Opportunity cost pricing for 400MHz services
In April 2012 the Australian Communications and Media Authority issued a discussion paper on a proposal to introduce opportunity cost pricing for apparatus licence holders in the 400MHz range.
Apparatus licences are often held by government and community organisations and are issued for specific transmitters/receivers rather than for a large segment of the spectrum (spectrum licences).
Generally, fees for apparatus licences are determined based on a range of historical factors rather than by supply and demand in the market. Other licence types, such as spectrum licences, are allocated by the market through an auction process with the highest bidder winning.The view stated by ACMA in its discussion paper is that the process of assigning apparatus licences leads to inefficiencies as there is insufficient financial incentive to relinquish unused spectrum. It is now seeking to introduce opportunity cost pricing to determine licence fees in the 400MHz spectrum. Licence fees for areas of high spectrum demand will rise as a result of the opportunity cost pricing model.
The Telco Authority prepared a submission in response to the ACMA discussion paper as part of its consultation process which covers the following issues:
- As government users in the 400 MHz band will be moving from apparatus licences to spectrum based licences, opportunity cost pricing would be disruptive and counter-productive at this stage.
- The non-commercial nature of government activities make the use of opportunity cost pricing inappropriate and inconsistent with the broader objectives of the Radiocommunications Act 1992 as it could result in government being hampered in providing important community services due to a requirement to pay commercial rates to access highly sought after spectrum.
- That consideration of any opportunity cost pricing model for the 400MHz band should be delayed until current reforms to improve efficiency and interoperability in the 400 MHz band are substantially implemented. Failure do so could see resources being diverted from existing changes to deal with opportunity cost pricing. A delay in considering the proposal would also allow full consultation which has not been apparent to date.
- Government agencies have been allocated exclusive use of particular segments of spectrum in the 400MHz band. As the allocation is exclusive to Government, pricing has no impact on the availability of supply for users.
Following the consultation period, the ACMA issued a final report on its proposal in August 2012, indicating that it intends to implement opportunity cost pricing in the 400MHz band.
The Telco Authority is currently reviewing the ACMA report.