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Expertise in spectrum management

Introducing Analysys Mason. Expertise in spectrum management. Amit Nagpal and Lee Sanders. Q2 2007.

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Expertise in spectrum management

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  1. Introducing Analysys Mason Expertise in spectrum management Amit Nagpal and Lee Sanders Q2 2007

  2. Due to the fast development of wireless technologies and applications and the finite amount of spectrum available, spectrum managers are required to make tough decisions around the use of their spectrum We have assisted many spectrum managers and associated organisations with a wide variety of issues: studies are often high profile (e.g. spectrum trading study for the European Commission) and on controversial matters (e.g. liberalisation of spectrum for mobile services in the UK) Our approach includes: rapid diagnosis of key issues industry consultation where appropriate rigorous and robust technical and economic analysis quantitative models to support qualitative arguments clear presentation of project recommendations Analysys Mason is ideally placed to identify the most appropriate solution(s): unique combination of commercial, economic and technical expertise detailed understanding of impact of regulatory decisions on spectrum users Mobile spectrum value over time 7 USA 900MHz 6 USA 1900MHz Europe 2GHz 5 Asia 2GHz 4 Australasia 2GHz Mobile spectrum value (USD/MHz/pop.) 3 2 1 0 Oct 95 May 05 Jun 94 Mar 97 Dec 99 Apr 01 Sep 02 Jan 04 Jul 98 The role of spectrum management is becoming increasingly important due to the rapid development of wireless services Summary of benefits and costs of spectrum trading in 28 European countries EUR million per annum Option A: Option B: Option C: Trading and Restrict Trading only liberalisation liberalisation Benefits 39 (a) Static efficiency * 19 (12) (b) Transparency Included in (a) and (c) (c) Competition* 697 18 (343) (d) Innovation* 8070 860 (2410) (e) Scale economies in regulation Probably small Gain (loss) relative to status quo* 8806 897 (2275) Costs (f) Regula tory costs* 9 4 (3) g) Regulatory innovation Can be mitigated by appropriate co-ordination (h) Interference co - ordination* 83 4 (49) (i) Standardisation Probably non-existent (j) Other national policy goals Unquantifiable, mainly political (k) Con centration Can be mitigated by appropriate competition policy Loss (gain) relative to status quo* 92 8 (52) *All welfare benefits and costs shown relative to the status quo Source: Analysys Mason

  3. Review of spectrum management strategies, including; spectrum trading and liberalisation licence-exempt spectrum Strategy implementation development of processes and roadmaps 25 T-DAB baseline T-DAB lower take-up 20 PMR/PAMR (UHF2 re-align occurs) PMR/PAMR (No UHF2 re-align) 15 Surplus NPV/MHz (GBP million) Total required spectrum (MHz) 10 London/major urban areas 5 London London 0 0 2 4 6 8 10 12 14 16 Band III Spectrum (MHz) (includes PMSE and SRD) CBS On-site Other wide area Local govt Taxi Underground Tram Bus and coach Network rail 50 45 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 40 35 30 25 20 15 10 5 0 We offer a range of spectrum management services to both regulators and users of the spectrum Allocation/assignment options Economic costs/benefits Spectrum demand forecasts Our range of spectrum management services Spectrum framework review Spectrum allocation and assignment Spectrum award advice and support Future spectrum demand Services for users of the radio spectrum • Policies and procedures for licensing spectrum • Recommendations for allocation of spectrum • Assessment of demand/economic benefit from spectrum uses • Recommendation of appropriate assignment mechanisms (e.g. first come first served, auction) • Marketing of licences • Recommendation of award parameters, including: • number of licences • spectrum packaging • usage rights • licence obligations • reserve price • Forecasts of future spectrum requirements, including: • forecasts of future service demand (e.g. cellular) • forecasts of future technologies and performance • calculation of resulting spectrum demand • Spectrum strategy advice • Spectrum licence acquisition support • Valuation of spectrum assets • Introduction to spectrum trading • Consultation process support Source: Analysys Mason

  4. Some of our high-profile spectrum management assignments are presented in the following slides

  5. Case study 1 In 2005, we supported the Danish regulator with the successful award of a 3G licence to SONOFON Business challenge • In January 2005, one of the Danish 3G licences was returned to the National IT and Telecom Agency (NITA) following TeliaSonera’s acquisition of Orange • Whilst the objectives were identical to the original award (to promote competition), this award presented some unique challenges: ensure that the existing 3G licensees viewed the process as fair; develop licence terms that were realistic to a new entrant, yet were not discriminatory; and create a process that facilitated competition given the presence of one incumbent non-3G operator (SONOFON) Approach Value to potential bidders of winning auction vs. alternative strategic options • Interview programme of the existing 3G licensees to gain their view on the award process • Extensive marketing of the licence. This included identifying potential bidders both within and outside Denmark, within the mobile sector and also in related industries • Valuation of the licence for different types of bidders (see illustrative chart to the right). This indicated the likely bidders in an auction and helped set the appropriate reserve price • Recommendations on the appropriate licence terms, including the licence duration, coverage obligations, etc. • Recommendations on the award design (auction) and assistance in developing the associated documents Illustrative NPV Wins auction Temporary Waits for Permanent MVNO expansion MVNO band Benefits and results • The auction was won by the incumbent non-3G operator (SONOFON), which has since begun the rollout of its 3G network • The award process and result was accepted by the three existing 3G licensees • The NITA hailed the award to have been a significant success

  6. Valuation(GBP) DVB-H XXXX DMB XXXX UMTS TDD XXXX WiMAX XXXX S-DAB XXXX PMSE XXXX Case study 2 We advised Ofcom on the award options for the L-Band (1452–1492MHz) Business challenge • Ofcom’s standard process is to award spectrum on a service- and technology-neutral basis by means of an auction so that the market can determine both the best use and best user of the spectrum • The L-Band has particular importance and represents a challenge for award design as it is of interest for a number of diverse applications: T-DAB, S-DAB, mobile multimedia (e.g. DMB, DVB-H), broadband wireless access, or audio links Incoming international interference Approach Valuation of spectrum for individual users • We used our ‘tried and tested’ methodology for such awards, working with our partners DotEcon: • detailed market assessment, encompassing a review of the candidate uses of the band, an extensive interview programme with potential users of the band and equipment manufacturers, and detailed modelling of the value to individual users • award process design, including recommendations for spectrum packaging, licence design (e.g. usage rights, minimum term) and design of the award process (assessment of candidate auction formats) • In conjunction with our sister company Mason, we also conducted analysis to understand the international interference restrictions on future users of the L-Band Benefits and results • Ofcom consulted on the L-Band award in Spring 2006 based on the recommendations of this study. Its intention is for an award to take place by the end of the financial year 2006/07 • Analysys/DotEcon/Mason are well established as key advisors to Ofcom on spectrum policy and award assignments. This work built on a number of spectrum studies undertaken for Ofcom. Other high-profile studies have included 2G spectrum liberalisation, award design for the 2.6GHz band and ‘digital dividend’ spectrum (both ongoing)

  7. Case study 3 By considering options for mobile operators facing increased traffic demands, we produced a long-range forecast of spectrum demand in Europe Business challenge • In preparation for the World Radio Conference (WRC) 2007, the UMTS Forum wished to understand the spectrum that would be required by Western European mobile operators to 2020 • Analysys was asked to calculate this spectrum demand from 2010 to 2020 given existing mobile traffic forecasts (from the UMTS Forum and the European Commission) Approach Spectrum requirements for cellular operators 2010–20* • Our approach was to understand the spectrum requirements from an operator’s perspective: operators face a trade-off between the amount of spectrum they have and the number of base stations they need to deploy • We developed a model that calculated the cost savings that an operator can make from obtaining additional spectrum, through needing to deploy less base stations • If this saving was significant, we assumed that the operators would demand more spectrum • We included a variety of scenarios regarding proportion of traffic which occurs during the peak hour, improvements in spectral efficiency, and competing mobile technologies 6000 6000 5000 5000 4000 4000 Total spectrum requirement (MHz) 3000 3000 2000 2000 1000 1000 Spectrum currently identified for cellular use 0 0 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 FMS ‘smooth development FMS ‘constant change’ Magicmobile future FMS ‘economic stagnation’ Benefits and results • We concluded that, given the traffic forecasts used, operators may require at least double the spectrum currently identified for mobile use • The credibility of our results was enhanced by our wide experience in cost modelling of mobile networks • The UMTS Forum has published the report on its Web site in order to encourage discussion of spectrum requirements and harmonisation among operators and regulators ahead of the WRC 2007 *Source: Analysys, 2006

  8. 16 000 14 000 12 000 10 000 8000 Spectrum demand below 15Ghz (MHz) Current capacity sub-15GHz 6000 4000 2000 0 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Economic downturn Base case Data takes-off Case study 4 We forecast commercial spectrum demand in the UK up to 2025 for a major government review of spectrum planning Business challenge • The Independent Audit of Spectrum Holdings (IASH) in the UK required forecasts up to 2025 of expected spectrum demand below 15GHz • We were contracted to determine potential commercial uses for the spectrum and to predict spectrum demand for each service Approach Urban spectrum demand 2005–25* • We identified five services which account for over 80% of current spectrum use below 15GHz: cellular, fixed links, broadband wireless, terrestrial TV and satellite • The key drivers for each service were identified, and their projected evolution until 2025 modelled • We used methodologies tailored to each service to calculate demand for spectrum, based on the evolution of the key drivers • Demand was modelled for low-, medium- and high-demand scenarios for each service, with the most likely scenario for each being incorporated into a base case Benefits and results • We predicted that, in the base-case scenario, extra bandwidth would be required from 2012. Total demand in 2025 is likely to exceed current allocations by 2.5GHz • Our report identified the sub-1GHz and the 6-15GHz ranges as requiring the most careful planning • The results, made available on the IASH Web site (www.spectrumaudit.org.uk), formed a critical part of the final report delivered to the government and will help guide Ofcom’s future international spectrum allocation work *Source: Analysys, 2005

  9. In addition to supporting spectrum managers around the world, we also regularly advise users of the spectrum on a wide range of issues [1]

  10. In addition to supporting spectrum managers around the world, we also regularly advise users of the spectrum on a wide range of issues [2]

  11. Industry commentary Leading Ofcom’s UHF spectrum project consortium Analysys Mason is pleased to announce that a consortium led by Analysys, including Mason Communications (Analysys Mason Group's technical consulting arm), DotEcon, Aegis Spectrum Engineering and Dr Damian Tambini, has completed its study to further Ofcom's understanding of UHF spectrum and its possible uses. Further details of the scope of the study can be found on Ofcom's Web site(http://www.ofcom.org.uk/radiocomms/ddr/) Amit Nagpal, Principal Consultant, December 2006

  12. Amit Nagpal and Lee Sanders amit.nagpal@analysysmason.com lee.sanders@analysysmason.com Analysys Mason Limited Bush House, North West Wing Aldwych, London WC2B 4PJ, UK Tel: +44 (0)20 7395 9000 Fax: +44 (0)20 7395 9001 www.analysysmason.com

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