UHF2 realignment study - Ofcom Licensing

Another challenge comes from determining which costs should be included in the analysis.
This is often controversial as organisations or interest groups may have considerable
debates on which costs should be included or excluded from a study.
ii. Defining Costs
It is important when conducting and reviewing cost-benefit studies to be aware of the way
that economists define costs. The true cost of something is what you give up to get it. In
terms of spectrum band alignment, costs are not only the resources needed to effect the
alignment but also the benefits that were forgone as a result of the decision to re-align the
band. These ‘opportunity costs’ are relevant for cost-benefit analysis.
In assessing which costs to include in the analysis, the key is to consider only the costs that
will vary as a result of the decision to align the band.
7.3 Methodology for measuring the costs and benefits of Band Alignment
We will use the following approach to estimate the costs and benefits of band alignment:
240689 - 450-470 Study Final Print
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Firstly, we will review previous studies on the costs and benefits of band
alignment – and summarise the results. Given primary level research is
beyond the scope of this project, we will rely heavily on the research that has
already been carried out on the costs and benefits of band alignment.
Previous research and analysis will be critically assessed, taking into account
any modifications needed given recent policy and market changes.
Secondly, we will outline the major options for band alignment. We will outline
the assumptions made in respect of the future use of the band. In particular,
how the spectrum is used once the band is aligned will have a key impact on
the results (for instance, the value of the spectrum that may be available for
re-allocation as a result of greater spectrum efficiency). Our assumptions on
the future use of the band are critical for the analysis. We will do this based
on providing three broad options for band alignment, which are discussed in
more detail in Chapter 8.
Thirdly, we will identify and discuss each of the high-level costs and benefits
that may accrue for each of the options. These will be based on relevant
previous work as well as our own analysis, assessments and assumptions.
Fourthly, we will review the three options in more detail and identify for each
option the detailed factors to be taken into account and measured in Net
Present Value (NPV) terms, based on a 15-year assessment period. Again,
we will draw on previous analysis of the costs and benefits of band alignment.
These will be assessed in light of the recent policy and market changes. We
will also carry out a sensitivity analysis to review how sensitive the results are
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