Radio spectrum pricing

[GWYN]

I am rather surprised (unless I have missed it) to have seen no discussion of the OFCOM proposals for pricing of radio spectrum. I do not know much detail but it seems that it should be a major concern to all airlines operating in the UK particularly in these 'challenging' times.

In short, as I understand, bouyed up by the spectacular windfall sums made by the auction of 3G spectrum a few years ago, OFCOM are now proposing a licensing regime for all use of elements of the radio spectrum. So NATS for example, would have to buy the spectrum to use radio comms, radar, as well as for all the ground-based navaids. Airlines would be charged for use of WX radar and RADALT for example. Indeed OFCOM are already putting prices on the use of these services. See double-udouble-udouble-u.ofcom.org.uk/consult/condocs/aip/fullpdf.pdf Not sure how to go about posting web addresses or how to set up a link.

This seems a very worrying development at a very difficult time for the industry. Indeed I am not convinced that it has really been thought through. The only (cold) comfort for the airline industry is that we are not alone, and it will apply equally to the maritime industry. I am not sure whether the charges will apply to the emergency services but I suspect that they will negotiate an exemption.

This is not something which will go away. Those in power smell another income stream and will not allow it to slip away. However it should be possible for our industry to negotiate to mitigate its impact otherwise it is simply another charge which will have to be passed on to a declining number of passengers.

[Sallyann1234]

The summary and full docs are here:
Applying spectrum pricing to the Maritime and Aeronautical sectors | Ofcom (http://ofcom.org.uk/consult/condocs/aip/)

This is just catching up with every other sector of business using radio. The fees are intended to promote efficient use of the spectrum, but there is no suggestion that spectrum used for aviation will be auctioned as happened with cellular radio spectrum. In practice the fees will be minuscule compared with other operating costs faced by airlines.

[HS125]

......If we had the balls to stand up it this sort of crap.
What if nobody [at all] pays the charges?

I know that's a long shot especially in england but WTF do OFCOM do for us?

[411A]

I know that's a long shot especially in england but WTF do OFCOM do for us?

Take the companies (or your) money....and no doubt fail to smile whilst doing so.:}

[AMEandPPL]

The only (cold) comfort for the airline industry is that we are not alone, and it will apply equally to the maritime industry

That may be, but may I remind you, gentlemen, of my earlier post highlighting that aviators and seafarers are NOT treated equally in respect of VAT on professional medical examinations. HMRC are blatantly discriminating against pilots by having aviation medicals charged standard rate VAT, whilst marine medicals (ENG.1's) are exempt.
In Great Britain, in 2008, this is simply outrageous ! Anyone agree ?
Sorry if this is deemed to be "thread drift" - now back to the topic of the radio spectrum ! !

[BEagle]

Well, here's what I sent to Ofcom:

Question 1: How should Ofcom manage the process of taking advice from users, regulators and government on efficient apportionment of AIP fees in the maritime and aeronautical sectors? Are any new institutional arrangements needed?:

You must prove that there would be no effect on safety as a result of your proposals. Thus a safety review shall first be conducted by the responsible authority and you shall be obliged to abide by its findings.

Question 2: If you consider that our proposals for pricing ground station users for any spectrum would be likely to have a detrimental impact on safety, please let us know. In order for us to understand your assessment fully, it would be helpful if you could outline the mechanisms whereby this might happen.?:

If elements of the aeronautical and maritime frequencies are auctioned, there is every likelihood that the costs will be passed on to those who have no option but to use radio communications for flight or maritime safety.

Your proposal puts an unacceptable price on safety; it is quite unacceptable to compare aeronautical and martime radio to business radio.

Question 3: Do you have any evidence which indicates that AIP charged to ground stations could have a material detrimental impact on UK competitiveness?:

If airlines are obliged to pay more to use VHF communications within UK airspace, it will be inevitable that they may move their operations to more reasonable EU Member States.

Question 4: Taking into account the information available in this document, including that set out in Annex 5, our initial views on VHF radiocommunications licence fees and on the reference rates for bands in other uses, and any information you have about the organisations to whom we are proposing to charge fees, please provide any evidence that you think is relevant to us in considering the financial impact of the fees we intend to propose for VHF radiocommunications, or for other uses:

You cannot expect to charge for safety!

Question 5: Do you agree that there is little to be gained, in terms of economic efficiency, from charging AIP to WT Act licences for aircraft:

Economic efficiency is utterly irrelevant in this context.

Question 6: Do you consider that we should discount fees for any particular user or type of user? Specifically, do you consider that there should be a discount for charities whose object is the safety of human life in an emergency:

There should be no AIP or any other charges beyond those exisiting today, 11 Aug 2008.

Question 7: Do you agree that Ofcom should apply AIP to ground stations? use of maritime and aeronautical VHF radiocommunications channels, to help manage growing congestion in current use and to ensure that the cost of denying access to this spectrum by potential alternative applications is faced by current users?:

NO

Question 8: Do you agree with our initial view that it would be appropriate to apply a pricing system similar to that already existing for Business Radio licences to maritime and aeronautical VHF communications? If not, what are your reasons for proposing that we should develop a fee structure for maritime and aeronautical VHF channels which is distinct from that already established for Business Radio?:

NO

Business Radio is for convenience and efficiency, whereas aeronautical and maritime radio is entirely for safety.

You CANNOT make this comparison - it is totally nihil ad rem.

Question 9: Are there any short term reasons specific to the sector(s) why it would be inappropriate to apply fees from April 2009?:

This absurdly short timescale would give insufficient time to conduct a proper Safety Review and Imapct Assessment.

Question 10: Ofcom would welcome stakeholders? views on the factors which should be taken into account when apportioning fees between individual users of radars and racons:

This is a statement, not a question.

Question 11: Do you agree with our initial view that a reference rate of £126k per 1 MHz of national spectrum for L band and S band radar spectrum would achieve an appropriate balance between providing incentives to ensure efficient use of spectrum while guarding against the risks of regulatory failure in setting the reference rate too high? If you consider a different rate would be more appropriate, please provide any evidence that you think we should take into account.:

NO

Question 12: Do you agree with our initial view that a reference rate of £25k per single MHz of national spectrum would be appropriate for deriving fees for licences to use X band radar?:

NO

Question 13: Do you agree that, generally, spectrum used by aeronautical radionavigation aids is currently uncongested? Do you believe that this may change during the next few years and, if so, approximately when?:

Certain frequencies are often congested, others relatively quiet. The use of data links may reduce voice RT requirements, but more efficient frequency planning (as has been proved in Germany) would improve congestion levels and negate the need to extend 8.33 KHz channelling requirements.

Question 14: Do you agree with the basis on which Ofcom has arrived at its initial view on reference rates for aeronautical radionavigation aids?:

Absolutely not.

Comments:

I am frankly appalled that Ofcom should even consider selling off safety to the highest bidder. Aeronautical and maritime frequencies are necessary for the safety of life - in no way whatsoever are they comparable with Business Radio or PMR.

Aeronautical and maritime VHF and radionavigation frequencies are essential for safety and must be removed from the spectrum pricing policy.

[green granite]

The fees are intended to promote efficient use of the spectrum,

No they are not, they are intended for one reason only, to raise yet more money for the government.

The answer is very simple, if all airlines/ships say "up yours" we're not going to pay it they would have to back down as there would be no flights entering or leaving the country.

[marchino61]

I disagree. They are there to promote more efficient and more productive use of spectrum. We have already seen this happening for mobile telecomms networks which can pack in far more users per unit bandwidth than a few years ago.

No reason why aviation should be exempt, just as there is really no reason why aviation should be exempt from fuel duties.

[GWYN]

Sallyanne: whether miniscule or not, this is just another charge on an already struggling industry. It never really ceases to amaze me, how in the UK, so many are just prepared to roll over and accept the diktats of the Government and pay charges / taxes etc. which are just imposed with no real opportunity for negotiation. Even if they are 'miniscule,' which I do not really accept, do you think that they will remain that way once the principle of charging has been established? Can you really believe that this charge would not be seen as just another cash cow and progressively ratcheted up? If you believe that the industry can support even miniscule additional charges, perhaps you might speak to our colleagues in Zoom, Silverjet et al.

Without wishing to reignite the fuel debate, marchin61, there is really no reason either why the industry should pay fuel duty. Many industries have individual tax regimes, indeed there is one highlighted by AMEandPPL above. The agricultural industry pays a reduced rate tax on its fuel, for example. Other transport industries do not pay passenger duties etc., trains do not have to pay a landing fee to every station at which they stop, etc.,etc.

BEagle: excellent as ever. I knew we could count on you! Unfortunately though, the chance of any response to 'consultation' being listened to is minimal unless it comes from the industry as a whole. That is not, of course, to say that we should not respond individually and I respect you for your response. So is there an industry-wide campaign?

Thanks for the responses.

[Sallyann1234]

BEagle:
I am frankly appalled that Ofcom should even consider selling off safety to the highest bidder.
The spectrum under discussion is not, I say again not, up for bidding or auction. There is no question about this. You made some very good points in your submission but over-reaction could discredit them.

GWYN:
Even if they are 'miniscule,' which I do not really accept, do you think that they will remain that way once the principle of charging has been established?
The figures per MHz suggested in the consultation, divided by the number of users and then divided again by the bandwidth actually used by each user, are indeed extremely small. As to the future, of course nothing is certain in this world but in my almost daily dealings with Ofcom I can detect no suggestion that AIP fees will be racked up.

The consultation is there to be replied to and no doubt those with points to make will respond. Previous consultations for other sectors have indeed resulted in substantial changes so it's well worth the effort to do so.

[BEagle]

Well, Sallyann1234, I'm sorry but the words:

The contribution that price signals can make has long been recognised

1.4 Since 1998, the Radiocommunications Agency and subsequently Ofcom have set about achieving this by applying a system of Administered Incentive Pricing (“AIP”), along with using auctions to allocate released spectrum, and making spectrum licences liberalised and tradable. All of these measures are aimed at enabling users to take decisions about their use of spectrum, in light of its value to other uses and users.

1.5 AIP is intended to apply market disciplines to the holding and use of spectrum rights, by requiring users to consider their spectrum needs in light of the AIP fees payable. AIP is already paid by most private sector users of spectrum, except where upfront fees have been set at auction. Many public sector users, including the Ministry of Defence (“MOD”) and the emergency services, also pay AIP.

'signals' to me that this is just another method dreamed up by government to try to wrest money out of anything it considers 'tradable'.

Ofcom must surely recognise the difference between the essential use of radio for control of civil airliners, compared to the use of business radio by some minicab firm.

To voice your opinions about this idea, please go to Applying spectrum pricing to the Maritime and Aeronautical sectors | Ofcom (http://www.ofcom.org.uk/consult/condocs/aip/) and follow the link 'How to respond'.

DO IT NOW!!

[Sallyann1234]

BEagle,
I'm not sure why you selectively highlighted only the along with using auctions bit. If you read the whole phrase you will see that it says along with using auctions to allocate released spectrum.
The aeronautical and maritime allocations are NOT released spectrum, they have been allocated on an international basis for many years and they cannot be changed without international agreement.
AIP and auctions are two alternative methods of pricing and the consultation makes it clear that AIP is being suggested, not auction.

But yes, the more responses the better.

[parabellum]

Well, first of all I would like to see their legal justification for their claimed 'ownership' of the spectrum. Bit like a tax on breathing, bathing in the sea, walking on the forest floor, total load of cock.
Marchin61 - you are just another aviation hater trolling an aviation BB engaging in a wind up aren't you?

[cwatters]

What marchino61 said is correct.. but the approach isn't without it's flaws, just look what's happening to "Freeview HD". Just a few HD channels and a reduction in the picture quality of SD channels to squeeze it all in (I believe).

[marchino61]

@parabellum - get a grip. The world does not revolve around aviation.

I love aviation. I am a very frequent flyer and recognise that the industry has allowed me to see places my parents could only dream of,

I am a strong believer that market mechanisms will improve efficiency. For eaxmple, aviation may find ways to compress bandwidth to save on fees, thus freeing up frequencies for other users.

[BEagle]

If auction does not feature in Ofcom's plans, why mention it?

As for compressing bandwidth to free up use for others, the VHF aeronautical band and marine VHF bands are internationally agreed, so the UK government cannot interfere with that.

I see Ofcom is now desperately trying to promote that failed turkey known as DVB radio on an unwilling public. To satisfy the government's greed, DVB bandwidth has been compressed well below the original recommendation (except for BBC Radio 3, following protest) - and the widely held view is that it actually sounds worse than the conventional VHF FM broadcasting it seeks to replace.

With the recent merger of XM and Sirius in North America, the chances of expanding satellite radio services further seems highly probable - and Ofcom won't find many people bothering with DAB once multi-mode internet and satellite radio receivers make a significant market pentration.

[green granite]

and Ofcom won't find many people bothering with DAB once internet radio and satellite radio makes a significant market pentration.Indeed I'm about to go for the BBC/ITV freesat option which includes hdtv and most of the beebs radio channels, with a lot more to come in the future.

(sorry for the thread drift)

[Sallyann1234]

BEagle,
I don't know why I keep repeating myself since you are clearly not listening, but here's one last attempt:

If auction does not feature in Ofcom's plans, why mention it?

Because the consultation has to be comprehensive and discuss all the options, otherwise it could be subject to judicial review. It mentions auctions only to dismiss them in this context.

If it didn't mention auctions before choosing AIP then:
(a) you would doubtless have jumped up and said "Oho! they haven't mentioned the auction option - they are keeping that one quiet to spring on us!"
(b) the anti-aviation lobby would immediately complain that the consultation was flawed and demand a new one with an auction as a valid alternative.

BTW:

To satisfy the government's greed, DVB bandwidth has been compressed well below the original recommendation
This has nothing whatever to do with the government's greed, or Ofcom's greed. It is the broadcasters' greed, their desire to squeeze as many channels as possible into each multiplex. Ofcom have responded to the market, however unsatisfactory the result might be to listeners.

But this is all way off topic in an aviation forum.

[llondel]

Given that aeronautical spectrum is allocated by international agreement and that the UK can't allocate it to anyone else because the interference potential to other countries is high, they can't hold a true auction because there's only really one potential bidder. The concept of a private company bidding for and winning the spectrum and then re-licensing it to NATS and the airlines at a profit just doesn't make sense.

[Sallyann1234]

Exactly !

[BEagle]

So why on earth are Ofcom even thinking about spectrum pricing for aeronautical and maritime users?

Why not just forget the whole idea and devote their efforts to other things?

Such as the DAB farce - soon to become the 'Betamax of radio'.

Sallyann1234, you wrote"This is just catching up with every other sector of business using radio"

That, I'm afaid, sums up Ofcom's failure. Aeronauical and maritime spectrum requirements are for safety of life, not mere 'business'....

[CJ Driver]

At risk of pouring fuel on the flames - I've now read the proposal, and it sounds pretty sensible to me. At the moment, I believe that VHF comms channels are allocated in a vague "national interest" manner to users ranging from your local parachute club through to Heathrow approach. They're suggesting that in future, you should pay £1650 a year for each channel you're sitting on (£4950 if it's 25 kHz wide). Heathrow is the top-end, and seems to sit on 15 mixed channels, so they'll pay about £30k a year for the privilege. I doubt this will change their economic model much.

On the other hand, since VHF comms channels are in short supply, if this proposal gets a few spare channels freed up for other users, it seems pretty sensible. In fact, at £1650 a year, I quite fancy my own channel :}

The biggest weakness is the differential pricing model between 8.33 kHz channels and 25 kHz channels, because that choice is set by airspace policy and aircraft equipment rules, and wasn't actually up to the channel user to choose. A flat price per channel is the only thing I would recommend changing...

[BEagle]

Don't confuse inefficient frequency management with opportunistic revenue generation!

IAOPA Germany has conducted an extensive examination of frequency management:

IAOPA has won significant concessions on the spread of 8.33 kHz radio with an agreement across Europe that they will not be mandated below FL195 until at least 2013 and possibly later.

Eurocontrol claims there aren't enough frequencies to go round and is demanding that every aircraft re-equip with 8.33 kHz-spaced radios, a demand that is estimated to cost the European GA industry some €2 billion. But IAOPA has demonstrated that this expenditure would be unnecessary if Europe got its act together on the existing frequencies. At the moment frequencies are allocated by individual countries, with each VHF frequency having an exclusive zone of up to 300nm around it. Huge numbers of frequencies have been allocated but are virtually or completely unused. IAOPA has pointed out that if the 27 frequency allocation offices in Europe were replaced by two people in Brussels, far better use could be made of the spectrum. The 27 offices disagree.

Michael Erb, managing director of AOPA Germany and a doctor of economics, has produced a technical paper showing the massive wastage in the current system. Martin Robinson says: "This is an excellent paper which shows there is plenty of capacity in Europe without 8.33 kHz. Eurocontrol have tried to ignore this paper so we have taken it to the European Commission, who asked Eurocontrol for an explanation. Eurocontrol tried to blind them with science, but the Commission has requested a full study and analysis. Their request seeks 'further information from Eurocontrol on how the current utilisation of the band could be assessed, and the potential gains which might be expected from improved practices. The outcome would provide the proper basis for a decision on the expansion of the newly adopted Regulation to the airspace below FL 195.'

"At a meeting in December I was able to ask the chairman of the EC's Industry Consultation Body if the ICB endorsed the EC's letter to Eurocontrol, and in effect they have no alternative but to do so. Eurocontrol is now bound to carry out the request. The earliest 8.33 kHz can now be mandated is 2013, and it may take longer."

Dr Erb adds: "This is a welcome development that will potentially save European general aviation many millions of Euros. A well crafted Europe-wide frequency utilization plan should easily prevent users of the lower airspace from having to re-equip with radios with channel spacing less than the existing 25 kHz."

[Sallyann1234]

Every sector using radio spectrum has in turn demanded to be exempted from AIP.
Business? "unemployment!
Emergency Services? "safety of life!"
Military? "national defence!"
Aeronautical and Maritime? "safety of life!"

But guess what? When faced with paying a competitive price for their spectrum, each of them in turn finds that they can manage perfectly well with less.

Efficient spectrum planning and AIP to reduce demand could well stave off further 8.33 channelling for a while. However 25kHz channelling goes back to the dark ages. Virtually every other service is now on 12.5k or less for single analogue channels.

[BEagle]

I would certainly agree that 8.33 kHz channelling was an utterly daft idea and that 12.5 kHz would have been the obvious way to go...

But, sadly, that's history.

Out of curiosity, how many other EU member states are proposing to inflict 'Administered Incentive Pricing' on internationally-agreed RF spectrum elements?

Or is this just a British (mis)government invention?

[Sallyann1234]

We are not alone. Most EU administrations are introducing pricing in one form or another. You can link to them via the ERO web site:
ERO (http://www.ero.dk/)

AIP and auctions are only part of the package. The general principle now is that spectrum becomes a financial 'good' like any other product. Instead of buying an individual user's licence from government for radio channels, you buy spectrum rights so that you can use the spectrum yourself and/or trade those rights to others at a profit. Chunks of spectrum are being bought, managed and rented out by wholesalers.
Whether this is a good thing is a matter of opinion, but there is a good living in it for financial and technical advisers!

[BEagle]

The general principle now is that spectrum becomes a financial 'good' like any other product. Instead of buying an individual user's licence from government for radio channels, you buy spectrum rights so that you can use the spectrum yourself and/or trade those rights to others at a profit. Chunks of spectrum are being bought, managed and rented out by wholesalers.

Which is utterly unacceptable for 'safety of life' aeronautical and martime frequencies.

I have no qualm with much of 'spectrum pricing' - except for government efforts to hasten 'analogue switch off' for terrestrial broadcasting so that they can flog off huge chunks of spectrum to the highest bidder. Instead of insisting on high quality digital broadcasting, Ofcom have allowed inadequate bit rates in order to squeeze more onto a smaller section of the RF spectrum, allowing more to be made available for selling off.

In particular, that useless turkey known as DAB which was intended to bring 'CD quality' to radio, has been allowed to use such low bitrates that the resulting broadcasts sound worse than analogue VHF FM. Ofcom are trying to prop up this poor system; even if they succeed those stupid enough to buy a DAB receiver will find that it is obsolete in a few year time...

Remember 'Rabbit'? OnDigital?? Both examples of poorly thought out systems - and DAB will undoubtedly prove to be the same.

I am also cynically sceptical about 'HD' TV. The broadcasters have again been allowed to use low bitrates on current digital platforms, so that even with high quality source material, the picture is often worse than BSB were capable of broadcasting 18 years ago.

A more efficient frequency allocation model should be mandated for the aeronautical frequencies in particular. It should be simple enough to map current transmitter sites, protected range requirements and spectrum available, then allow a software program to optimise the allocation of frequencies.

[Sallyann1234]

You are still reading more into the consultation than is being proposed.
I outlined above the general principle that Ofcom now follows. They call it their "marked based approach".
BUT what they are proposing for the specific cases of aeronautical and maritime spectrum excludes the trading aspects for very obvious reasons.
I strongly suspect that spectrum users, whether large airlines or private fliers, will notice little or no difference when the process is all over.
Aviation faces far more serious problems at the moment.

[CJ Driver]

BEagle, you grumble about putting a price on "safety of life" communications. I'm with you on that, but to play devil's advocate for a moment, there are 2,280 VHF comms frequencies in Europe. How many of 'em are needed for safety of life? A few hundred, perhaps? :E

And that of course is the point...

[eglnyt]

Just another example of the many stealth taxes which the current UK Government finds so attractive. It's got nothing to do with spectrum efficiency, the original Cave report was commissioned by the Treasury and I doubt you'd choose a Professor of Economics to write the report if your prime objective was better use of the spectrum.

Aviation's use of spectrum is inefficient and outdated but Ofcom knows perfectly well that any change requires International agreement and that those affected by the charging have limited ability to influence the speed or type of change. It is, for the Treasury, the perfect tax as those affected have virtually no choice and can't avoid it.

[BEagle]

Ofcom have now released a so-called 'update':

Ofcom consultation on introducing Administered Incentive Pricing (AIP) for the maritime and aeronautical sectors: December 2008 update | Ofcom (http://www.ofcom.org.uk/consult/condocs/aip/update171208/)

The fact that they have been sent away with their tails between their legs to think again is, curiously, not mentioned.

The fight to stop price hikes resulting from this government greed goes on!

[NavMonkey]

The fact that they have been sent away with their tails between their legs to think again is, curiously, not mentioned.

You mean you believe that Ofcom expected the aviation and maritime communities to embrace an additional cost on their activities? :E

Turkeys don't generally support the idea of Christmas.