European CEPT administrations issued a new report in early May on spectrum trading procedures within CEPT countries. The report does not make recommendations or set the stage for further legislation. Instead, it gives a good introductory background to the spectrum trading regime in Europe and notes disparities among countries and frequencies bands. It observes that there are “very different transaction patterns (number of licenses and number of transactions)” depending on the frequency bands, which in turn could mean that related competition issues may differ depending in the spectrum involved.

The report was adopted by the Working Group on Regulatory Affairs (WGRA) of the Electronic Communications Committee (ECC) at its meeting in Paris, France on May 3-6 as ECC Report 169, titled “Description of Practices Relative to Trading of Spectrum Rights of Use. The WGRA gathered detailed information through a questionnaire issued to all CEPT countries. Of the 22 countries that answered the questionnaire only four declared that they do not allow trading of usage rights. Of those four, two are preparing regulations (Estonia and Ireland). That nevertheless leaves 26 administrations that did not respond, as there are 48 countries in the European Conference of Postal and Telecoms Administrations (CEPT).

At the outset, Report 169 describes the characteristics of frequency authorizations across Europe. As such, this is a good primer on the system for spectrum licensing. For instance, it notes that spectrum usage rights are not considered property, because they are part of the “national domain” and therefore should be seen as a concession by the governments to the operators. That leads to a discussion of the duration of usage rights. It identifies two ways to deal with this matter. First, for frequency assignments with no limited selection process, rights generally are granted for a short period (one to three years) normally with an automatic renewal. There is no reference to the U.S. FCC “renewal expectancy” approach, but in practice this seems to be used in Europe as well. The second approach is applied for spectrum granted by auctions, comparative proceedings or negotiated outcomes. These rights normally are granted a longer duration (between five and twenty years) with a possibility, but not a guarantee, of being renewed.

There also is a short section on restrictions relating to the country where the licensee is registered. Most EU countries do not require licensees to be registered in their country. Some others require the license holder to be registered in their country – which we have always viewed to be a violation of EU freedom to provide services in the internal market for a licensee that is registered in any other EU member state.

Of course the bulk of the report concerns how CEPT members approach spectrum trading. It describes, for instance, how countries approach trading possibilities, whether trades can be for an entire frequency allotment, the geographical area of the spectrum rights that can be traded and the duration of the trade. Most trades must be reported to the regulator; only two countries do not require such notification (Finland and Sweden). Another section reports on trading activity by type of application, for example the number of trades of spectrum used for fixed wireless access.

The intensity of trading (how often, how much) is reported, showing very substantial variations among the countries. The report cautions against drawing statistically significant conclusions from the limited data, but describes two scenarios for spectrum trading. One scenario is trading in bands with a large number of licensees, such as for public mobile radio below 450 MHz. The other is where the number of licenses is small – competition issues may be greater in this area but because the number of trading transactions also is small, the regulators have no great burden in assessing each trade.

The topic of spectrum trading is relatively recent. The first trades in Europe were allowed as early as 1997 in Denmark, but most did not start up until the early part of the 2000’s. We participated in a May 2004 “Study on conditions and options in introducing secondary trading of radio spectrum in the European Community” (Full Report 1.91 MB PDF – Summary 338 KB PDF) for the European Commission, which was partially designed as an awareness campaign to alert regulators and operators to the possibilities. That project culminated in a detailed presentation in Brussels in July 2004 (workshop slides, 1.17 MB PDF). The 2009 amendments to the EU electronic communications regulatory framework also place greater emphasis on spectrum trading.

For any further analysis of spectrum trading, this WGRA report will be a necessary starting point. The report puts into one place the relevant legal texts from the EU framework, the most detailed information to date on national practices, and some beginning analysis of the benefits of trading in practice as well as competitive effects