Spectrum – the billion pound prize?

One of the issues in Digital Britain that gets the least coverage compared to its value is that of spectrum reform. It is a highly obscure and technical issue that many people in government have yet to get their head round, never mind the general public. Yet I would argue the prize at stake, in terms of the sort of services and economic activity that could be unlocked, deserves a huge amount more attention than it gets.

An extremely short history of radio spectrum policy in the 21st century goes something like this.

Spectrum in the UK had historically been licensed for specific purposes to a range of public and private sector users, paying varying amounts for the privilege, having been selected by various means, and with various controls over what the spectrum could be used for.

In line with the Cave review, the government adopted a new market-led strategy which aimed to put spectrum in the hands of those who valued it most, to do with it broadly what they wanted. The spectrum auction in 2001 was the first step towards this goal, and with the creation of Ofcom, the process of liberalisation was to be embarked upon.

That we have not got further down the track of a market-based system of allocation, with widespread spectrum trading, change of use and greater efficiency, is at least in part due to the complicated nature of legacy spectrum licences. Incumbents have naturally sought to maximise the value of their licences and avoid what they see as discrimination, including  by legal challenge.

This is most evident in the mobile sector, where we have five players falling roughly into three camps. Yesterday, the Secretary of State met the five UK mobile operators to discuss next steps on how to drive forward liberalisation. There is a growing understanding that this might be the best chance we get to unlock new spectrum for use, and allow already-held spectrum to be used for other services, at a pace with which everyone can live.

The fact it has taken me four paragraphs just to understand why we want to take action, never mind what the details will be, demonstrates how obscure an issue this is. But the prize – new services; new technology; new economic value – is enormous and could well be one of the most important things we achieve in Digital Britain.

The state and its limits

Working in the Department for Business puts me right on the divide between the public and private sectors. Our ability to achieve our policy objectives often means flexing tht boundary, either through spending, regulation, direct involvement in a market or some other intervention. The current political climate sees a lot of discussion about how much of all of this the state should have been doing, or should do in future.  Some people are claiming that decades of belief that we should have a small state letting the market prosper might be coming to an end, with the pendulum swinging towards a highly interventionist state.

While communications policy hasn’t endured such a dramatic twelve months as the financial sector, the same issues are at play. Virtually nobody really hankers after renationalisation of our telecoms networks, for instance, but lots of people want to see a very active state providing investment in next generation broadband. In broadcasting, the consensus around the BBC’s role in the country’s culture might be cracking a little bit at the edges, but I would argue there is a general acceptance that it will play a massive role in our future, tempered by a concern that commercial alternatives are starting to look under severe strain.

So how should the government react? People will always look to the government to ‘do something’. It sometimes takes a brave minister to say there is nothing for us to do.  As always in politics, the trick is to get the balance right and make the intervention the right one that leaves the market able to function properly. Maybe that’s what Digital Britain will ultimately be judged on.