by Gerry Oberst

Government charges for access to satellite spectrum is always a hot topic. A series of recent consultations from Australia to Ireland focused on this issue recently, while a research report from the British National Space Centre (BNSC) shed some light on the principles and practice of such charges.

The Australian Communications Authority (ACA) closed a consultation on fees in late May this year. The ACA, in a remarkably clear and precise document, discussed how fees affect spectrum sharing, and asked whether spectrum pricing could be used to discourage the establishment of ubiquitous services in shared spectrum. These services include mainly the small satellite broadcasting dishes, with future two-way applications for Internet or broadband access.

Among other questions, Australia welcomed comments on how to make more use of auctions for allocating satellite licenses, keeping in mind that it tried unsuccessfully in 2001 to auction two licenses for broadcasting satellites, but received only one bid, and that at the lowest acceptable price. One reason for the failure apparently was that the license covered only a five-year term, and the ACA asked what it could do to give greater security of tenure for satellite licenses.

Also in May 2003, the Irish regulator, newly named the Commission for Communications Regulation (ComReg), issued a lengthy paper on fees for authorizations in the electronic communications field generally. ComReg said there is a good case to provide an "opportunity" to satellite operators to pay a fee where spectrum is protected for satellite broadcasting reception.

In the "best interests of simplicity" and to roughly ensure that the satellite fees are comparable to terrestrial fees, ComReg proposed to charge one euro (about U.S. $1.16) per subscriber for this opportunity.

Meanwhile, in the United Kingdom, controversy still swirls over the proposal from the U.K. Radiocommunications Agency (RA) to charge a "recognized spectrum access" or RSA fee for use of receive-only spectrum. (See our column in the July 2002 issue of Via Satellite on "U.K. Charges for Satellite Services.") This approach has been labeled a "protection racket" in testimony before the U.K. House of Lords and the satellite industry has vigorously resisted the legality or wisdom of the extra charges the RA would like to reap.

Contributing to this debate is a report finished in April 2003 on behalf of the BNSC prepared by a group of outside consultants led by Aegis Spectrum Systems. The report entitled "Potential impact of spectrum pricing on the U.K. space industry," identifies numerous concerns from the satellite industry over work by the U.K. government on spectrum pricing.

The report to the BNSC addresses the need for ways to achieve greater efficiency in satellite use of spectrum, through administrative incentive pricing (i.e., prices set by the regulator to reflect an assumed market value), auctions or spectrum trading. The main point of the report is to assess the potential ramifications for the U.K. satellite industry of such market mechanisms.

The report says that before these approaches might be applied to satellite services, certain conditions need to be met. Among these conditions are that users could economize on spectrum use or somebody else could use the spectrum.

Satellite spectrum use does not always fit this condition. Spectrum pricing is not required to give incentives for efficient satellite use of spectrum, according to the report, because satellite operators already have "powerful financial incentives" to use spectrum efficiently. Due to the large fixed costs of satellites, operators already seek to maximize transponder capacity. This argument echoes one raised by the U.S. Satellite Industry Association back in March 1996, when it submitted detailed arguments to the Federal Communications Commission on the public harms unique to satellite spectrum auctions.

Nor can satellite users easily shift to other frequencies. Although not stated in the Aegis report, large numbers of consumer antennas or smaller populations of business satellite facilities cannot be repointed to other satellites without substantial disruption and cost.

A large part of the report analyzes business scenarios to check the "sensitivity" of satellite services to different fee levels. Although the level of fees for RSA is not clear, the U.K. government set out an illustrative fee of 117 English pounds or U.S. $192 per terminal. The business case for Very Small Aperture Terminal satellites is calculated in the report to be sensitive to a fee one-tenth of this amount, i.e., business would suffer. For receive-only services, such an RSA fee would approach the capital cost of the terminal itself with "serious consequences" for the viability of the business, i.e., the satellite digital pay TV industry would wither.

The overall conclusion of the report is that the satellite industry would be vulnerable to any significant changes in the current pricing regime.

These three items are but the tip of the iceberg of reports, studies, consultations and discussions of spectrum pricing. There seems to be a consultation in the United Kingdom at least annually on how to measure spectrum charges, and now with so many other countries assessing how to best squeeze fees, we can expect to see many more. v

Gerry Oberst is a partner in the Brussels office of the Hogan & Hartson law firm. His email address is [email protected].