UHF2 realignment study - Ofcom Licensing

7 Economics, Costs, Demands and Benefits of Reconfiguring the UHF2
band
7.1 Introduction
This chapter covers the following topics:
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a discussion in broad terms of the key economic concepts used when
analysing the economics of spectrum;
a summary of the theory of measuring economic costs and benefits;
an outline of the methodology to be used to estimate the costs and benefits of
band alignment;
an outline of the key costs and benefits identified by previous studies when
reviewing the potential reconfiguration of the UHF2 frequency band;
a review of previous research into the likely demand for UHF2 frequency
spectrum if it was reconfigured;
a review of Ofcom’s current plans for future spectrum allocations in the UHF2
frequency band; and
a summary of the key assumptions to be used in the cost benefit study.
With all the relevant topics discussed, we then develop a methodology for the Cost Benefit
Analysis (CBA).
7.2 Measuring Costs and Benefits of UHF2 spectrum reconfiguration
One of the key analytical tools employed when reviewing any future policy changes for the
UHF2 band is to undertake a cost benefit analysis. In this section, we discuss the concept of
cost-benefit analysis and its relevance to policymaking prior to applying the concept to the
challenge of UHF2 re-configuration.
7.2.1 The Theory
Cost-Benefit Analysis (CBA) is an economic tool to aid decision-making. It is typically used
by governments to evaluate the desirability of a given market intervention. The aim is to
assess the efficiency of the intervention relative to doing nothing.
The costs and benefits of the impacts of an intervention are evaluated in terms of:
the public's (consumers and producers) willingness to pay for the benefits of
the intervention; or
the willingness to pay to avoid the costs.
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