This report considered Ofcom’s proposals for the potential application of AIP to spectrum utilised for national terrestrial TV broadcasting.

In its consultation on spectrum pricing for broadcasting, Ofcom stated that, where there are constraints on spectrum release, it does not expect “…the application of AIP to meet its core objective of securing the optimal use of spectrum” .  Nevertheless, Ofcom argued that AIP should apply to spectrum used for terrestrial TV broadcasting in the long term (after 2018).

Plum’s report argued that binding constraints will continue to apply – at least until 2022, and potentially to 2032 – even if there were fundamental changes in public service broadcasting (PSB) legislation. These constraints included cross-border interference from France, UK DTT transmission contracts (which apply to 2032) and multiplex operators’ licences (which apply to 2026).

More fundamentally, the report argued that there is no economic case for applying AIP to multiplex operators’ existing spectrum holdings, regardless of constraints. This is because scarcity of UHF spectrum promotes efficient use of spectrum by profit-maximising multiplex operators. Multiplex operators must pay for additional spectrum, and this acts to discourage excess demand.

Finally, the report questioned Ofcom’s indicative AIP values, which relied on estimates of the opportunity cost of 700 MHz spectrum to mobile services. Plum argued that these estimates were based on unrealistic assumptions, and noted that similar modelling work had come up with estimates of the opportunity cost that differed by an order of magnitude. This suggested that some effort at reconciliation between these estimates is needed before they can provide sound basis for spectrum pricing.