Spectrum Trading - GSR notes
The GSR Discussion Paper identifies several forms of Spectrum Trading which are summarized below.
There are several ways to share spectrum and to achieve the goal of improving access to spectrum. Regulators can provide greater flexibility by implementing:
- Liberalized methods for assigning spectrum rights such as leasing, trading and the unlicensed use of spectrum;
- A new paradigm for interference protection that takes into account new technologies such as dynamic spectrum access.
Dynamic spectrum access can make use of underlay spectrum sharing technologies that feature power limits or other technical features that minimize the risk of harmful interference. Such underlay technologies may include UWB, mesh networks, software defined radio (SDR), smart antennae and cognitive radios.
In a consultancy report commissioned by the European Commission, Analysys et al.[i] identify the following methods for transferring rights of use:
- Sale – Ownership of the usage right is transferred to another party.
- Buy-back – A usage right is sold to another party with an agreement that the seller will buy back the usage right at a fixed point in the future.
- Leasing – The right to exploit the usage right is transferred to another party for a defined period of time but ownership, including the obligations this imposes, remains with the original rights holder.
- Mortgage – The usage right is used as collateral for a loan, analogous to taking out a mortgage on an apartment or house.
In terms of the trade itself, there are a variety of mechanisms that can be used. These include:
- Bilateral negotiation: The seller and (prospective) buyer directly negotiate the terms of the sale and are not subject to any particular constraints set by the regulator;
- Auctions: Once a type of auction has been chosen and the rules have been decided primarily by the seller, prospective buyers have the opportunity to acquire the spectrum usage rights by bidding in the auction;
- Brokerage: Buyers and sellers employ a broker to negotiate, with their consent, the contractual terms under which the transfer of usage rights can take place.
- Exchange: This refers to the establishment of a trading platform, similar to a stock market, where transfers take place according to specific rules.
These mechanisms are most likely to be used in combination. In the first instance an auction will be used as the primary means of assignment, tradable spectrum is listed on an exchange and either direct negotiation or brokerage facilitates the transfer of spectrum user rights. As discussed earlier, band managers may be delegated responsibility for managing certain bands on behalf of the regulator.
[i] Analysys, Dotecon, and Hogan and Hartson (2004), Study on the conditions and options in introducing secondary trading of radio spectrum in the European Community. Final report for the European Community, Cambridge (U.K.), Analysys.