Overview of Analysys Mason 2012 study on the value of spectrum to the UK economy Presentation to UK Spectrum Policy Forum - Cluster 3: Economic and Social Value of Spectrum 29 March 2018 Philip Bates More information on the UK Spectrum Policy Forum can be found here: https://www.techuk.org/about/uk-spectrum-policy-forum

1. 36655-133 | Commercial in confidence
Overview of Analysys Mason 2012 study on the
value of spectrum to the UK economy
Presentation to UK Spectrum Policy Forum
Philip Bates
29 March 2018

2. 36655-133 | Commercial in confidence
Background and objectives
Workstream A: Existing spectrum uses and value to the economy
Workstream B: Factors affecting future spectrum use and demand
Workstream C: Implications for spectrum management and allocation
Recommendations for a new study
3Contents

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The objective of the 2012 study was to advise on the value of radio
spectrum to the UK economy, and factors influencing this
▪ A study on the value of radio spectrum to the UK economy last commissioned by Ofcom in 2006
▪ Substantial changes since 2006 in various key factors affecting value generated by radio spectrum
use, notably:
– Enormous growth in mobile broadband consumption, driven by smartphone adoption (though 4G
not launched in UK at the time)
– Switchover from analogue to digital terrestrial TV broadcasting
– Substantial growth in DAB (from 11% in 2005 to 36% in 2010, according to Ofcom estimates
– Growth in IPTV and Internet radio
▪ Objectives of study were three-fold:
1.Provide updated assessment of impact of radio spectrum on UK economy – and extend
assessment by considering additional aspects of wireless use (e.g. by public sector)
2.Consider how economic impact of spectrum use is affected by current and future market and
technology developments, and by other shifts in supply and demand (e.g. greater use of
spectrum sharing)
3.Assess impact of different options for release of 500MHz from public sector holdings
4
Source: Analysys Mason
Background and objectives

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The study ran for six months and comprised three workstreams
5
Workstream C:
Implications for
spectrum
management and
allocation
Effect on value
of allocation
policy
Effect on value
of options for
timing of
release
Effect on value
of options for
prioritising
bands
Deliverable:
Final report
Deliverable:
Meeting to
discuss
initial
findings
Deliverable:
Presentation
of results from
final report
Workstream A:
Existing spectrum uses
and value to the economy
Review
existing
literature
Review
spectrum
use
Design
modelling
method-
ologies
Assess
value of
spectrum
use
Analyse
findings
Stake-
holder
interviews
1a:
Existing
uses
1b:
Method-
ology
definition
1c:
Economic
modelling
Identify
constraints
Technology
and
market
trends
Workstream B:
Factors affecting
future spectrum use
and demand
Migration,
re-farming
and sharing
Technology
and
convergence
International
develop-
ments
Overview of study methodology

5. 36655-133 | Commercial in confidence
Background and objectives
Workstream A: Existing spectrum uses and value to the economy
Workstream B: Factors affecting future spectrum use and demand
Workstream C: Implications for spectrum management and allocation
Recommendations for a new study
6Contents

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Workstream A took an economic welfare approach to estimating the value
of spectrum, building on the method used in previous studies
▪ We considered economic welfare to be sum of consumer
surplus and producer surplus (i.e. external benefits were
not quantified)
▪ Given extent of changes in the public mobile and TV
broadcasting sectors since previous study, we built new
models to estimate consumer and producer surplus from
public mobile and TV broadcasting (the two areas with
largest economic welfare benefits)
▪ Due to lack of recent data on willingness to pay for mobile
services, we presented a range of values for consumer
surplus for mobile
▪ We also used a different and, we believe, more robust
approach to calculating benefits of Wi-Fi, based on
savings achieved through offload by mobile broadband
consumers and mobile operators
▪ For remaining areas covered by 2006 study (which are
relatively small in comparison), we updated previous
models
▪ In addition to providing annual values for 2011, we also
calculated NPV of welfare benefits from 2012-2021
▪ We did not attempt to quantify economic welfare benefits
arising from public sector uses of spectrum
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Source: Analysys Mason
Workstream A
Consumer surplus
Producer surplus
Supply curve
Demand curve
Quantity
Price
Choke
price
Selling
price
Subscribers
Illustration of consumer and producer surplus calculation

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Our estimate of the overall economic welfare in 2011 was GBP51.9-55.9
billion, compared to GBP35.2 billion in 2006
8Workstream A
Fixed links
Benefit
Consumer
Producer
3.9
3.9
–
3.3
3.3
–
22.1
22.1
–
Satellite links
Benefit
Consumer
Producer
2.8
2.8
(0.005)
3.6
3.0
0.6
31.3
22.0
9.3
PBR
Benefit
Consumer
Producer
1.2
1.2
–
2.3
2.3
–
19.2
19.2
Radio
Benefit
Consumer
Producer
1.91
1.61
0.3
3.0
2.7
0.3
28.6
2.8
25.6
Wi-Fi
Benefit
Consumer
Producer
–
–
–
1.8
1.8
–
25.6–31.0
24.8–27.9
0.8–3.1
Total mobile
Benefit
Consumer
Producer
21.8
19.0
2.8
30.2–34.2
24.2–28.2
5.9
273–341
246–314
27
2006 2011 2012 -2021 discountedGBP billion
TV
Benefit
Consumer
Producer
3.61
3.41
0.2
7.7
6.2
1.4
86.0
72.6
13.4
1European Economics figures restated in a manner that is consistent with our approach
–

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In addition, we analysed revenue and employment along the value chain
for three major areas of spectrum use: public mobile, TV and radio
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Source: Analysys Mason
Workstream A
Site Property
Owners
Site Civil
Contractors
Network
Equipment
Suppliers
Network
Operators
Mobile
Subscribers
Independent
Mobile CPE
Retailers
Mobile
Advertising
Companies
Mobile
Commerce
Companies
Mobile
Content
Suppliers
Mobile App
Developers
MVNOs
1
4
5
Passive infrastructure
Network
equipment
Devices
Content
Third-party
airtime
retailers
2
Sales, marketing
& distribution
3
Value chain for public mobile services
▪ We estimate that total revenues
along the public mobile value chain
are around GBP20 billion per annum,
with an employment level of around
75 000
▪ We estimate that total revenues
along the TV broadcasting value
chain (not illustrated here) are around
GBP16.1 billion, with an employment
level in excess of 40 000
▪ We estimate that total revenues
along the radio broadcasting value
chain (not illustrated here) are around
GBP1.2 billion, with an employment
level is around 2 500

9. 36655-133 | Commercial in confidence
Background and objectives
Workstream A: Existing spectrum uses and value to the economy
Workstream B: Factors affecting future spectrum use and demand
Workstream C: Implications for spectrum management and allocation
Recommendations for a new study
10Contents

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The key developments identified in Workstream B by and large describe
what has happened in the last 6 years
▪ Continued growth in mobile data traffic
▪ Growing use of licence-exempt spectrum, with an
increasing range of M2M applications emerging as
well as increased use of Wi-Fi. In particular, the
2.4GHz band is increasingly being used for
subscribers who are paying for a mobile broadband
service
▪ In TV broadcasting , a move towards DVB-T2 to
provide additional HD capacity is envisaged at
some point, but not until access to DVB-T2
receivers is higher. TV viewing is no longer
restricted to just TV sets, and streamed TV is
increasingly being viewed via connected TV sets,
on smartphones and on tablet devices. We believe
that high demand for DTT will continue beyond
2020 but in the longer term other platforms
(cable, satellite, fibre and mobile) may
increasingly dominate
▪ In radio broadcasting , an upgrade from DAB to
DAB+ (or similar) would be desirable on technical
grounds, but raises similar issues of equipment
compatibility to the DVB-T2 move
11
▪ Fixed microwave links will continue to be used to
bridge gaps between a cellular base station and
the nearest fibre point, although the average link
length is likely to reduce as fibre is rolled out
further. This may mean that more links can be
based on, for example, the licence-exempt 60GHz
band
▪ Principal trend in satellite communications is a
move to higher frequency spectrum bands, brought
about by a shortage of capacity in lower bands. For
PMSE there is also a trend towards use of higher
frequency bands, and a more widespread use of
bands such as 6–7GHz for wireless cameras
▪ Within the PBR sector, the main trend is a need
within larger PBR users (e.g. utilities, transport
authorities and emergency services) to have
access to mobile broadband services. The
emergency services in particular have identified a
need for a mobile broadband solution
▪ Making better use of spectrum by re-using under-
utilised portions (e.g. UHF white space), or
through sharing (e.g. authorised shared access, or
licensed shared access), is an important area of
policy development
Workstream B




?




11. 36655-133 | Commercial in confidence
Background and objectives
Workstream A: Existing spectrum uses and value to the economy
Workstream B: Factors affecting future spectrum use and demand
Workstream C: Implications for spectrum management and allocation
Recommendations for a new study
12Contents

12. 36655-133 | Commercial in confidence
We made recommendations to maximise the future value created of
spectrum use, grouped into a number of themes
13Workstream C
▪ Actions supporting the future growth of the public mobile sector
▪ Actions concerning growth in other sectors that will be influenced by the growth in mobile data
▪ Actions in relation to DTT and DAB technology upgrades
▪ Actions relating to better sharing of under-utilised spectrum
▪ Actions relating to the release of public-sector spectrum

13. 36655-133 | Commercial in confidence
Background and objectives
Workstream A: Existing spectrum uses and value to the economy
Workstream B: Factors affecting future spectrum use and demand
Workstream C: Implications for spectrum management and allocation
Recommendations for a new study
14Contents

14. 36655-133 | Commercial in confidence
We made recommendations to maximise the future value created of
spectrum use, grouped into a number of themes
15Recommendations for a new study
▪ It seems very likely that mobile communications and broadcasting continue to generate the most
value
– It would be highly desirable to gather new data on willingness to pay to support consumer
surplus calculations
▪ Methods to explore the value derived from public sector use of spectrum should be further
considered
– Issue about welfare value of having an army, police force, scientific research etc
– Issue about contribution of spectrum use to overall benefit
▪ Although contribution of other areas is relatively low, they have not been remodelled in more than
a decade and should perhaps be reconsidered as opposed to simply being updated

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Philip Bates
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