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1. What is the digital dividend?

The digital dividend is the spectrum that will be released by the switch to all-digital television between 2008 and 2012. Digital television broadcasting is many times more efficient in the use of spectrum than analogue broadcasting. The switch to all-digital television broadcasting will therefore create a significant spectrum ‘dividend’ for the UK.

On 19 December 2006 Ofcom published its Digital Dividend Review, which sets out proposals for consultation for the most effective use of the spectrum. For completeness the project also considers some other bands that could be freed for new uses at the same time.

2. Is the spectrum that will be released through digital switchover valuable?

Spectrum is a national resource that underpins broadcasting, fixed and wireless communications as well as essential services such as defence, transport, the emergency services and healthcare.

Business activity that is largely dependent on the radio spectrum contributes £37bn, or 3 per cent, to the UK’s GDP. This means that uses of spectrum account for nearly one pound in every 30 generated by the UK economy.

The spectrum that will be released by digital switchover is in the sought-after UHF band in the frequencies 470-862 MHz. Transmissions in these bands cover large geographical areas with relatively few base stations, offering national network rollout at lower costs when compared to services delivered at higher frequencies which offer greater bandwidth but at shorter range.

The amount of spectrum released through digital switchover will be one of the largest in the UK for many years, potentially supporting a range of new and innovative services of benefit to millions of people every day.

Ofcom estimates that the benefit to the economy from the use of this spectrum (as opposed to revenues raised for the Government from the auction of the spectrum) is likely to be around £5bn-10bn in total over 20 years.

3. What is Ofcom’s duty with regards to the Digital Dividend Review?

Ofcom’s primary duty, as defined in Section 3 of the Communications Act 2003, is to further the interests of citizens in relation to communications matters and further the interests of consumers in relevant markets, where appropriate by promoting competition. Ofcom has a number of other statutory duties relevant to the Review, including a duty in the Act, to secure the optimal use of the electro-magnetic spectrum.

4. Why is Ofcom proposing a market-led approach to releasing the spectrum?

Ofcom believes that the most effective way to ensure spectrum is used for the greatest benefit for the UK as a whole is to allow spectrum users the flexibility to adapt and innovate as markets evolve over time.

Historically, spectrum use has been dictated by a command-and-control approach by the regulator or government agency, which set down precise rules as to what spectrum could be used for, and by whom.

In its Spectrum Framework Review (SFR), published in November 2004, Ofcom set out a new deregulatory approach under which the market, not the regulator, would determine the most appropriate use of spectrum. This also created the freedom to trade licences between providers and carried a commitment by Ofcom to make spectrum available on a liberalised, platform and technology-neutral basis.

Ofcom's research indicates a wide range of uses of the digital dividend spectrum with high social and commercial value. It is also clear that demand is likely to exceed supply. However, under such circumstances Ofcom does not believe that the regulator is best placed to decide which services should get access to spectrum; nor which should not. This is because:

• to do so would distort incentives: users who benefited from preferred access to the spectrum would have less of an incentive to use this allocation efficiently, as well as less of an incentive to consider more efficient alternatives;
• it would reduce flexibility: the more the regulator stipulates preferred uses, the more the use of the spectrum is constrained to those uses alone; and
• it assumes that the regulator can make better decisions than the market, when in reality there is significant uncertainty and information is limited.

The consultation document proposes that the most effective way to maximise the value to society of the spectrum is to give freedom to spectrum users, with appropriate incentives, to decide how these frequencies should be put to use. This includes both commercial and public service or public sector users.

5. Which spectrum bands will be released though the DDR?

The spectrum that will be released by digital switchover is in the UHF band in the frequencies 470-862 MHz. There are three types of spectrum that will be considered in the Review:

1. Cleared spectrum: 112 MHz of spectrum that will become available as a result of digital switchover. These channels are numbered 31-35, 37, 39-40 and 63-68.
2. Channel 36 and Channel 69: two blocks of spectrum that fall within the spectrum bands currently used by terrestrial television across Europe. Channel 36 is currently used for airport radar and Channel 69 for wireless microphones. Both channels have the potential to be cleared, and together make up 16 MHz of spectrum.
3. Interleaved spectrum: the ‘white space’ that exists geographically between television transmitters to prevent interference.

6. What is a ‘channel’ in this context?

The UHF band is divided into frequency channels of 8MHz; there are 49 such channels between 470 - 862 MHZ.

7. What is happening to the rest of the spectrum presently used for analogue broadcasting?

Some 32 of the 49 channels have already been reserved by the Government for digital terrestrial broadcasting at digital switchover. This will expand the coverage and capacity of terrestrial broadcasting.

8. How does Ofcom propose to release the digital dividend spectrum?

We propose to hold three distinct awards of interleaved spectrum:

• a beauty contest for a package with PMSE obligations;
• an auction for geographic packages suitable but not reserved for local television in about 25 locations throughout the UK; and
• an auction for channels 61 and 62 where they are not being used for DTT.

We will consult on detailed award design in the next phase of the DDR.

9. How will consumers and citizens benefit from the DDR?

Consumers are likely to benefit from new or improved services, which could be based on the use of new technologies. The potential for innovation and new competition with existing operators is expected to provide consumers with greater choice and increased value in existing services. Possible uses of the spectrum are set out in the answer to question 14.

Because uses of the radio spectrum in the UK contribute £37bn, or 3 per cent, to the GDP, then making more efficient use of this scarce resource will generate new value to the economy.

10. Are you proposing to award the spectrum to raise revenue for the Government?

No. Ofcom’s primary duty, as defined in Section 3 of the Communications Act 2003, is to further the interests of citizens in relation to communications matters and further the interests of consumers in relevant markets, where appropriate by promoting competition. Ofcom has a number of other statutory duties relevant to the Review, including a duty in the Act, to secure the optimal use of the electro-magnetic spectrum.

Raising revenue from the release of spectrum is not one of Ofcom’s objectives.

11. What are the potential uses of the spectrum that will be released through the DDR?

The wide range of potential uses for the digital dividend distinguishes it from other awards. Potential uses that we have identified or that have been suggested to us include:

• mobile television and other types of mobile video and multimedia;
• extending existing DTT coverage;
• new DTT channels aimed at a UK market in either SD or HD;
• new DTT channels aimed at local markets (i.e. local television);
• wireless microphones and applications for PMSE;
• other low power applications, like hubs to distribute content around the home or using ultra wideband (UWB) technologies;
• broadband wireless applications, which could be mobile, and other mobile voice and data services;
• services using satellite communications;
• emergency and public safety services;
• cognitive radio;
• community radio;
• digital radio;
• communication with medical professionals and educational institutions;
• amateur and/or university use;
• new services for people with disabilities;
• international and cross border uses (e.g. an international emergency channel);
• digital public service teletext to match the analogue service; and
• user created networks (e.g. employing mesh technology).

This list is not exhaustive, and rapid changes in technologies, services and applications in the communications sector mean that new uses of the digital dividend will continue to emerge.

12. Will the spectrum licences be tradable?

Ofcom proposes to award licenses that are tradable. This offers scope for organisations to develop efficient ways of using spectrum.

13. Is the spectrum that will be released through digital switchover more valuable than the spectrum that will be released in the 2.6 GHz auction?

Different spectrum bands have different characteristics. Transmissions in the lower frequencies cover large geographical areas with relatively few base stations compared to the higher spectrum frequencies. However, the available bandwidth (the amount of information that can be transmitted at any one time) in the higher frequencies is greater than at lower frequencies.

The digital dividend spectrum is at lower frequencies than the spectrum at 2.6 GHz on which Ofcom is currently also consulting.

The different characteristics of the spectrum bands mean that they are suitable for different uses. A range of potential uses of Digital Dividend spectrum are listed in the answer to question 14.

14. What are the next steps in the consultation?

We will consult on the detailed design of the digital dividend awards in spring 2008. We anticipate publishing consultation documents covering:

• the award of cleared spectrum, channel 36 and interleaved channels 61 and 62 (where available);
• the award of geographic packages of interleaved spectrum suitable but not reserved for local television; and
• the award of a package of interleaved spectrum with PMSE obligations to a band manager by beauty contest.

We expect to publish an information memorandum and draft regulations setting the rules for each award during autumn 2008. We would bring the final regulations for each award into force in time for us to hold them in late 2008 or early 2009. We hope to issue licences for use of the digital dividend during the first half of 2009.

Timetable for awarding a package of interleaved spectrum with PMSE obligations to a band manager by beauty contest

Spring 2008	Consultation on award design
Summer 2008	Consultation closes
Autumn 2008	Invitations to tender
Late 2008	Award

 

Timetable for awarding geographic packages of interleaved spectrum suitable for local television

Spring 2008	Consultation on award design
Summer 2008	Consultation closes
Autumn 2008	Information memorandum and draft regulations
Late 2008	Awards in Border, Granada, West Country and Wales
Summer 2009	Remaining awards

 

Timetable for awarding cleared spectrum, channel 36 and interleaved channels 61 and 62

Spring 2008	Consultation on detailed award design
Summer 2008	Consultation closes
Late 2008	Information memorandum and draft regulations
Summer 2009	Award

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