Regional and remote apparatus licences in the 1800 MHz band

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Nov 21, 2013 (3 years and 8 months ago)

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Regional and remote apparatus

licences

in the 1800 MHz band

1800 MHz

a shared strategy

Issues paper 1

DECEMBER

2012







Canberra

Purple Building

Benjamin Offices

Chan Street

Belconnen ACT


PO Box 78

Belconnen ACT 2616



T

+61 2 6219 5555

F

+61 2 6219 5353

Melbourne

Level 44

Melbourne Central Tower

360 Elizabeth Street

Melbourne VIC


PO Box 13112

Law Courts

Melbourne VIC
8010


T

+61 3 9963 6800

F

+61 3 9963 6899

Sydney

Level 5

The Bay Centre

65 Pirrama Road

Pyrmont

NSW


PO Box Q500

Queen Victoria Building

NSW 1230


T

+61 2 9334 7700


1800 226 667

F

+61 2 9334 7799




© Commonwealth of Australia
2012

This work is
copyright. Apart from any use as permitted under the

Copyright Act 1968
, no part may be reproduced

by any process without prior written permission from the Commonwealth. Requests and inq
uiries concerning reproduction

and rights should be addressed to the Manager,
Editorial Services
, Australian Commu
nications and Media Authority,

PO Box 13112 Law Courts, Melbourne Vic 8010.


Published by the Australian Communications and Media Authority




Contents





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1

Introduction

1

1.1

Legislative and regulatory framework

2

2

Proposal to introduce PTS apparatus licences

4

2.1

Demand for 1800 MHz and its proposed use

4

2.2

Proposed PTS apparatus licensing arrangements

5

3

Impact of proposed changes on existing services

8

3.1

Current use of the 1800 MHz band

8

3.2

Managing the impact on fixed links in 1800 MHz

9

4

Regulatory activities to effect proposed changes

12

4.1

Amendments to Embargo 62 to make PTS licences available

12

4.2

Introducing an assignment priority for PTS licences

13

4.2.1

Matters relevant to assigning priority to different prospective users

13

4.2.2

Possible models for assignment priority

14

4.3

Pricing review for PTS licence tax

18

4.3.1

Apparatus licence fees

18

4.3.2

PTS apparatus licence tax

current price

18

4.3.3

Proposed tax

18

4.3.4

Methodology for pricing review

19

4.3.5

Estimating population

22

4.3.6

Proposed amendments to the Tax Determination

23

5

Questions

24

6

Invitation to comment

25

6.1

Continuing the conversation

25

6.2

Collaborate online

25

6.3

Make a submission

25

6.3.1

Effective consultation

25

6.3.2

Publication of submissions

26

6.3.3

Release of submissions where authorised or required by law

26

6.3.4

Status of this paper

26


Table of figures

Figure 1 Areas subject to spectrum and apparatus licences in the 1800 MHz band

6

Figure 2 Point
-
to
-
point links in the 1800 MHz band

8

Figure 3 Possible assignment priorities for the 1800 MHz band in remote Australia

16

Figure 4 Possible assi
gnment priorities for the 1800 MHz band in regional Australia

17

Figure 5 General tilted annuity formula

21







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1

Introduction

The 1800 MHz band is used for a variety of fixed and mobile services. In metropolitan
areas and some regional areas, the band is used to provide mobile voice and data
communications services. These services operate under spectrum licences
,

which

are
subject to the ACMA’s current expiring spectrum licence process.
1

In regional and
remote areas of Australia, however, the band is generally used for the deployment of
fixed
point
-
to
-
point links under ap
paratus licensing arrangements.


The availability of emerging
4G
technologies
,

including long term evolution (LTE
),

for
the 1800 MHz band
,

has led to increased demand
by a variety of stakeholders
.
There
is particular d
emand
for

access to

spectrum

in this band in regional and remote areas
of Australia, to support the deployment of mobile services
. The ACMA
has
commenced this review
of arrangements in the 1800 MHz band
to address
this
identified

demand. The timing of the review

coincides with the expiry of

spectrum
licences in the band. This timing will

ensure
that arrangements across the band

are
aligned and coherent before the commencement of the next 15
-
year spectrum licence
period.


The ACMA commenced its review of the band
in October 2012 with the release of a
paper
,

1800 MHz

a shared strategy
.
T
hat

paper

set out the ACMA’s proposed
consultation process
for

the development of revised licensing, technical a
nd regulatory
arrangements for the 1800 MHz band
.

T
he ACMA indicated that three further

issues

papers would be released that focused on particular regulatory and technical is
sues of
relevance to the band.
This paper is the first of th
e issues
papers
.


On 15 November
2012
,

the ACMA hosted a workshop at its Sydney office

and by
w
ebinar
. Stakeholders participated in discussions about the range of issues to be
covered in this consultation, with a focus on th
e

issues covered in this paper.
The
nature of the
discussions
,

and specific stakeholder comments
,

have been included,
where relevant, in this paper.


The ACMA has formed the view that changes to the existing
spectrum licensing and
regulatory
arrangements

for the 1800 MHz band

in regional and remote areas
of
Australia are necessary to ensure that
the spectrum is alloc
ated to its highest value
use.
This means that
revised
regulatory arrangements are needed in the band
to
encourage
the deployment of
a greater
number and variety of services.


The 1800 MHz cons
ultation considers both long
-

and short
-
term arrangements for the
band. The ACMA seeks the input of all interested parties on licensing and regulatory
arrangements that will meet the needs of current and prospective licensees
,

both now
and in the future. L
onger term issues to be covered in later issues papers include the
possible extension of spectrum licensing to cover more of the band and

the

means by
which the ACMA may encourage greater spectrum sharing.


The purpose of this paper is to set out the ACMA’s proposed changes to current
regulatory and licensing arrangements
to allow
mobile services
to operate
under
public telecommunications services (PTS)
apparatus licences in
the
1800 MHz band in
regional and
remote areas of
Australia.
The proposed changes are
temporary and
will
be in place until long
-
term planning for the band is
comp
l
ete
d

and implemented.





1

Further information on the ACMA’s expiring spectrum licence process is available at
www.acma.gov.au/WEB/STANDARD/pc=PC_410295
.





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1.1

Legislative and regulatory framework

The ACMA is guided in its spectrum management functions by the obje
cts
set out in
section 3 of the
Radiocommunications Act 1992

(the
Radiocommunications
Act) and
the
Principles for
s
pectrum
m
anagement

(the
p
rinciples)
.

The key theme of both
the
objects and

the

p
rinciples is to maximise the overall public benefit derived
from use of
the radiofrequency spectrum. The ACMA achieves this goal through a balanced
application of market and regulatory mechanisms.


The
ACMA’s
proposals set out in this paper are informed by, and are consistent with,
objects (a)
, (c), (e) and (f) of
the
Radiocommunications
Act.
These objects are:

(a)

Maximise, by ensuring the efficient allocation and use of the spectrum, the overall
public benefit derived from using the radiofrequency spectrum.

(c)

Provide a responsive and flexible approach to meeting the
needs of users of the
spectrum.

(e)

Provide an efficient, equitable and transparent system of charging for use of the
spectrum, taking account of the value of both commercial and non
-
commercial use
of spectrum.

(f)

Support the communications

policy objectives of the Commonwealth Government.

The ACMA’s proposals
also
meet the
p
rinciples
:

>

Principle 1

Allocate spectrum to the highest value use or uses

>

Principle 2

Enable and encourage spectrum to move to its highest value use or
uses

>

Principle 3

Use the least cost and least restrictive approach to achieving policy
objectives

>

Principle 4

To the
ex
te
n
t possible, promote both certainty and flexibility

>

Principle 5

Balance the cost of interference and the benefits of greater spectrum
utilisation

The ke
y proposal in this paper is to
:



release the 1800 MHz band for PTS apparatus licensing and facilitate the
deployment by several industries of mobile services throughout

regional and
remote Australia.

This proposal is principally intended to support Principl
e 1 and allocate the spe
ctrum
to its highest value use.


The details of the proposed arrangements are also designed to support the other
principles, for example:

>

The development of assignment priorities for new PTS licences in regional and
remote Australia

is
designed to balance the cost of interference and the benefits of
greater spectrum utilisation. It would do this by ensuring an orderly release of
spectrum to meet the anticipated high demand.

>

The review of fixed services in the 1800 MHz band is conside
ring appropriate
outcomes for the different services in the band to ensure that the spectrum is

put to
its highest value use
and
that this
continues. In doing so, the ACMA aims to
provide both certainty and flexibility to incumbent and prospective
licensees.

>

The review of the PTS apparatus licence tax provides a least
-
cost and least
-
restrictive approach to achieving policy objectives. It does this by requiring
prospective licensees to pay an approximate value of the spectrum to gain access,
which
will moderate demand for the spectrum.






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Table
1

provides a high
-
level summary of the regulatory activities
that it is proposed
the ACMA
will
undertake
in order to change the existing arrangements of the
1800

MHz band
. The table also
indicates how they meet

the
p
rinciples.
These
activities are discussed in further detail in Chapter
4
.


Table
1

Principles for spectrum management

Activities necessary to change the arrangements

Key issues

Principle
1

Principle
2

Principle
3

Principle
4

Principle
5



Development of

priority access arrangements to
specified frequencies to avoid fragmentation of
licence holdings.












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The ACMA is seeking the views of all parties interested in the development of the
proposed arrangements for the 1800 MHz band set out in this paper. Active
contributions from all
of

our stakeholders are critical to the ACMA developing the best
possible arr
angements for the band.






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2

Proposal

to introduce PTS
apparatus licences

This chapter discusses the ACMA’s proposal to change existing arrangements in the
1800 MHz band to allow for
the introduction of mobile services in the band. The
discussion provides background on the demand that the ACMA has seen emerge in
the band from various industries and explains how changes to the existing
arrangements can meet this demand.


2.1

Demand for 1800

MHz and its proposed use

The ACMA has been approached by a number of stakeholders from various industries
seeking access to the 1800 MHz band in regional and remote areas of Australia. The
developing ecosystem of LTE equipment in the 1800 MHz band has led

to significant
interest from a number of sectors of industry in deploying 4G communications
networks and smart infra
structure systems in this band.


A
ccess to other spectrum bands that would allow for immediate deployment of 4G
technologies
is
subject to ongoing regulatory activities by the ACMA. For example, a
number of these bands are part of the ACMA’s expiring spectrum licence process or
are the subject of
allocation activities in 2013.
Therefore, the 1800 MHz band is
recognised by stakehold
ers as a band that could be immediately available and
suitable for 4G technologies as they continue to evolve.


Along with the demand demonstrated by telecommunications providers, the availability
of LTE and GSM
-
R equipment also offers opportunities for ot
her industries that
traditionally
have not
relied heavily

on these technologies to deliver services.
The
refore, the

kinds of services that are expected to be deployed include:

>

mobile phone and broadband services

>

smart networks, such as smart energy grids

>

a
utomated systems, including transport and other infrastru
cture.

At
the ACMA’s
recent stakeholder workshop, several different
industr
ies

explained
how

their particular use of the spectrum is an input to their business leading to an
output that has considera
ble public benefit.
Examples included:

>

Telecommunications

carriers project a steep increase in demand for mobile
broadband services in the coming years. Spectrum in the 1800 MHz band will
facilitate the deployment of LTE services in regional and remote Aus
tralia. The
carriers observed that the economies of scale that emerge from the identification of
1800 MHz as a globally harmonised LTE band will drive down
the cost of user
equipment (that is,

smartphones). They argue that this will further increas
e

demand

for mobile services in
the
1800 MHz

band
.

>

State
rail operators are working toward
national, interoperable rail safety and
control communications
. Rail spokespeople have indicated that the 1800

MHz
band is the onl
y band
available in Australia
in which internationally
recognised rail
communications standards have been developed. For this reason, the industry
seeks access to the 1800 MHz band to futureproof safety communications
systems.








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>

Mining sector participants
intend

to deploy emerging tech
nologies to support
productivity and safety operations in their mining and transport activities. Remote
operation of trucks, drills and trains, among other systems, is enabled by LTE
technologies, with equipment becoming available in the 1800 MHz band.

>

Mem
bers of the retail energy sector have expressed interest in deploying smart
grids to support their energy distribution.

This technology could increase efficiency,
conserve energy and enhance the reliability of energy networks. The 1800 MHz
band is one of t
he LTE bands that could support smart grid networks.

Given the emerging demand from stakeholders and
the
technology evolution path, it is
the ACMA’s view that the current arrangements in the 1800 MHz band in regional and
remote areas of Australia do not
allocate
the spectrum to its highest value use. The
existing coordination arrangements in the 1800 MHz band are optimised for fixed
services and are not flexible enough to allow for successful c
oexistence of mobile
services.
This is especially the case whe
re the number of mobile services expected to
be deployed in the band, resulting from the expected growth of machine
-
to
-
machine
communications, are significant. Therefore, the ACMA is proposing to undertake a
number of activities that will ultimately change

the existing arrangements of the band
enabling
it

to move to its highest value use.


Q1.

Is this an accurate description of likel
y demand for the 1800 MHz band?

Q2.

Are there other demand drivers for the 1800 MHz that the ACMA has not
discussed here?


2.2

Proposed
PTS apparatus
licensing arrangements

The ACMA is considering both short
-

and long
-
term arrangements for the 1800 MHz
band. In a future issues paper, the ACMA will discuss the relative merits of increasing
the amount of spectrum space in the 1800 MHz band t
hat is covered by spectrum
licensing. However, in the short
-
term, the ACMA’s priority is to maximise th
e use of
this high
-
value band.
The short
-
term arrangements will be implemented while longer
term arrangements are being developed. This paper is concerne
d with short
-
term
licensing arrangements.


The types of services that stakeholders are seeking to deploy are mobile voice and/or
data communication services using emerging 4G technologies. These types of
services are generally cellular and deployed across
lar
ge geographic areas.
This is
significantly different to the operation of fixed point
-
to
-
point links that are
site
-
based

and
directional.

Given the nature of proposed mobile operations in the 1800 MHz
band, the optimal licensing arrangement could be a sp
ectrum licensing arrangement.
However, these types of arrangements take some time to develop and implement.








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Current licensing arrangements in the 1800 MHz band are shown in
Figure
1
.


Figure
1

Areas subject to spectrum and apparatus licences in the 1800 MHz band


This paper focuse
s

on facilitating access to spectrum in regional and remote areas as
early as possible and ensuring that this access allows a variety of users into the
spectrum space. With this policy objective in mind, the ACMA

s view
is
that apparatus
licensing arrangements will allow
it

to provide stakeholders with access to the band in
early 2013.
2


The
ACMA position is that an
appropriate apparatus licence type for the
kinds

of
mobile services that stakeholders are seeking to deploy

in

the 1800 MHz band is a
p
ublic
t
elecommunications
s
ervice (PTS) licence. A PTS licence is a type of apparatus
licence authorising services that consist of one or more stations

operated to provide
public telecommunications services.
3







2

The ACMA will consult with stakeholders regarding a proposal to extend spectrum licensing in the
1800

MHz band as part of its consultation on the longer term arrangements for the band. This paper is
expected to be released in the first half of 2013.

3

The

PTS licence type and its various licence sub
-
types are defined in the
Radiocommunications
(Interpretation) Determination 2000
. More information is available on the
Public Telecommunications
Service

page of the ACMA website.

Band (MHz)

Metropolitan

Regional

Remote

1710

1725/1805

1820

Spectrum

Spectrum

Apparatus

1725

1785/1820

1880

Spectrum

Apparatus

Apparatus


Metropolitan and regional spectrum licence areas are defined in
Embargo 26
. Indicative representations of these areas
can be
viewed in Google Earth
.







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The ACMA currently i
ssues PTS licences in the fol
lowing paired frequency ranges:

>

825

845/870

890 MHz

>

890

915/935

960 MHz

>

1710

1785/1805

1880 MHz
(the 1800 MHz band)

>

1920

1980/2110

2170 MHz.

However, the 1800 MHz band has been under embargo since January 2011, while the
ACMA
has been
consider
ing

what licensing and regulatory arrangements should be in
place. Having come to a view that PTS apparatus licences are appropriate

for the
services to be deployed in the 1800 MHz band, it is appropriate to amend the
e
mbargo
to facilitate

the licensing of services.


The ACMA proposes to issue PTS apparatus licences in the 1800 MHz band as soon
as practicable in 2013.
Some stakeholders have expressed a view that
while a

PTS
licence
is the best approach for public mobile telecommunications s
ervices (PMTS), it
may not be the most appropriate licence to authorise
some of the other

services likely
to be deployed in the 1800 MHz band.
Stakeholders are invited to provide reasons
why different licensing arrang
ements may be more appropriate.


Q3.

Is the

PTS apparatus licence type the most appropriate way to licence all the
diverse mobile services that are expected to be deployed in the 1800 MHz band
in the medium
-
term?


Although
current
licensing and pricing arrangements allow the issue of PTS licences i
n
the 1800 MHz band, the ACMA proposes that:

>

Appropriate technical arrangements be developed
to
ensur
e

that the needs of
different users are considered.

Further information on
proposed
arrangements
to
manage the impact on

existing

fixed links
is discussed in
section
3.2
.

Proposed
arrangements for the orderly assignment of frequencies to prospective licensees is
discussed in section
4.2
.

>

A review of the current apparatus licence tax to ensure that the value of the
spectrum is
accurately reflected

and applied equitably.

Further inform
ation on the
review of the apparatus licence tax applicable to licences issued in the 1800 MHz
band is discussed in
section
4.3
.

Once these arrange
ments have been reviewed and
implemented
, the ACMA proposes
to
amend
Embargo 62

and allow the issue of PTS apparatus licences in the band. The
ACMA expects that

this will oc
cur in early 2013.





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3

Impact of
proposed
changes

on existing services

The proposed
introduction of PTS apparatus licences in the 1800 MHz band is
expected to
impact current users of
fixed links in
the band in regional and remote
areas
.
This chapter provides information regarding the current use of the band and
explains how these licensees may be impacted by the introduction of the ACMA’s
proposed changes.
This chapter also suggests options
for how the ACMA
might
coordinate the introducti
on of PTS apparatus licences with existing fixed links to
balance the needs of
different
users and allow the band to move to its highest value
use.


3.1

Current use of the
1800 MHz
band

The majority of apparatus licences in the 1800 MHz band are for fixed poin
t
-
to
-
point
services. These services have been coordinated in accordance with the requirements
set out in
RALI FX3
, which details the channel arrangements and assignment
instructions for

each microwave frequency band.


There are around 700 fixed
-
service licences in the 1800 MHz band, with 85 per cent of
th
e
se held by Telstra. BHP holds
four
per cent of the fixed licences in the band and
QR Networks hold
s

2.5 per cent.

Figure
2

shows the fixed links in the 1800 MHz band
within the different licensing regions
;
spectrum licensed areas are shaded, with the
regional spectr
um

licensed areas shaded in red and the metropolitan spectrum

licensed areas shaded in
black
.


Figure
2

Point
-
to
-
point links in the 1800 MHz band









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Figure
2

demonstrates that
there
is
a significant number of fixed services in regional
and remote
areas
operating

in the 1800 MHz band.
New PTS applications will need to
be coordinated with these services
before a licence will be issued. T
his may
affect the
ab
ility of operators to deploy
services
in some locations.


The ACMA expects that reg
ional areas will experience higher demand for acc
ess by
operators of mobile servic
es compared with remote areas.
However, the ACMA also
expects that there will be targeted areas, or hotspots, in remote areas where access to
spectrum in the 1800 MHz band for mob
ile services will be required.
These hotspot

areas are likely to be linked to mining operations and associated infrastructure.


Q4.

What are the likely impacts
on
both fixed and mobile services of the proposed
introduction of PTS services
in 1800 MHz spectrum
in regional and remote

areas
?


3.2

Managing the
impact on

fixed links in 1800 MHz

In
October
2010, the ACMA published the discussion paper
Changes to Channel
Arrangements for Fixed Point
-
to
-
Point Links in the Lower Micr
owave

Bands
,

which

sought comment
on

proposed changes to arrangements for services in frequency
bands below 5 GHz.

The changes proposed in this paper were intended to increase
flexibility in the bands and to meet the changing needs of existing and potential
licensees while minimising disturbance to existing us
ers. In particular, this paper:

>

i
dentified the

1800 MHz
ban
d

as being the subject of

increasing demand to
accommodate technological advances and other purposes

>

indicated that further restrictions on fixed
-
link deployments would be likely as a
consequence of replanning activities to support the introduction of new
services
and expansion of o
ther services in shared bands.

In January 2011, the ACMA introduced Embargo 62
which has

restricted the issue of
apparatus
licences in the 1800 MHz band.
The purpose of the embargo is
to preserve
future planning options in the
band
.
The
options

flagged

in the band included the
development of arrangements to introduce

PTS

apparatus licences

and arrangements
,
as well as the potential for

services associated with smart infrastructure
.


Any arrangements to allow PTS access to the 18
00 MHz band in the short
-

to
medium
-
term will require coexistence with existing fixed link services. There is great
opportunity for PTS and fixed link services to share the 1800 MHz band. This has
been shown in the 2 GHz band. However, the deployment of PT
S would be hampered
in many locations. This is because both fixed and mobile services are currently
granted primary status in the
Australian Radiofrequency Spectrum Plan 2009
. As a
result propose
d PTS applications must successfully coordinate with fixed links b
efore
a licence will be issued.


One of the ways in which the ACMA can manage this complexity is to review the
status of services in the 1800 MHz band.
The ACMA is considering the appropriate
balance between the existing fixed link services in the band and the high demand from
prospective licensees to deploy PTS services.
Relevant considerations include the
demand for and potential public benefit derived
from current and proposed services.
This includes the
telecommunications
services

for regional and remote communities
currently

provided by Telstra

under the universal service obligation using its fixed links
in 1800 MHz.


The ACMA proposes that no new fix
ed point
-
to
-
point services will be
licensed in the
1800 MHz band.
If this approach is implemented, the ACMA will only need to consider
long term options for

existing fi
xed link services in the band.
The ACMA has identified
the following
three options for e
xisting fixed link services in the 1800

MHz band:





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1.

Allow existing fixed
-
link services to continue operating with their current
primary status.

Under this option, existing fixed
-
link licensees would not be required to relocate
from the band. New PTS licensee
s would be required to coordinate their new PTS
services with existing fixed services before commencing operation.

The new PTS
service would not be permitted to operate
if they

interfere
d

with the existing fixed
service.


2.

Allow existing fixed links to
continue operating but change their status to
secondary.

T
he
status of fixed links could be changed from primary to secondary

through
either
a band plan or licence conditions
.

Under such arrangements
,

a secondary
service is not permitted to cause interfere
nce to a primary service or claim
protection from inter
ference from a primary service.


Under this option existing fixed services would need to coordinate with new PTS
services. If the two services could not be successfully coordinated, the fixed
service c
ould be required to adjust or cease its operation so
it did
not interfere
with
the PTS service. The fixed service would have no protection from interference
from the PTS service.


This approach would not inhibit the rollout of PTS services in the band. It
would
allow fixed links to continue operating in area
s in which PTS is not deployed.


Use of notification procedures and ‘best efforts’ coordination could also be
implemented to indicate to fixed
-
link licensees that a service will soon be deployed
in the a
rea and
to
determine if the fixed link can continue operating. These kinds
of arrangements were implemented in the 1900

1920 MHz band to facilitate the
rollout of point
-
to
-
multipoint services.


Among the regulatory tools the ACMA could use to achieve this
end are:

>

s
pecial conditions attached to

apparatus
licences for fixed point
-
to
-
point
services making them secondary

>

a

band plan

either an administrative plan or a formal frequency band
plan

under the

Radiocommunications

Act.
4


3.

Clear the band of all fixed
-
link services.

There are two ways that the ACMA could undertake this clearance.
It

could make
a planning decision and notify affected licensees
that they

need to relocate from
the band wit
hin a suitable period of time.
T
he minimum amount of time the ACMA
h
as provided for band clearance activities is generally
two years.
However, it is
likely that the ACMA could consider providing a longer clearance period than this.
The ACMA would not issue or renew fixed point
-
to
-
point licences after this
clearance period
expire
d
.


The other way the band could be cleared of fixed links is through a spectrum
reallocation associated with a move to spectrum licensing.
One of the longer term
issues to be considered by the ACMA as part of this consultation is whether more
of the

1800 MHz band should be spectrum licensed. This matter will be addressed
in an issues paper in 2013

and all interested parties will be invited to comment.







4

An example is the band plan for the 1900

1920 MHz band, which available from the Comlaw website
www.comlaw.gov.au/Details/F2012L00733







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If the outcome of the ACMA’s consultatio
n
is
a proposal to extend spectrum
licensing
arrangements

in the 1800 MHz band in regional and remote areas, then
the band may be subject to the reallocation provisions specified in Part 3.6 of the
Radiocommunications
Act.
5

At the end of
a two
-
year reallocation period,
any
existing services in the band
would
be
automatically cancelled
to make way for
new spectrum licences
.


The ACMA considers that
either options 1 or 2 are likely

to be implemented in the
proposed arrangements to allow the introduction of PTS apparatus licences in the
band.
This is because these a
rrangements provide flexibility in allowing existing
services to continue operating indefinitely, subject to coordination requirements wit
h
other services.


Q5.

The ACMA seeks input from stakeholders on future options for fixed
-
link
services in the 1800 MHz ba
nd. What would be the most beneficial approach for
government, community and industry?

Q6.

What are the likely impacts
on
current and prospective licensees of the three
options

for fixed
-
link services in the 1800 MHz band
?

Q7.

How should the ACMA strike the
balance between existing fixed links and new
PTS deployments?





5

The ACMA’s consultation process on the longer term arrangements for the 1800 MHz band includes the
release of a paper discussing a proposal to extend spectrum licensing in regional and remote areas. T
his
paper is scheduled for release in early 2013.





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4

Regulatory a
ctivities

to effect
proposed changes

Suitable licensing

and technical regulatory

arrangements will facilitate the deployment
of a range of services

and maximise the public benefit d
erived from the use of the
band
.
This chapter describes the regulatory actions that the ACMA proposes to take to
facilitate access to the 1800 MHz band for PTS services in the near
-
term.
The ACMA
will draw on the outcomes of
stakeholder

discussions to refi
ne the arrangements
proposed in this section

prior to their implementation
.


4.1

A
mendments to Embargo 62

to make PTS licences
available

The ACMA proposes to amend Embargo 62 to release the
1800 MHz
band for PTS
licences.
Under this approach
,

the

ACMA
may

issue

PTS
licences from early 2013,
to

facilitate the deployment of new services in regional and remote Australia
.
The ACMA
will conclude its review of
the applicable apparatus licence

tax

for these licences

and
implement any consequential changes
prior t
o ma
king these licences available.
For
more information on the
apparatus licence tax

review, see
section
4.3

of this paper.


Possible future implementation of longer term arrangements in the 1800 MHz band
has the potential to affect
any
licensees in the band. In particular, a future extension to
spectrum licensing in the band
,

or arrangements to support an infrastructure park
,
c
ould affect current and future licensees issued with PTS licences under the proposed
short
-
term arrangements.


The ACMA
’s

goal is to release the band in the short
-
term to maximise the public
benefit derived from the spectrum.
A twin goal is to limit the im
pact that any services
introduced in the short
-
term may have on longer term arrangements.
In order to avoid
these possible impacts
, the ACMA proposes to apply the following measures to the
issue

of PTS licences in the short
-
term:

>

Prospective licensees will

be informed that planning processes are underway in the
band. This will be reinforced by advisory notes attached to each licence.

>

Licences will not be issued for more than
one
year at a time.

>

To the extent practical
,

the
assignment of licences would be
aligned, in terms of
frequencies held by each licensee, with spectru
m licence holdings in the band.

>

The maximum bandwidth for l
icences issued in
a
frequency range identified for use
by infrastructure industry participants
(
as discussed in section
4.2
)

would
be 2

x

10

MHz.

These measures

would be
taken to ensure that long
-
term arrangements can be
implemented when they have been finalised. All prospecti
ve

apparatus

licensees
will
be

advised that
longer term

arrangements may be put in place within the next few
years. Each applicant will need to make an assessment of th
e

risk
s involved

before
applying for a licence.


A possible outcome of this consultation is
that
more spectrum

in the band

could be
allocated to spectrum licensing
. In that case
, any
apparatus
licences operating
in
the
identified frequencies and areas
would be automatically cancelled at the end of the
re
allocation period
.

These devices could be reregistered under the appropriate
spectrum licence by the new licensee. This would effectively allow continued
operation.






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13


A
nother

possible outcome of this consultation is

that

an infrastructure park

or other
priva
te park
could be
established
. In that case
,

any
apparatus
licence operating in the
identified

frequencies

and areas
would either not be renewed following establishment
of the park, or would be migrated into the park if the licensee is eligible to enter.


Q8.

The ACMA seeks views on the proposed measures to facilitate access to the
1800 MHz band for mobile service
s in the short
-

to medium
-
term.


4.2

Introduc
ing an assignment

priority for PTS licences

As a consequence of the shared nature of the 1800 MHz band, parti
cular care needs
to be taken when assigning new licences in the band.
RALI MS 34

was introduced in
2012 in anticipation of this review

of the 1800 MHz band
. It provides information about,
and d
escribes procedures for, the frequency coordination and licensing of PTS in the
1800 MHz band. It includes information about necessary coordination with spectrum
licences, point
-
to
-
point links and other relevant servic
es in and adjacent to the band.


RALI
MS34 aims to manage interference to and from services operating in and
adjacent to the 1800 MHz band. Any proposed PTS deployments must be assessed
against
RALI MS34
and meet
its
criteria before an assignment will be accepted by the
ACMA. This means access

to spectrum in some areas may be limited by existing
services such as fixed links or other PTS licences.


The ACMA proposes to amend RALI MS34 to define assignment priorities for PTS
licences.

The ACMA has developed
options

for assigning priority to the placement of
licensees’ services within the 1800 MHz band
.
That is, once Embargo 62 is amended
and prospective licensees begin submitting applications for PTS licences, the ACMA
proposes to issue PTS licences to particular li
censee
s in specified frequency bands.


4.2.1

Matters relevant

to assigning priority to different prospective users

Public mobile telecommunications services

To ensure the most technically efficient use of the spectrum, the ACMA proposes to
facilitate the
deployment of nationwide networks for a single operator in c
ommon
spectrum Australia
-
wide.
To achieve this, the ACMA proposes that each of the three
major public mobile telecommunications operators

Telstra, Optus and Vodafone
Hutchison Australia

be allocat
ed a portion of the band in regional and remote
Australia
,

corresponding as closely as feasible to
their
spectrum licence holdings in
m
etropolitan and regional areas.


Infrastructure services

Operators in the infrastructure
sector
(
for example,

mining and energy companies)
have indicated that at least 2

x

10 MHz of spectrum at specific sites or areas is
required to deploy services. The ACMA has taken into account that in mining areas in
particular, different companies operate in close geographic

proximity to each other.
Consequently, the ACMA proposes 2

x

10 MHz assignment limits in spectrum
identified for infrastructure users to facilitate access for two or more licensees in
each
area
, where possible
.


In order to protect future options for a po
ssible infrastructure park, the ACMA may limit
access to spectrum using an assignment priority order for infrastructure industry
participants.

The ACMA is considering models that
provide either 2

x

20 MHz or
2x30

MHz of spectrum for use collectively by inf
rastructure and rail services.

The
larger allocation is expected to better meet the current and forecast needs of these
sectors.

The ACMA will investigate the use of some of the 1800 MHz band for a future
infrastructure park in the third issues paper of th
e 1800 MHz strategy consultation, due
to be released in the se
cond quarter of 2013.





14

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Rail services

Commonwealth,
s
tate and
t
erritory governments
recognise the value
of a national,
interoperable rail safety and control communications service, using spectrum
in the
1800 MHz band
.
The ACMA is considering the most appropriate licensing approaches
to support this goal. This requires balancing the need to safeguard sufficient spectrum
to enable rail service providers to deploy a robust communications solution

for
existing and future rail networks

against the reserv
ing

additional

spectrum that may
not be used.


The ACMA proposes priority access arrangements for rail in the upper portion of the
1800 MHz band. In most cases it is expected that access to 2

x

5

MHz of s
pectrum will
be sufficient. However, in some locations, such as the
S
unshine
C
oast, access to as
much as 2

x

10 MHz may be required. These arrangements will provide spectrum
access for rail services where it is needed in regional and remote Australia, with
out
reserving additional spectrum throughout Australia.


In areas where this spectrum is not being used by rail services, apparatus licences
could instead be granted to other infrastructure operators.


The ACMA is not proposing to allow general PTS licensi
ng in the
1775

1785/1870

1880 MHz frequency ranges until discussions regarding a national rail safety and
control communications service have been finalised with
Australian
Government and
other stakeholders
. However, the ACMA may consider, case
-
by
-
case, ap
plications for
PTS licence to support rail communications systems.


4.2.2

Possible models
for assignment priority

Different assignment priorities are proposed for regional and remote areas
. This is

to
account for
a disparity
in the amount of apparatus licence
spectrum available in
different areas of Australia.
6

O
ne option
is
proposed for remote areas, where spectrum
is less scarce
,

and three options in regional areas
,

where demand is higher.


The proposed arrangements
(see pages
16

and
17
)
indicate
the
possible placement of
the three major mobile carriers in the band. Also shown is
the

potential placement of
other services in the band, including
those
deployed by infrastructure industries
,

such
as energy, transport and mining. Spectrum has also been iden
tified to support national
rail communications infrastructure. The rationale for these proposed arrangements
is
discussed in more detail below
.


Should prospective licensees from sectors not already identified in this paper seek
apparatus licences in the b
and, the ACMA will attempt to accommodate access to the
spectrum for all users in an equitable manner.


The

proposed
assignment strateg
ies are

designed to
:



minimise the impact of implementing long
-
term arrangements



promote more efficient use of the band by

operators wanting to deploy nationwide
networks



facilitate future spectrum
-
sharing arrangements.

The ACMA is consulting on proposed assignment priorities with prospective licensees
so that the
se priorities

can be developed in
the
light of future proposed
uses of the
band. Responses from stakeholders to this issues paper will assist the ACMA when it
chooses which assignment priority model to adopt.





6

The boundaries of regional and remote areas are depicted in
Figure
1
.






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15


These
proposed
arrangements would apply only until long
-
term arrangements are
identified and

implemented.

In all cases, access to spectrum will be based on an
assessment against the assignment criteria specified in RALI MS34. In particular
locations
,

access may be limited due to existing services.


Q9.

The ACMA seeks the views of prospective licensees on its prop
osal to introduce
assignment priorities for PTS licences in the short
-

to mediu
m
-
term.


The ACMA
developed
a single option for the assignment of spectrum in remote areas.

An additional model was proposed
at the recent workshop

and is included for
considera
tion.


For

regional areas, the ACMA is aware of divergent stakeholder views and
developed
three options for comment
, with a fourth, proposed
at the recent workshop
, also
included
in this paper
for consideration
.


The ACMA previously consulted on an earlier version of RALI MS34 that included a
possible assignment priority for regional areas. Stakeholders differed in their
responses and, for this reason, the ACMA now offers three options for consideration
and comment
. The assignment priority from the earlier version of RALI MS34 is shown
below in
Figure
4
.


T
he ACMA
considered a number of factors in the developmen
t of the options

for
remote and regional areas
, including:

>

providing an adequate quantity of spectrum for the different anticipated industry
uses to meet demand and enable the spectrum to be put to its highest value use.

>

promoting efficiency of spectrum us
e at the boundaries between spectrum and
apparatus licences, by aligning PTS assignments with spectrum licence holdings to
the extent feasible.

>

providing equity of access to spectrum for industry competitors.

Each of the options proposed has advantages for

different prospective licensees. In
deciding whether to apply one option or another, the ACMA will seek to balance the
competing demands for the band in order to maximise the public benefit derived from
the use of the spectrum.


The proposed assignment pr
iorities for remote and regional Australia are discussed
below.


Q10.

The ACMA seeks views on the preferred option for assignment priorities to
facilitate access to the 1800 MHz ban
d in the short
-

to medium
-
term.


Possible
arrangements

for
r
emote Australia

Possible
assignment priorities for remote Australia are shown in
Figure
3
.
This
includes the ACMA
-
proposed model
(Remote Option 1)
and a model proposed

at the
recent workshop (Remote Option 2)
.


Remote Option 1
:

>

maximises the amount of spectrum available to infrastructure services in remote
Australia

>

provides access to an equitable amount of spectrum for carriers





16

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>

minimises

any future disruption to services (including cessation of services) if the
entire
1755

1785/1850

1880 MHz

band is identified for an infrastructure park
(including rail applications).

Remote Option 2
:

>

maximises the amount of spectrum available to public mo
bile telecommunications
services in remote Australia

>

provides access to an equitable amount of spectrum for carriers

>

could lead to future disruption
to Optus’
s

and
/or other carriers’ services (including
cessation of services) if the top 30

MHz

of the 1800 MHz of the band is identified
for an infrastructure park and rail applic
ations.


Figure
3

Possible
assignment priorities for the 1800 MHz band in
remote

Australia

Frequency

Channel (2

x

5
MHz)

Remote Option
1

Remote
Option 2

1710/1805 MHz















1785/1880 MHz

1

Telstra

(2

x

15 MHz)

Telstra

(2

x

20 MHz)

2

3

4

VHA

(2

x

15 MHz)

5

VHA

(2

x

20 MHz)

6

7

Optus

(2

x

15 MHz)

8

9

Optus

(2

x

20 MHz)

10

Infrastructure*

(2

x

20 MHz)


11

12

13

Other

(2

x

15 MHz)

14

Other/Rail

15

Rail (2

x

5 MHz)


*Licensees in this segment of the band will be subject to a 2 x 10 MHz spectrum access limit.


Q11.

Which assignment priority model for remote Australia would best meet the
needs of prospective licensees?

Q12.

Which assignment priority model for remote Australia would maximise the public
benefit derived from use of the spectrum?


Possible arrangements for r
egional Australia

Four
options for assignment priorities in regional Australia are shown in
Figure
4
.







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Figure
4

P
ossible

assignment priorities for the 1800 MHz band in
regional

Australia

Frequency

Channel

(2

x

5 MHz)

Regional

Option 1

Regional

Option 2

Regional

Option 3

Regional

O
ption

4

1710/1805
MHz














1785/1880
MHz

1

Spectrum

l
icensed

Spectrum
l
icensed

Spectrum licensed
(Telstra)

(2

x

15 MHz)

Spectrum
l
icensed

2

3

4

Telstra

(2

x

10 MHz)

Telstra

(2

x

10 MHz)

VHA

(2

x

15 MHz)

Telstra

(2

x

15 MHz)


5

6

VHA

(2

x

10 MHz)

VHA

(2

x

15 MHz)

7

Optus

(2

x

15 MHz)

VHA

(2

x

15 MHz)


8

Optus

(2

x

10 MHz)

9

Optus

(2

x

15 MHz)

10

Infrastructure*

(2

x

20 MHz)

Infrastructure*

(2

x

20 MHz)

Optus

(2

x

15 MHz)

11

12

Infrastructure

(2

x

10 MHz)

13

Other
*

(2

x

15

MHz)

14

Other/Rail

Other/Rail

Other/Rail

15

Rail (2

x

5 MHz)

Rail (2

x

5 MHz)

Rail (2

x

5 MHz)


*Licensees in this segment of the band will be subject to a 2 x 10 MHz spectrum access limit.


Key

considerations that will underpin any decision on assignment priorities include:

>

the equity of allocations within and between industry sectors

>

the relative likelihood of future disruption to services

should some of the ACMA’s
longer term proposals for the band be implemented.

The extent to which these considerations are addressed by each of the
four
options is
compared in
Table
2
.


Table
2

Comparison of
four
options for regional assignment priorities

Characteristic

Regional

Option 1

Regional

Option2

Regional

Option 3

Regional

O
ption

4

Amount of spectrum available to
infrastructure services
in regional Australia
.

M
ore

L
ess

M
ore

L
ess

Distribution of spectrum for carriers
.

Equal PTS

Adjusted
PTS

No PTS for
Telstra

Equal PTS

If this model is implemented now
,

and the longer term
outcome is that 2x30

MHz of spectrum is allocated to a
rail/infrastructure park
,

what is the p
ossible future
disruption
to

carrier
services
?

No
disruption

Possible
disruption

No
disruption

Possible
disruption

If this model is implemen
ted now
,

and the longer term
outcome is that a maximum of 2

x

15/20 MHz of
spectrum is allocated to a rail/infrastructure park, what
is the p
ossible future disruption
to

infrastructure
services
?

Possible
disruption

No
disruption

Possible
disruption

No
disr
uption

Alignment with

aggregated spectrum assignments in
the spectrum

licensed portion of the band
.

Low

Medium

Low

High

Alignment with

ACMA
-
proposed spectrum assignments
in remote Australia
.

Medium

Low

High

Low








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Q13.

Which assignment priority model for
regional

Australia would best meet the
needs of prospective licensees?

Q14.

Which assignment priority model for
regional

Australia would maximise the
public benefit de
rived from use of the spectrum?


4.3

Pricing review

for PTS
licence
tax

The
curr
ent apparatus licence tax for PTS licences was determined several years ago
and does not reflect the current value of the spectrum in the 1800 MHz band. It
therefore
does not provide

appropriate

incentives for efficien
t

spectrum use. The
ACMA proposes to r
aise the unit price applicable to the apparatus licence tax for PTS
apparatus licences from $0.01/MHz/pop on a paired basis, to $0.055/MHz/
p
op on a
paired basis. The context and rationale for this proposal is provided below.


4.3.1

Apparatus licence fees

There a
re two types of fees applicable to apparatus licences:



administrative charges to recover the direct costs of spectrum management



annual taxes to recover the indirect costs of spectrum management and provide
incenti
ves for efficient spectrum use.

Indirect c
osts are those that cannot be directly attributed to individual licensees. These
relate to activities undertaken by the ACMA to manage the spectrum and include
international coordination, domestic planning and interference management.
7


In early April e
very year
,

apparatus licence taxes are increased by
the
consumer price
index (CPI). This is to ensure that the desired outcomes of the tax

efficient use of
spectrum and indirect cost recovery

are not erod
ed by the effects of inflation.


4.3.2

PTS a
pparatus licen
ce tax

c
urrent price

The annual licence tax for
a
PMTS Class B (1805

1880 MHz) apparatus licence is
currently $0.01/MHz/pop on a paired basis
,

which equates to $0.0050/MHz/pop on an
unpaired basis
.
8

This tax is not differentiated by density area or on any
other basis.
The population estimate applied in calculating the aggregate apparatus licence tax is
based on the population in the local government area (LGA) in which relevant base
stations are situated
. It
is
sourced from the 2006 Census conducted by the
Australi
an
Bureau of Statistics (ABS).
The aggregate apparatus licence tax is independent of the
number of base stations in any particular individual LGA

and is scalable to population.

Consequently,

licences based on LGAs with smaller populations incur sma
ller
aggregate taxes than those based on LGAs

with larger populations
.

4.3.3

Proposed
tax

Estimates based on the methodology outlined in Attachment A indicate the following
potential apparatus licence taxes (for the first year on a paired basis):

>

$0.0635/MHz/pop

based on the preferred post
-
tax approach and applying the
current statutory corporate tax rate of 30

per cent

>

$0.0547/MHz/pop based on a pre
-
tax approach
and
applying the current statutory
corporate tax rate of 30

per cent
.




7

The licence tax is set out in the
Radiocommunications (Transmitter Licence Tax) Determination 2003
(No.

2)
. More information is available on the
Apparatus licence fees

page on the ACMA website.

8

For more information see Table 6.1 of the
Apparatus licence fee schedule
.






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The calcul
ated

estimates are both above the current price for PMTS Class B (1805

1880 MHz spectrum) on an apparatus licence basis ($0.01 on a paired basis).
However, given that the current apparatus licence tax in the
Radiocommunications
(Transmitter Licence Tax) Determ
ination 2003

(No. 2)

was
set
some time ago, it does
not necessarily reflect contemporary market value, opportunity cost or a
ny economic
pricing rationale.


The ACMA intends to adopt a conservative approach to spectrum pricing, noting that
generally the
consequences of overpricing are more inefficient and costly than
underpricing.

Reflecting this, the ACMA proposes a revised apparatus licence tax of
$0
.055/MHz/pop on a paired basis.

Q15.

The ACMA seeks input from stakeholders on the proposed tax.


4.3.4

Methodology
for pricing review

The ACMA

propose
s

that the annual apparatus licence taxes for access to 1800 MHz
spectrum be consistent with the unit spectrum access charge (on a $/MHz/pop basis)
set as directed by the Minister
for Broadband, Communications and the Dig
ital
Economy
(the minister)
for the reissue of expiring 15
-
year spectrum licences in the
1800 MHz band
.

The charge is
in the
Radiocommunications (Spectrum Access
Charges) Direction 2012 (the
m
inister’s
d
irection)
.
9

The unit spectrum access charge
for the 1
800 MHz band included in th
e
m
inister’s
d
irection for a 15
-
year spec
trum
licence is $0.23/MHz/pop.


This unit spectrum access charge
is
the most recent valuation of spectrum in the
1800

MHz band in Australia and
is
therefore its opportunity cost.

As such
,

a
key
objective of the proposed approach is to ensure that the economic incentives for the
efficient use of spectrum, which are embedded in the minister’s direction around 15
-
year spectrum licences for 1800 MHz spectrum, are also incorporated into apparat
us
licence taxes.

This requires that the long
-
term economic cost for licensees using
apparatus licences would be the same as for lic
ensees using spectrum licences.


Given the difference in timing between the effective cashflows of these licensing
approache
s
10
, the standard

economic approach is to aim for equivalent net present
value (NPV) between the cashflows of the two licensing approaches
,

that is,
the NPV
of the stream of annual apparatus licence taxes should equal the once
-
off licence fee

(determined by the
m
inister).
The long
-
term economic costs to licensees would
therefore be equivalent for the two licensing approaches
.

L
icensees

would
also

encounter the same long
-
term economic incentives towards efficient use of spectrum
in both licensi
ng approaches.


These equivalence calculations need to allow for fact that the annual payments under
an apparatus licence framework will evolve across the 15
-
year spectrum licence
period.
This reflects two factors:

>

apparatus licence taxes are escalated ann
ually by the CPI to ensure that the
incentives toward efficient use of spectrum are not eroded through time by general
inflation

>

apparatus licence taxes are applied to an expanding population base across the
licence period
.




9

For more information se
e
www.dbcde.gov.au/radio/radiofrequency_spectrum/spectrumlicences
.

10

Spectrum licences involve an upfront, one
-
off payment near the beginning of the licence period while
apparatus licence payments are typically made on an annual basis.





20

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These factors need to be capture
d so that a licensee is
has no preference for

spectrum
or

apparatus licensing from a pricing perspective.


Some stakeholders at the ACMA’s recent workshop expressed concerns regarding the
appropriateness

of using the
m
inister’s valuation of expiring
spectrum licences as the
basis for t
he tax for apparatus licences.
These concerns included perceptions that:

>

there are differences between the values for spectrum
in metropolitan and other
areas

>

the
m
ini
ster’s valuation also included
a
premium

for the existing spectrum
licensees that would not be relevant in an apparatus licence context
,

such as
avoiding the costs associated with an auction
-
based reallocation process and the
certainty
provided by reissue of existing
licences.

In addition, as
me
ntioned
in
section
2.2
,

some potential licensees (such as those in
the mining and rail sectors) have
said
that the PTS licensing regime may not be t
he
best fit for them
. This is

where their use of spectrum is as an ancillary input to their
services rather than direct input to the products provided by mobile carriers.

Q16.

Stakeholders are invited to expand on their views on these and other issues
.

They are

invited to

provide more detail on the basis for incorporating
corresponding adjustments in apparatus licence taxes that nevertheless remain
consistent with the
m
inister’s unit value.


The ACMA proposes to apply a

tilted annuity based approach

.
This

approach is
commonly applied in network costing contexts where the focus is on identifying the
stream of annual cashflows that mimic cost recovery in a competitive market.
Specifically, a tilted annuity identifies an initial (year 1) payment that, if incr
eased at a
fixed annual rate over the entire useful life of the asset, will generate an aggregate
NPV equal to the original capital cost of that asset.
11

The capital costing context is
analogous to constructing annual prices (
for example,

annual apparatus l
icence taxes)
and is consistent with a once
-
off initial charge (
for example,

a spectrum access charge
for a spectrum licence). The general tilted annuity formula applied in this context is
shown in
Figure
5
.





11

See Australian Competition and Consumer Commission,
Assessment of Telstra’s Unconditio
ned Local
Loop Service Band 2 monthly charge undertaking, Final Decision, Public Version
, April 2009, p. 256






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Figure
5

General tilted annuity formula






























(













)


Where:

ALT
t


=

the annual apparatus licence tax in year t

MV

=

the
m
inister’s unit spectrum access charge for re
-
issue of spectrum licences for 1800 MHz
adjusted on a paired based (ie times 2)

N

=

the number of years in the spectrum licence period (15 years)

g

=

the expected effective escalation of the effective apparatus licence taxes across the licence
period

WACC

=

an indicative discount rate




Application of this formula with t set to 1 calculates the apparatus licence tax for year 1
of the 15
-
year
licence perio
d given the WACC and degree of ‘tilt’

applied.


The tilted annuity approach requires an assumption about the appropriate quantum of
the

tilt


(often a growth rate, an inflation
rate or some other escalator).
In this context
,

the unit apparatu
s licence tax would evolve commensurate with annual escalation at
CPI and would be applied to an expanding population base as population in the
relevant licence area grew across the licence period.
12

The tilt factor applied in the
annuity approach is based
on expectations over the entire licence period and on:

>

an expected annual general inflation rate of 2.5

per cent
per annum
,

which is both
the long
-
term historical average and the mid
-
point of the target range around which
the Reserve Bank of Australia cond
ucts monetary policy

>

expected long
-
term population growth of 1.2

per cent
per annum consistent with
the advice from Plum Consulting that, in part, informed the valuation in the
m
inister’s
d
irection.
13

This implies an expected tilt of 3.73

per cent
per annum

over the licence period.
14







12

The current apparatus licence tax for PTS in the 1800 MHz band is based on the local government area in
which the base stations are sited using d
ata from the 2006 Census. From a NPV indifference perspective
the aggregate cost to a apparatus licensee will only reflect updated population after each Census (that is, on
a five
-
yearly basis). The tilted annuity, however, applies a constant growth rate a
cross the entire licence
period and cannot accommodate multiple effective annual population growth rates (that is, 0 per cent for
four years and then an annual increase reflecting five years of inter
-
censal growth). Analysis suggests that
the impact of thi
s simplification on the constructed apparatus licence tax is insignificant.

13

Plum Consulting,
Valuation of public mobile spectrum at 1710

1785 MHz and 1805

1880 MHz
, a report
for the Department of Broadband Communications and the Digital Economy, 28 June
2011.

14

Tilt is based on compounding of long
-
term population growth and inflation; (that is, (1+pop%) * (1+CPI%)


1.





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The tilted annuity based approach also requires a specific assumption about the
discount rate (weighted average cost of capital

or
WACC) to be applied to derive the
stream of annual payments under an apparatus licence that are

equivalent in NPV
terms to the unit spectrum access charge in the
m
inister’s
d
irection. The ACMA
proposes to apply a post
-
tax WACC because t
hese valuation or equivalence analyses
are normally unde
rtaken on a post
-
tax basis (that is,

post
-
tax cash flow dis
counted by
a post
-
tax WACC)
. This is

generally the preferred analytical approach
,

given that tax is
not part of the value to a capital provider/investor or their indifference considerations.

As this analysis applies a post
-
tax WACC, the
resulting
apparatus licence tax will also
be on a post
-
tax basis. Therefore, the post
-
tax apparatus licence tax estimated using
the tilted annuity approach needs to be grossed up for the impact of tax.
An
alternative
approach is to undertake the equivalence a
nalysis

on a pre
-
tax basis (that is,

pre
-
tax
cash flow
discounted by a pre
-
tax WACC).
The
resulting
apparatus licence tax is
directly on a pre
-
tax basis and requires no further adjustment.


This analysis applies a discount rate that is consistent with the advice
from Plum
Consulting that, in part, informed the valuation in the
m
inister’s
d
irection (along with
other impacts).
15

The WACC estimates applied in these equivalence analyses are
12

per cent

pre
-
tax and 8.4

per cent

post
-
t
ax.
This should be viewed as applyin
g a
representative WACC estimate consistent with the highest value use for relevant
spectrum around provision of mobile voice and data services rather than a precise
estimate of the WACC for any particular licensee. Applying these WACC estimates
ensures th
at the apparatus licence taxes estimated are consistent with t
he
m
inister’s
unit value for 15
-
year spectrum licences.

Q17.

The ACMA seeks input from stakeholders on the methodology used to revise
the PTS licence tax
.


4.3.5

Estimating population

The current apparatus licence tax for the 1800 MHz band is calculated on a
$/MHz/pop basis.


The population estimate currently applied in calculating the aggregate apparatus
licence tax is based on the population in the local government area (LGA) in whic
h
relevant base stations are situated
. It uses

LGA boundaries effective at the time of the
2006 Census.
The population metric currently applied is from the 2006 Census
conducted by the ABS. Because population data is now available from the 2011
Census, the

ACMA proposes to its population estimates based on the LGA boundaries
at that time.


LGA boundaries are not the responsibility of the ABS but controlled by state and
territory governments and can change over time. There has been some rationalisation
of LG
A’s (especially in Queensland) since the 2006 Census. In addition to the
proposed change in the tax from $0.01/MHz/pop to $0.055/MHz/pop on a paired basis,
this may lead to some changes in the overall taxes paid by licensees
.







15

Plum Consulting,
Valuation of public mobile spectrum at 1710

1785 MHz and 1805

1880 MHz
, a report
for the Department of Broadband Commun
ications and the Digital Economy, 28 June 2011.






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Q18.

The ACMA seeks views on ap
proaches to identifying an appropriate geographic
boundary and for quantifying population when calculating apparatus licence
taxes.

Q19.

PTS taxes in the 2.1 GHz band are also currently based on estimates of
population for the relevant LGA sourced from the 2006

Census and applying the
2006 LGA boundaries. The ACMA seeks the views of interested parties’ on
maintaining consistency of population metrics across the different spectrum
bands.


4.3.6

Proposed a
mendments to the Tax Determination

The proposals outlined in this

chapter will require amendments to the
Radiocommunications (Transmitter Licence Tax) Determination 2003

(No. 2)
(the Tax
Determination)
.

The required amendments to the Tax Determination and the proposed
wording are shown below.



Proposed amendment to Table

702, item 17
:

17

PMTS Class B operated in the frequency
range 1805

1880 MHz

$0.055 for each paired
MHz of spectrum on which
the service may be
operated multiplied by the
population of the area to
which the service relates
as worked out in the 2011
Census




In addition, a note w
ould be added below the table:

Note
:
If an amount of tax is to be calculated
for item 17
by reference to the
population of an area as worked out in the 2011 Census, the relevant figure in
that Census is the population figure for

the

‘local government area’. Those
figures are available on the website of the Australian Bureau of Statistics
(ABS).


Q20.

The ACMA seeks
comment on the proposed amendments to the Tax
Determination
.







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5

Questions

1.

Is this an accurate description of likel
y demand for
the 1800 MHz band?

2.

Are there other demand drivers for the 1800 MHz that the ACMA has not
discussed here?

3.

Is the PTS apparatus licence type the most appropriate way to licence and tax all
the diverse mobile services that are expected to be deployed in the 1
800 MHz
band in the medium
-
term?

4.

What are the likely impacts for both fixed and mobile services of the proposed
introduction of PTS services in regional and remote 1800 MHz spec
trum?

5.

The ACMA seeks input from stakeholders on future options for fixed
-
link
services
in the 1800 MHz band. What would be the most beneficial approach for
government, community and industry?

6.

What are the likely impacts for current and prospective licensees of the three
options for fixed
-
link

services in the 1800 MHz band?

7.

How shoul
d the ACMA strike the balance between existing fixed links and new
PTS deployments?

8.

The ACMA seeks views on the proposed measures to facilitate access to the
1800

MHz band for mobile service
s in the short
-

to medium
-
term.

9.

The ACMA seeks the views of prospe
ctive licensees on its proposal to introduce
assignment priorities for PTS licence
s in the short
-

to medium
-
term.

10.

The ACMA seeks views on the preferred option for assignment priorities to
facilitate access to the 1800 MHz ban
d in the short
-

to medium
-
term.

11.

Which assignment priority model for remote Australia would best meet the
needs
of prospective licensees?

12.

Which assignment priority model for remote Australia would maximise the public
benefit de
rived from use of the spectrum?

13.

Which assignment priority mod
el for regional Australia would best meet the
needs
of prospective licensees?

14.

Which assignment priority model for regional Australia would maximise the public
benefit der
ived from use of the spectrum?

15.

The ACMA seeks input from stakeholders on the proposed
tax.

16.

Stakeholders are invited to expand on their views on these and other issues and
provide more detail on the basis for incorporating corresponding adjustments in
apparatus licence taxes that nevertheless remain consistent with the
m
inister’s
unit value.

17.

The ACMA seeks input from stakeholders on the methodology used to revise the
PTS licence tax
.

18.

The ACMA seeks views on approaches to identifying an appropriate geographic
boundary and for quantifying population when calculating apparatus licence taxes.

19.

PTS

taxes in the 2.1 GHz band are also currently based on estimates of
population for the relevant LGA sourced from the 2006 Census and applying the
2006 LGA boundaries. The ACMA seeks the views of interested parties’ on
maintaining consistency of population
metrics across the different spectrum
bands.

20.

The ACMA seeks comment on the proposed amendments to the Tax
Determination.








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6

Invitation to comment

6.1

Continuing the
c
onversation

This paper is the first of a series of three issue papers to be release as part of the
consultation process
1800 MHz

a shared strategy
. These papers are designed to
encourage dialogue be
tween the ACMA and stake
holders around relevant issues.


The next issues paper will consider the relative merits of extending spectrum licensing
in the band. The third and final paper will discuss possible approaches to spectrum
sharing arrangements in the

band, including possible licensing arrangements for
specific infrastructure industries, including transport, energy and mining.


All interested parties are encouraged to engage in this consultation process through
any o
f the channels discussed below.


6.2

Collaborate online

Throughout this consultation process, the ACMA will make information available
through our website. Participants to this discussion are encouraged to contribute their
views as comments to posts on our website or to our acmadotgov social
media
channels on Facebook and Twitter. Throughout the consultation period, participants
may cont
ribute to the conversation via T
witter, with the hash tag
#
1800MHz
.


The ACMA is interested to hear what you think about other stakeholders’ views and for
our
final approach to be shaped by a genuine, multilateral dialogue on matters of
interest.


6.3

Make a submission

The ACMA encourages participants to the consultation to make submissions on the
issues raised. We welcome shorter, ad hoc submissions on particular i
ssues, or a full,
formal submission on all the matters cover
ed by one of our issues papers.

Submissions
on the broader consultation process
can be made at any time prior to the
close of the final issues paper:

By email:

spectrum.outlook@acma.gov.au

By facsimile:

+61 2 6219 5353

By mail:


Manager

Spectrum Outlook and Review Section

Australian Communications and Media Authority

PO Box 78

Belconnen ACT 2616


The closing date for submissions

on
this paper

is
Friday
, 1 February

201
3
.


Media enquiries should be directed to Emma Rossi on (02) 9334 7719 or by email to
media@acma.gov.au
.


6.3.1

Effective consultation

Stakeholder consultation processes are an important source of evidence for ACMA
regulatory development activities. To assist stakeholders in formulating submissions to
its formal, written consultation processes, the ACMA has developed
Effective
consultation: A guide to making a submission
. This guide provides information about
the ACMA’s formal, written, public consultation processes and practical guidance on
how to make a submission.





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6.3.2

Publicat
ion of submissions

In general, the ACMA publishes all submissions it receives. However, the ACMA will
not publish submissions that it considers contain defamatory or irrelevant material.


The ACMA prefers to receive submissions which are n
ot claimed to be
confidential.
However, the ACMA accepts that a submitter may sometimes wish to provide
information in confidence. In these circumstances, submitters are asked to identify the
material over which confidentiality is claimed and provide a written explanation
for
confidentiality claims.


The ACMA will not automatically accept all claims of confidentiality. The ACMA will
consider each claim for confidentiality on a case
-
by
-
case basis.


6.3.3

Release of submissions where authorised or required by law

Any submissions pr
ovided to the ACMA may be released under the
Freedom of
Information Act 1982

(unless an exemption applies) or shared with other
Commonwealth Government agencies or other parties under Part 7A of the
Australian
Communications and Media Authority Act 2005
. T
he ACMA may also be required to
release submissions for other reasons including for the purpose of parliamentary
processes or where otherwise required by law (for example, under a court subpoena).
While the ACMA seeks to consult submitters of confidential
information before that
information is provided to another party, the ACMA cannot guarantee that confidential
information will not be released thro
ugh these or other legal means.


6.3.4

Status of this paper

This paper provides background information to assist people in making comments to
the ACMA on the issues addressed in the paper.
Information in this paper should not
be taken to indicate the ACMA's commitment to a particular policy
position
or course
of ac
tion
.