33% 40 MHz 4% Microwave bands 30-50 MHz 40 MHz 100% 14 MHz 4% Microwave bands 7-14 MHz 10.5 MHz 133% 29.65 MHz 3% Microwave bands 14-30 MHz 22 MHz 135% 200 kHz 3% FM Broadcasting 36-200 kHz 118 MHz 169% 2 MHz 2% Telstra DRCS 500-2000 kHz 1.25 MHz 160% 7.5 MHz 2% 18 GHz band 7-14 MHz 10.5 MHz 71% 28 MHz 2% Microwave bands 14-30 MHz 22 MHz 127% 6 kHz 1% HF and below 2-7 MHz 9 kHz 67%

4 MHz 1% 1.5 GHz band and some radars 2-7 MHz 4.5 MHz 89%

29 MHz 1% Microwave bands 14-30 MHz 22 MHz 132% 2.8 kHz 1% Defence 0-18 kHz 9 MHz 31% 1.82 MHz 1% 400 MHz band 500-2000 kHz 1.25 MHz 146% Other 11%

Bandwidth Options for Change

• Finer dissection of bands– Better fit with bandwidth actually used

• Fees are exactly proportional to the channel width used– Exact fit of fees with bandwidth used

Geographic Location

• Where high demand– fees give an incentive

• minimise spectrum use• change spectrum band

• In rural areas want to encourage use of spectrum.– lower fee than in the city

Geographic Options

• Greater number of areas in fee formula– Enables fees to be tailored more precisely to

the level of demand in each area– Reduce the variation in fees when moving

from one area to another

• Specifically could split low density areas– Fees in very remote areas lower than in areas

of higher congestion

What remote area may look like

Point to Point < 1.5 GHz

Microwave Point to Point

Spectrum Location

• Gives an incentive to move to less congested bands

• However– Spectrum location ranges are very broad– Contain an number of bands where demand

differs greatly– PC argued bands next to each other should

have similar fees

PC Recommendation

0

1

2

3

4

5

6

< 30 MHz 30-70 MHz 70-960 MHz 960-2690 MHz 2.69-5.0 GHz 5.0-8.5 GHz 8.5-31.3 GHz > 31.3 GHz

Spectrum location

Co

ng

esti

on

wei

gh

t

Existing weight

Interpolated weight

Spectrum LocationSpectrum Location Range

Approximate Broad Uses

0-30 MHz HF and below—mainly Defence, land mobile, fixed and broadcasting.

30-70 MHz Little non-Defence demand 70-960 MHz VHF and UHF broadcasting bands

VHF and UHF land mobile/fixed bands Defence use GSM 900 and CDMA mobile phones

960-2690 MHz Spectrum Licensed bands for mobile phones Aeronautical Fixed (including 2.5 GHz ENG bands) MDS Mobile satellite Defence

2.69-5 GHz Spectrum Licensed FWA (3.4 GHz) Fixed (3.8 GHz band, long haul) Substantial Defence Use Radars Fixed Satellite

5-8.5 GHz Fixed point to point (long-medium haul) and TOB Aeronautical Fixed Satellite Defence Radar

8.5-31.3 GHz Fixed point to point (medium-short haul) Fixed Satellite Substantial Defence Use Radar

> 31 GHz Some Fixed (urban) Defence Low current demand

Flexibility

• Weights give relativities between different spectrum and geographic locations

• Weights have not altered since 1995– Demand patterns have changed– New uses in 1-5 GHz range

• Stability can be important for licensees’ business plans– Desirable to review weights regularly to keep

relativities current

Relativities

0

2

4

6

8

10

12

30 MHz andbelow

30 to 70 MHz 70 to 960 MHz 960 to 2,690MHz

2.69 to 5.0 GHz 5.0 to 8.5 GHz 8.5 to 31.3 GHz Above 31.3GHz

Spectrum Range

Wei

gh

t

Australia Wide

High Density

Medium Density

Low Density

Relativities

Geographic Location Frequency range Australia

Wide High

Density Medium Density

Low Density

30 MHz and below 2.157 2.157 2.157 2.157 30 to 70 MHz 9.747 3.807 2.025 0.437 70 to 960 MHz 10.000 4.902 2.243 0.421 960 to 2,690 MHz 9.985 2.241 1.036 0.521 2.69 to 5.0 GHz 9.974 1.853 0.751 0.537 5.0 to 8.5 GHz 8.421 1.557 0.725 0.330 8.5 to 31.3 GHz 5.111 1.336 0.316 0.023 Above 31.3 GHz 1.012 0.539 0.117 0.004

Coverage

• Allows for the size of the geographic area covered by a service– Encourages greater efficiency– Rewards services that allow greater re-use

• Implemented as a power function• Of all small coverage licences

– 78% are land mobile– 14% are narrowcasting– 7% are radiodetermination

Limitations of Coverage Factor

• Doesn’t capture all low powered applications– 1 watt is not appropriate for all types of

service

• Doesn’t give incentive for fixed services to allow greater re-use

Coverage Options

• Further study to identify– Most appropriate power level for discount for

small area applications• For each type of service

– Extension to fixed services• Studies by ACA engineers indicate that antenna

quality id a major factor in the amount of re-use by microwave fixed services