Britain’s communications regulator should set new values for radi...

and the Warwick Business School - - was commissioned by the Radiocommunications Agency, since rolled into OFCOM. The regulator will use it and other information to decide the basis for and amounts of future spectrum license charges, it said. The report defines AIP as prices charged to spectrum licensees and holders of recognized spectrum access that are set by the regulator and aim to reflect the opportunity cost of spectrum use, providing effective incentives for using spectrum efficiently. AIP were introduced in the U.K.’s 1998 Wireless Telegraphy Act to promote greater efficiency in spectrum use, and prices were set based on the next best alternative, the report said. In 2002, an independent spectrum review recommended spectrum prices be set based on opportunity cost, a methodology the govt. endorsed. It sought a review of the approach, and this study is part of it. Under the methodology, marginal opportunity costs are estimated by calculating the impact of a hypothetical marginal change in spectrum on the costs of an “average firm,” assuming output and service quality remain unchanged, the report said. Spectrum value is assessed at the margin by using the opportunity cost of alternative inputs, it said. The report found opportunity costs optimally will lie between values calculated for alternative users or uses. Once in effect, AIP will cause changes in spectrum use and assignment, and they must be periodically recalibrated to ensure convergence toward the optimum, the report said. AIP should be applied to TV broadcasting, sound broadcasting, fixed links and public mobile networks, among other uses, it said. The report recommends that: (1) New values for AIP be implemented with a short transition, if any, after appropriate consultation. (2) AIP be reviewed every 5 years. (3) OFCOM monitor the impact of pricing and report whether any efficiency benefits were achieved. (4) In uncongested areas, users pay fees or administrative charges set to recoup OFCOM’s variable costs. (5) OFCOM undertake research to find information on users’ willingness to pay for spectrum. OFCOM’s spectrum review will also take into account broader policy issues such as promotion of digital switchover and competition in the provision of e-communications services, introduction of spectrum trading, and fostering greater broadband takeup, the regulator said. OFCOM expects to unveil a consultation paper on future spectrum license charges toward summer’s end, and draft regulations by year- end, it said.