UHF2 realignment study - Ofcom Licensing

7.5.5 Summary of the benefits
Previous estimates of benefits of band alignment need to be re-assessed given the
significant changes that have occurred in both the policy and market environment since
many of the studies were completed.
The introduction of spectrum trading means that many of the benefits of band alignment can
now be achieved without direct intervention by the regulator. In addition, technological
advances have meant that the costs of managing continental interference for existing
spectrum users in the 450-470 MHz frequency band have been significantly reduced. This, in
turn, has reduced the size of benefits that would accrue by aligning the band. For more
details on these changes, see Chapters 3 and 4.
As a result of theses developments we have significantly discounted previous research on
the benefits of band alignment. Instead, we have carried out our own analysis on the likely
use of the spectrum that is freed up as a result of band alignment. We have also examined
the value of that spectrum based on our expectations of the likely revenues that will accrue
to Government through allocating the spectrum to the market and the associated AIP pricing
that would result. In terms of the benefits from reduced interference, our modelling has
provided an estimate of the actual net impact of band alignment, taking into account the
impact of current technologies that can manage continental inference without the need for
band alignment. Chapter 8 discusses this in more detail and provides our estimate of the
size of these benefits.
7.6 Distribution of costs and benefits
Cost-benefit analysis is typically not concerned about how the cost or benefits are distributed
among consumers or producers. However, as highlighted by a number of previous studies
into the costs and benefits of band alignment, the issue of how the benefits and costs are
distributed is of critical importance for public policy.
Earlier studies indicated that the benefits of band alignment tended to be concentrated on
those spectrum users on the South East coast of the UK (where continental interference
risks exist), while costs are shared across all users in the band. Hence, many spectrum
users receive no benefit from band alignment – but may face considerable costs. This is
demonstrated in the continental interference differences between the Thames Gateway and
Bradford in Chapter 6.
In defining the options to be studied as part of the cost-benefit study, we have tried to be
cognisant of the impact of each of the options on spectrum users. As well as reviewing the
size of net-benefits for each of the options, we also review the net-impact on spectrum users.
Minimising the impact of band alignment on spectrum users will be one of the factors to be
considered when making our recommendations on the preferred route for achieving the
policy aims of band alignment.
240689 - 450-470 Study Final Print
Version (Dec08).doc
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