Description
In contrast to most recent pieces of legislation, the Act does not contain a purpose statement, nor principles stating the policy objectives that the Act is aiming to achieve. Instead, the policy objectives influencing MBIE's spectrum management decisions will be directed by the government of the day.
VODAFONE NEW ZEALAND LIMITED
SUBMISSION TO THE MINISTRY OF BUSINESS, INNOVATION AND
EMPLOYMENT
IN RESPONSE TO
Review of the Radiocommunications Act 1989:
Discussion Document
Public version
17 October 2014
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 2
17 October 2014
Table of Contents
A Executive Summary ........................................................................................................................... 4
B Policy objectives and problem definition ..................................................................................... 5
B1 Policy objectives for the spectrum management regime ................................................................................................................................ 5
B2 Vodafone’s use of spectrum .......................................................................................................................................................................................... 5
B3 Challenges identified in Vodafone’s interaction with the spectrum management regime ............................................................... 6
C Spectrum management in New Zealand (DD1.2) ..................................................................... 11
C1 Radio spectrum management (DD2.3) .................................................................................................................................................................. 11
D Managing the potential for interference (DD 3) ....................................................................... 14
D1 Coordination of uses: frequency allocations and band plans (DD3.2) .................................................................................................... 14
D2 The licencing process (DD3.3) ................................................................................................................................................................................... 14
E When interference occurs (DD4) .................................................................................................. 15
E2 The arbitration process (DD4.2) ................................................................................................................................................................................ 17
E3 Compliance and enforcement (DD4.3) .................................................................................................................................................................. 21
E4 Liability issues (DD4.4) .................................................................................................................................................................................................. 22
F Management Rights (DD5) ............................................................................................................. 23
F1 Aggregation and transfer of management rights (DD5.2) ............................................................................................................................. 23
F2 Modification and cancellation of management rights (DD5.3) ................................................................................................................... 24
F3 Power Floors (DD5.4) ..................................................................................................................................................................................................... 24
F4 Conditions on management rights (DD5.5) ......................................................................................................................................................... 24
F5 Geographic extent of management rights and spectrum licences (DD5.7) .......................................................................................... 24
G Licences (DD6) .................................................................................................................................. 25
G1 Unwanted emissions (DD6.1) ..................................................................................................................................................................................... 25
H Competition (DD8) ........................................................................................................................... 25
H1 Regulatory overlap during allocation process (DD8.2) ................................................................................................................................... 25
H2 Spectrum caps (DD8.3) ................................................................................................................................................................................................. 27
H3 Secondary markets (DD8.6) ........................................................................................................................................................................................ 29
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17 October 2014
I Spectrum sharing (DD9) ................................................................................................................. 29
I1 Discussion (DD9.3) .......................................................................................................................................................................................................... 29
I2 Dynamic spectrum access technologies (DD9.4) ............................................................................................................................................. 29
J Other issues (DD10) ......................................................................................................................... 30
J1 Licences with multiple transmitter locations (DD10.2) .................................................................................................................................. 30
K Discussion Document Questions with Short Responses ....................................................... 31
Confidentiality
This document contains confidential information. Confidentiality is asserted in respect of the
information that is highlighted in red and contained in square brackets, i.e. [xxx]. Confidentiality is
sought in respect of this information for the purposes of section 9(2)(b) of the Official Information
Act 1982 on the grounds that:
(a) the information is commercially sensitive and contains valuable information which is
confidential to Vodafone; and
(b) disclosure would be likely to unreasonably prejudice the commercial position of the
Vodafone, as the party providing the information.
Vodafone requests that it is notified of any request made to MBIE under the Official Information
Act 1982 for Vodafone confidential information, and that MBIE seeks its views as to whether the
information remains confidential and commercially sensitive at the time those requests are being
considered.
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A Executive Summary
A1 Thank you for the opportunity to comment on the Ministry’s Review of the Radiocommunications
Act 1989 Discussion Document (the ‘Discussion Document’).
A2 Internationally, demand for spectrum continues to increase with the rapid growth in use of
smartphones and other wireless devices, as well as increasing use of machine-to-machine
communication. Similarly, demand for mobile services continues to increase rapidly in New
Zealand: expectations are that 90% of Vodafone customers will have a smartphone by 2015;
Vodafone’s 4G mobile data traffic will grow by 1200% in the next 3 years, and total mobile data
traffic will grow by 300% in next 3 years. It is essential that New Zealand spectrum is carefully
managed to address this increasing demand, and the spectrum regime provides certainty and
protection for management rights holders.
A3 Vodafone recognises the importance of MBIE’s role in managing New Zealand’s spectrum
resource. The Radiocommunications Act 1989 (‘the Act’) creates the framework for MBIE to
manage the Crown’s spectrum. In responding to the Discussion Document, we have assessed
whether the current Act delivers outcomes that are consistent with allocative, productive and
dynamic efficiency.
A4 Vodafone has two principal concerns with the current Act that we recommend are addressed in
the review:
(a) Interference is a key driver of productive inefficiency, and is not sufficiently guarded
against by the current management regime. Interference imposes significant cost on our
business, estimated at [_________________________________________]. Some
reflection of International Radio Regulations (‘IRR’), the International
Telecommunication Union (‘ITU’) spectrum planning rules is necessary, and checks and
balances in the licensing process are also required. Enforcement provisions must be
strengthened and more effective arbitration provisions introduced.
(b) Confusion and duplication in the regulatory regimes governing competition in
spectrum holdings exists because MBIE and the Commission currently both apply
measures that are directed at protecting competition. The functions of MBIE and the
Commission need to be more clearly differentiated. Retaining separate but overlapping
mechanisms that have the same goals results in confusion as to how they operate in
combination and tend to generate uncertainty that is particularly harmful during the
initial allocation phase for spectrum management rights.
A1.2 The comments in this submission are provided in the form of answers to some, but not all,
questions posed in the Discussion Document.
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B Policy objectives and problem definition
B1 Policy objectives for the spectrum management regime
B1.1 In contrast to most recent pieces of legislation, the Act does not contain a purpose statement,
nor principles stating the policy objectives that the Act is aiming to achieve. Instead, the policy
objectives influencing MBIE’s spectrum management decisions will be directed by the
government of the day.
B1.2 As such, it appears to have been difficult for MBIE to clearly define the problem it seeks to address
by comparing the current experience to stated objectives. Similarly, respondents to the
Discussion Document do not have an objective ‘ideal’ against which to frame comments on
whether the Act is ‘working’ or not. Subject to this general caveat, this document sets out
Vodafone’s views on those areas where the current Act does not currently meet user needs.
B1.3 It is appropriate to assess the effectiveness of the Act and its implementation with reference to:
(a) the economic objectives of allocative, technical and dynamic efficiency Act; and
(b) the regime’s performance against any stated social objectives.
B1.4 The regulatory design objectives we propose MBIE must consider when presenting
recommendations to Ministers, or making spectrum management decisions within the Ministry,
include:
(a) Flexibility - ensuring spectrum can transition to the most efficient user over time
(allocative efficiency);
(b) Technology neutrality - ensuring that technically efficient changes in use can occur over
time (productive efficiency); and
(c) Certainty - ensuring that decisions provide for longer term investment decisions
(dynamic efficiency).
B1.5 To achieve certainty, the regime must protect management and user rights, allow spectrum use
without interference, and attach clear technical definitions to usage rights. Where interference
does happen, the regime must provide a clearer process to facilitate fast and effective resolution,
including the potential for immediate intervention and an effective set of remedies. Competition
concerns must be dealt with to ensure no duplication or confusion of regulatory oversight
responsibilities, and to ensure fast resolution if issues arise.
B2 Vodafone’s use of spectrum
B2.1 Vodafone holds management rights in the following bands:
Low Frequency
(MHz)
High Frequency
(MHz)
Bandwidth
(MHz) LTE Band
Intended Use by NZ
Government C_________________
723 738 15 28 LTE700UL
C_________________
778 793 15 28 LTE700DL
C_________________
899.8 915 15.2 8 GSM900 UL
C_________________
944.8 960 15.2 8 GSM900 DL
C_________________
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1,760 1,785 25 3 GSM1800 UL
C_________________
1,855 1,880 25 3 GSM1800 DL
C_________________
1,920 1,945 25 1 UMTS2100 UL
C_________________
2,015 2,020 5 UMTS TDD
2,020 2,025 5 UMTS TDD
2,025 2,053 28 ?
2,110 2,135 25 1 UMTS2100 DL C_________________
2,200 2,236 36.5
2,555 2,575 20 7 WiMax
C_________________
2,675 2,690 15 7 WiMax
C_________________
3,424 3,445 21 22 FDD or 42 TDD 3.5GHz fixed wireless
C_________________
3,445 3,452 7 22 FDD or 42 TDD 3.5GHz fixed wireless
C_________________
3,524 3,545 21 22 FDD or 42 TDD 3.5GHz fixed wireless
C_________________
3,545 3,552 7 22 FDD or 42 TDD 3.5GHz fixed wireless
C_________________
24,549 24,885 336 LMDS
C_________________
25,053 25,392 339 LMDS
C_________________
25,557 25,893 336 LMDS
C_________________
26,061 26,400 339 LMDS
C_________________
26,400 26,550 150 LMDS
26,550 26,700 150 LMDS
26,700 26,850 150 LMDS
26,850 27,350 500 LMDS
C_________________
27,350 27,850 500 LMDS
C_________________
27,850 28,350 500 LMDS
C_________________
B2.2 Under the Act, Vodafone creates spectrum licences for the transmission and reception of
radiocommunications within these bands, and is expected to manage any interference issues in
the range of frequencies covered by the management right.
B3 Challenges identified in Vodafone’s interaction with the spectrum
management regime
B3.1 Our assessment is that the current Act does not provide an effective spectrum management
regime that leads to the most efficient spectrum usage outcomes. The ways in which the current
spectrum management system impedes allocative efficiency, and our own productive and longer
term dynamic efficiencies is set out below.
Allocative efficiency problems
B3.2 Allocative efficiency problems exist where spectrum is allocated to a person that places lower
value on its use than another person, and where there is no effective mechanism for reallocating
the spectrum to its highest value use.
B3.3 Social policy goals may at times be balanced against allocative efficiency. For example, spectrum
caps (such as used in the recent 700MHz auction) may prioritise social policy goals, or be used as
an instrument to protect nascent competition in downstream markets or to allow competition to
emerge in a market that is not yet developed. We do not have any existing allocative efficiency
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issues to bring to MBIE’s attention; however recommend that allocative efficiency impacts be
considered when designing regulatory interventions such as spectrum caps. Allowing
technological neutrality for licences
1
will enhance allocative efficiency.
B3.4 The design of spectrum auctions will also impact on allocative (and productive) efficiency. When
multiple bands of spectrum packets are being auctioned, MBIE should consider all forms of
allocation mechanism, including using best practice combinatorial auction design, in order to
optimise efficiency.
Productive efficiency problems
B3.5 Productive efficiency problems exist if the spectrum management system either creates
unnecessary costs, or does not guard against the costs caused by others (e.g. interference).
B3.6 Vodafone takes pride in providing New Zealanders with the superfast mobile network that has
been independently recognised as one of the world’s most advanced. The global leader in
broadband speed testing, Ookla, ranked Vodafone New Zealand’s network as the fastest in the
world in its Global Net Index of telecommunications companies for May 2014,
2
and this lead
position was attained four times in the past five months. The Vodafone SuperNet is a key
competitive strategy for Vodafone’s business: combining the reliable coverage, reliable speed,
and reliable network services across New Zealand that our customers expect.
B3.7 Interference impacts network performance for all network providers, and every dropped call or
slow webpage download affects the ability to deliver a quality service. Degraded service capacity
due to legal and illegal interference poses a real problem, with very real business revenue
impacts for Vodafone. This is especially the case for operators such as Vodafone that have
pursued a deliberate strategy of investing significantly in being New Zealand’s reliable network.
B3.8 Interference is a driver of productive inefficiency that is not sufficiently guarded against by the
current spectrum management system. Interference often occurs through use of imported items
transmitting into our bands, and the users are often unaware of the impact or, in some cases
illegality of their activity. For example, while cellphone jammers are a prohibited import by NZ
Customs, in contrast baby monitors and videoconferencing audio-bridge equipment imported
from overseas and configured to operate within the 900 and 2100 MHz bands are not. Instead,
the illegality arises when the device is switched on, and starts to interfere. Vodafone is likely to
face more frequent interference issues than other mobile companies, as the American ‘free use
ISM’ band overlaps with the 900 MHz band, while the Digital Enhanced Cordless
Telecommunications (DECT) phone band overlaps with our 2100 MHz band.
B3.9 The effects of interference include reduced cellsite coverage and network capacity, a higher
proportion of calls that are either dropped or not connected, lower data activity, and voice calls
with problems of one-way speech
3
or voice distortions. It is extremely difficult to precisely
1
Vodafone strongly favours technology neutrality but it must be in conjunction with a best practice band plan which provides
guidance for the selection of technology to minimise the risk of interference from incompatible technologies located in adjacent
bands. See Section D.
2
The real time Global Net Index by Ookla uses five million tests each day with 350 million users in the past year and 2,600 testing
servers worldwide. The rankings can be found at http://www.netindex.com/mdownload/
3
One-way speech is when the person you are calling can hear you but you can't hear them or the same situation in reverse.
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quantify the business impact on revenue lost due to service degradation, given that every
occurrence of interference varies in severity, duration and footprint.
B3.10 Vodafone has a dedicated team of specialist technicians that deal regularly with interference, and
thus we can estimate the cost to Vodafone of dealing with interference issues:
(a) [____________________________________________________________________.
(b) ____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
(c) ____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.]
B3.11 Figure 1 presents a cost stack of the productive efficiency impacts faced by Vodafone when
experiencing interference.
[_______________________________________________________________________
_]
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B3.12 It is possible to provide estimates of the direct practical cost of managing interference. Table 1
shows types of interference dealt with by Vodafone, and the time to resolve.
_________________________________________________________________
___________________ ___________________ ___________________
___________________
___________________ ___________________
___________________
___________________ ___________________
___________________
___________________ ___________________
___________________
___________________ ___________________
Direct cost to Vodafone when dealing with interference
B3.13 ____________________________________________________________________._______
_________________________
B3.14 ____________________________________________________________________._______
_____________________________________________________________.______________
______________________________________________________._____________________
_______________________________________________..]
B3.15 While the costs highlighted show the significant impact of interference to Vodafone, such costs
are not unique and we expect that the other mobile operators will similarly be experiencing
interference impacts. Extrapolated across the industry, material productive inefficiency is being
experienced.
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B3.16 The problem and costs of interference is growing over time, due to factors including:
(a) The sensitivity of devices and networks is increasing. There are ever more wireless users
and spectrum is becoming more congested with devices operating in adjacent spectrum.
As technology advances to cater for the increasing demand and capabilities, handsets
and networks are both becoming more sensitive. The latest technologies are increasingly
sensitive and with higher technical requirements making these devices more susceptible
to performance degradation through interference.
(b) Individuals are increasingly importing devices for use in New Zealand, commonly
purchased through international websites. Also, a recurrent source of interfering
equipment is items which have been brought into the country by people moving to (or
back to) New Zealand to live. In our experience, many people are simply unaware that
overseas transmitting devices may cause interference when used in New Zealand. We
suggest MBIE increase its focus on education and awareness, and focus on upfront
compliance rather than remedying interferences ex-post.
[[_______________________________________________________________________
_]
System efficiency - Administrative costs (through fees) of the spectrum management system
B3.17 [___________________________________________________________________________
_____________________________________________________.]
B3.18 Our view is that these licence fees should be limited to cost recovery of administration activities
by MBIE, as well as a fair contribution to costs common across all stakeholders.
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B3.19 We recommend MBIE revisit current licensing fees, and make adjustments to ensure that these
are limited to cost recovery and are fairly shared across the industry.
Examples of dynamic efficiency impact
B3.20 Dynamic efficiency problems exist where the spectrum management system does not create
sufficient certainty for longer term investment decisions to be made. Such problems could arise
where, for example, there is uncertainty as to whether the value of management rights acquired
can be adequately protected in circumstances, for example, where parties’ ability to enforce or
protect rights may be subject to uncertainty as regards procedure or the likelihood of outcomes.
In these circumstances, parties may be less willing to invest in management rights or, at the very
least, may adjust the value assigned to rights.
B3.21 A fundamental regulatory design concern is that without a clear framework prescribing the
balance between economic and social objectives in the spectrum management regime; it is
difficult to see how the regulatory certainty required for optimal longer term investments can be
attained. Greater clarity on the relative weighting given to economic and social objectives would
create more certainty, contributing towards dynamic efficiency.
B3.22 Clarifying MBIE’s objectives for spectrum management is discussed in the following section.
C Spectrum management in New Zealand (DD1.2)
C1 Radio spectrum management (DD2.3)
C1.1 In our response to the Productivity Commission’s Regulatory Institutions and Practices Issues
Paper (August 2013) we discussed the elements of a high quality regulatory framework:
a. a regulator which has clear functions and duties;
b. a framework within which the regulator makes decisions that are predictable and
transparent;
c. regulatory ‘solutions’ are only proposed in response to a clearly defined problem that
cannot be solved by any other means;
d. problems are well analysed and understood, and the regulator prefers the minimum
intervention necessary to address the problem (i.e. intervention is proportionate);
e. regulatory decisions are preceded by genuine discussion and consultation with
stakeholders;
f. decisions are based on broad and ‘best quality’ evidence, and competing evidence is
carefully weighed and analysed;
g. reasons for decisions are transparently explained;
h. there is a process for review of decisions by an independent entity; and
i. there is an express requirement for a regular stock-take of existing regulation, and
provisions that ensure that regulation is retained only if the ‘threshold conditions’ that
justified it being imposed originally remain in place.
C1.2 These elements are necessary to deliver consumer benefits, competition, certainty and
incentives. It follows that we endorse Treasury’s best practice principles for regulatory design and
implementation: good quality regulation is growth supporting, proportional, flexible, durable,
certain and predictable, and transparent and accountable.
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C1.3 The spectrum management regime does not contain a clear framework prescribing the balance
between economic and social objectives. Our strong preference is that primary legislation
provides for trade-offs between different objectives. In other words, legislation clearly specifies
the duties/objectives that a regulator must pursue in reaching any decision, and how these
should be prioritised where they may conflict. Provided that there is clarity on how a regulator will
proceed when reconciling different objectives, pursuing multiple goals need not undermine
predictability and certainty.
C1.4 The Act does not contain a purpose statement. In the absence of a purpose statement or other
means to state objectives, there is no guiding principle that directs how MBIE must discharge
various functions under the Act or resolve any conflict between different functions. This is in
contrast with the approach taken in the UK and Australia, where regulatory objectives are clearly
prescribed; covering both the economic and the social objectives decision-makers must adhere.
See Box 1 for information on the Australian and UK stated spectrum management objectives.
C1.5 Vodafone submits that the Act should include a clearer statement of MBIEs duties when making
spectrum allocation decisions and the factors that it must take into consideration when
performing this function. MBIE must also share clear and definite information about future
spectrum allocation plans (as expectations on future spectrum availability affects the (scarcity)
value users place on spectrum available today).
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Box 1: Policy objectives are clearly prescribed for Australia and the UK’s spectrum management authorities
The Australian Radiocommunications Act 1992
a
includes specific objectives that the Australian Communications and
Media Authority (ACMA) must consider in undertaking this task, as well as the regulatory tools that are available to it.
Part 1.2—Object of this Act
3. The object of this Act
The object of this Act is to provide for management of the radiofrequency spectrum in order to:
(a) maximise, by ensuring the efficient allocation and use of the spectrum, the overall public benefit
derived from using the radiofrequency spectrum;
(b) make adequate provision of the spectrum:
(i) for use by agencies involved in the defence or national security of Australia, law enforcement
or the provision of emergency services; and
(ii) for use by other public or community services;
(c) provide a responsive and flexible approach to meeting the needs of users of the spectrum;
(d) encourage the use of efficient radiocommunication technologies so that a wide range of services of an
adequate quality can be provided;
(e) provide an efficient, equitable and transparent system of charging for the use of spectrum, taking
account of the value of both commercial and non commercial use of spectrum;
(f) support the communications policy objectives of the Commonwealth Government;
(g) provide a regulatory environment that maximises opportunities for the Australian communications
industry in domestic and international markets;
(h) promote Australia’s interests concerning international agreements, treaties and conventions relating
to radiocommunications or the radiofrequency spectrum.
The UK Government’s recently published Spectrum Strategy,
b
states the ‘Core principles for spectrum management’
which include:
? Change of use within the UK: we will manage change of use within the UK, where it is required to meet
international commitments, or where it is deemed to be in the best interests of the UK, by taking account of
the economic and social impact on those affected and apportioning the costs of the change fairly
? Assignment of spectrum to new users: we will use the process to assign spectrum to new users which is
likely to deliver the best value to the UK, whether through auctions, comparative selection processes, ‘first
come, first served’, […]
? Continuing use of spectrum: all spectrum users will face incentives to use spectrum efficiently. For
spectrum not acquired through an auction, users should pay a market-based fee except where this fee
would be lower than the cost of managing the spectrum (whether by Ofcom or a Crown body). Users should
be free to innovate and make changes to how they use their spectrum, subject to any licence conditions and
not causing harmful interference to other legitimate users;
? Change of assignment to users: market mechanisms should incentivise the transfer of rights to use
spectrum between users, whether by outright sale of some or all of the spectrum, or by sharing. Sharing may
take the form of agreement to leasing on a time or location basis to a designated second user, or may be
through supporting dynamic spectrum access.
a
The Australian Radiocommunications Act 1992 (at http://www.comlaw.gov.au/Details/C2013C00586/Html/Text#_Toc368410007).
See also: ACMA, Principles for Spectrum Management, 31 March 2009. The ACMA also released the Response to the Submissions on the
Draft Spectrum Management Principles, which provides more information on the Principles.
b
UK Department for Culture, Media and Sport, The UK Spectrum Strategy, 10 March 2014.
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D Managing the potential for interference (DD 3)
D1 Coordination of uses: frequency allocations and band plans (DD3.2)
D1.1 Management rights are not technology specific, and the most efficient scenario will be that right
holders retain the current flexibility over which technology is deployed within spectrum bands
held.
D1.2 However, the trade-off of this flexibility is that it exposes investors to significant risk of
interference. A good example of this occurred when [_________________.________________
____________________________________________________________._______________
_____________________________________________________________.______________
_________________________________________________________].
D1.3 Vodafone strongly favours technology neutrality but it must be in conjunction with a best
practice band plan which provides guidance for the selection of technology, to minimise the risk
of interference from incompatible technologies located in adjacent bands. Although spectrum
management rights could in principle be allocated to a range of uses, Vodafone submits that
MBIE must take relevant considerations into account when determining the uses to which
spectrum will be put, including at a minimum, IRRs and best practice band plans.
D1.4 A band plan covering private management rights should not be included in the Act. However,
Vodafone supports the establishment of a band plan that does contemplate spectrum being
allocated to specific uses, to retain flexibility for future uses but also to provide protection and
guidance in the event of interference. The plan needs to be separate from the Act so that it may
be amended, as required, to reflect important considerations such as international best practice
and efficient use of spectrum. As discussed below, the Act should introduce a mandatory
requirement for radio engineers to consider such a band plan in issuing radio licences.
D2 The licencing process (DD3.3)
Certification of licences
D2.1 The requirements placed on radio engineers during the certification process must be made
directly, be more specific, and be compulsory. Most licences that Vodafone issues are to itself for
licences within its own management rights. We issue many licences (as each transmitter requires
a licence), for which the certification process is currently quick and easy. While Vodafone does not
support the increasing of licencing requirements (and associated costs) where there appears no
good reason, as the legality (or otherwise) of operations hinges, at least in part, on licence
certifications, it is necessary that some changes to this process occur.
D2.2 Vodafone’s view is that the matters set out in s25(5) of the Act must be satisfied, in the opinion of
the engineer, having regard to the matters in s25A, before he or she issues the certificate.
Satisfaction of these matters must be mandatory as presently all that is compulsory is for the
engineer to ‘have regard’ to s25A matters. A specific requirement to consider the technical
compatibility of intended and actual services/applications (by reference to the ITU and New
Zealand table of frequency allocations) should be added. As well as this, an addition must be
made to the requirements contained in s25(5) to ensure that the engineer is satisfied that the
exercise of the rights will be technically compatible.
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Technically compatible and low power emissions
D2.3 Radio engineers should take into account the cumulative effects of transmission sources. To
retain flexibility within the regime, such requirements should be addressed outside of the Act, for
example via guidance.
Preventing interference with future users of adjacent bands
D2.4 The current system whereby the management right holder that first creates and registers
licences is able to protect its interests, will lead to regulatory certainty. However allocative and
productive efficiency may be impacted if a low value user precludes a higher value user from
operating within an adjacent band; such as occurred in the [_____________.________________
____]; or with a similar value user installing new equipment that interferes with existing rights,
such as occurred to the Vodafone and 2degrees networks when Spark rolled out its 3G network.
D2.5 Radio engineers should be required to consider whether a proposed licence is technically
compatible with potential future uses of adjacent management rights as discussed above. That is,
not speculatively but having regard to specific factors such as the proposed band plan, the IRR,
ITU band plans and ITU recommendations.
Required licence parameters
D2.6 It should not be unlawful to record broader parameters than deployed today as this would
remove the potential for flexibility in how a licence is used. Requiring the re-issuing of a licence
for every minor change in technology deployed would create significant administration
complexity and cost to rights holders. Moreover, there are situations in which it is impossible to
accurately specify a level, for example a cellular base transceiver station constantly changes
transmission power due to the transmission power control.
D2.7 We recommend that the licence should be certified for the maximum power allowed, rather than
expecting licence holders to state exact parameters (even with allowed tolerances).
E When interference occurs (DD4)
E1.1 In managing interference, we follow a two stage process:
(a) We investigate, and attempt to resolve any issues directly, using our internal team of
radio engineers and external contractors.
(b) When necessary, we involve the MBIE compliance unit’s Radio Inspectors.
Vodafone provides the material to MBIE, and MBIE then takes over efforts to resolve the
interference. MBIE has powers of intervention (e.g. the ability to engage with the judicial
system to obtain a warrant to access premises) that are not available to Vodafone.
E1.2 MBIE should give further consideration to whether changes should be made to the Act to provide
for effective management and resolution of interference issues. As discussed above, changes to
the licensing regime would assist in avoiding future interference issues but further changes are
still required to ensure that the Act delivers an efficient and effective regime for addressing
harmful interference of all kinds.
E1.3 Our comments are informed by our experiences under the current Act:
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(a) Interference dispute between Vodafone and Telecom (now Spark) resulting from Spark's
introduction of its 3G XT network. Spark was aware, before it deployed the new
equipment, that it was likely to interfere with existing services. The deployment of this
network resulted in Vodafone experiencing serious network deterioration at various
points in its own 3G network and this increased as the XT rollout progressed.
Investigations revealed that interference was caused by new equipment installed by
Spark. 2degrees also experienced similar interference but, at that time, it was in the early
stages of its network deployment, and MBIE intervened, requiring Spark to fit filters to its
transmitters to protect 2degrees. No commercial compromise could be reached
between Vodafone and Spark as Spark argued its operations and licences were legal. To
support its argument, Spark said that it was operating below the power floor and also that
the requirements of the IRR did not apply to it, so there was no breach of s103. Absent
any scope for a compromise solution, urgent injunction proceedings were commenced.
Ultimately, settlement was achieved part way through injunction hearing and no
judgment was issued.
(b) [____________________________________________________________________.
_____________________________________________________________________
______.______________________________________________________________
_____________._______________________________________________________
____________________.________________________________________________
___________________________._________________________________________
__________________________________.__________________________________
_________________________________________.___________________________
________________________________________________.____________________
_______________________________________________________._____
4
]
General observations regarding interference
E1.4 The common feature in each of the interference cases is that the Act provided little clarity on
how disputes could be resolved. This arose both in terms of how provisions in the Act apply when
interference occurs, and uncertainty as to whether they actually provide an effective remedy.
E1.5 At present, the Act does not give sufficient assurance that a person who has created harmful
interference will be required to remedy it in a timely manner, if at all. Where interference issues
arise, the Act provides no clear framework for their resolution and licence holders are often
forced to reach compromise solutions that may involve significant cost, and which do not
effectively protect the value of their investment in spectrum management rights.
E1.6 The Act currently makes no provision at all for the following important potential causes of
interference:
(a) unlicensed operation of spectrum, which is increasingly common as large numbers of
mass market devices make use of unlicensed spectrum; and
4
Frequencies sharing a common boundary at 2110 MHz.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 17
17 October 2014
(b) cumulative effects of interference from multiple (licenced or unlicensed) sources of
emissions, where it is difficult or impossible to attribute responsibility for interference to
a single person.
E1.7 As presented in section B above, Vodafone incurs a direct annual cost of [_____________] as a
result of interference with spectrum for which it is the licence holder. This includes the cost of
investigating and resolving interference where it does occur. But it does not include the
significant legal and expert expenses it incurred in each of the major interference instances
described above, nor the lost revenue or reputational impacts associated with degradation of
Vodafone services.
E1.8 In light of these issues, it is important that changes to the Act:
(a) encourage transmitters to avoid causing interference by imposing a positive obligation
(i.e. a general duty) to prevent harmful interference;
(b) provide sanctions where they do that are proportionate to the costs of interference for
other licence holders; and
(c) provide mechanisms for the resolution of interference in a timely and effective way.
E1.9 Vodafone's specific recommendations for amendments to the Act to better manage interference
are set out below. The recommendations focus in particular on:
(a) improving clarity as to when Act provisions for addressing interference are available;
(b) enhancing the remedies that are available to licence holders when interference occurs;
and
(c) addressing interference scenarios that the Act does not currently provide for.
E2 The arbitration process (DD4.2)
E2.1 The arbitration process provided in Part 12 of the Act is discussed in section 4.2 of the Discussion
Document. As the Discussion Document notes, this process has not been used since its
introduction in 2000,
5
with the majority of interference issues being resolved via negotiation.
E2.2 Vodafone submits that the reluctance of licence holders to refer interference to the Chief
Executive of MBIE pursuant to sections 108 and 109 of the Act illustrates the central problem
that:
(a) It is unclear whether the Chief Executive will in fact resolve an interference issue that is
referred. There is no transparent framework explaining the factors that the Chief
Executive will take into consideration when deciding whether an issue should go to
arbitration.
(b) There is no certainty as to how long resolution will take. The specified timeframes for the
Chief Executive to decide whether or not an issue should go to arbitration are too long,
5
Radiocommunications Amendment Act 2000.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 18
17 October 2014
given the urgency of resolving interference issues and the significant harm/cost to
licence holder that can accrue while these issues are ongoing.
(c) If an interference issue does go to arbitration, the timeframe and methodology to be
used to resolve it is unclear. This methodology is specified in general terms in the
Arbitration Act 1996, but disagreement on the appointment of an arbitrator can cause
delay. Where appointment is made, there is no certainty as to the specific factors that an
arbitrator will take into consideration when making an award. For example, to what extent
would an arbitrator be required to give effect to the principle that the license holder who
has caused interference must fix it?
(d) If there is a question as to whether the interference is lawful or unlawful, there is
uncertainty as to whether the provisions can be employed.
E2.3 In addition, as the Discussion Document notes, where interference issues have arisen, key
limitations in provisions of the Act have become apparent, including:
(a) a presumption in the dispute resolution process in favour of earlier licences, including
through the certification process;
(b) the absence of a general duty not to cause harmful interference (once a proposed
licence has been certified and the licence registered);
(c) failure to account for use of incompatible technologies in adjacent spectrum bands; and
(d) failure to fully account for IRR as they apply to licences.
E2.4 Finally, there is an underlying assumption in the Act that if an emission is below the power floor
then it will not cause harmful interference.
6
This assumption may have been correct 25 years
ago when the Act was introduced. However, modern receivers can detect signals that are
significantly lower than the power floor, and this sensitivity is important in maximising network
coverage. This increased sensitivity is significant for enabling efficient network design and,
amongst other things, limits the environmental impact by reducing the number of cell-sites
required to be deployed.
E2.5 In combination, these factors mean the arbitration process now provided in the Act is, in
Vodafone's submission, not fit for purpose. We support the creation of an effective and certain
arbitration process in place of the existing scheme. Our recommendations as to the changes that
should be made to the existing process in order to achieve this are set out below.
Availability of the arbitration process
E2.6 As MBIE notes, the arbitration process is not available where harmful interference is caused by
unlawful emissions. However, it can be difficult to determine whether emissions are consistent
with the terms of a licence, and therefore whether they are in fact unlawful. This creates serious
uncertainty about the jurisdiction of the courts, for an injunction, or the jurisdiction for arbitration
under the Act.
6
Accordingly, if there is harmful interference, the interferer can argue that so long as they have met the power floor threshold,
their interference and actions are lawful. If so, the affected licence holder may be deprived of the ability to seek relief.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 19
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E2.7 The Act must provide an arbitration process that is generally available as a mechanism for dealing
with all harmful interference, irrespective of whether it is caused by lawful or unlawful emissions.
E2.8 Applying the same logic, licence holders should have the ability to seek an injunction (as a route
to dispute resolution in alternative to the arbitration route). At present, an injunction is available
only where there is a breach of section 103 of the Act, i.e. interference resulting from an unlawful
transmission.
7
Irrespective of whether interference is lawful, Vodafone submits that an injunction
should be available to cover all instances of harmful interference.
E2.9 Prompt and effective enforcement action by MBIE, assisted by the inclusion in the Act of a
general duty on licence holders not to cause harmful interference (which Vodafone supports),
offers the most timely and effective means of addressing unlawful emissions.
8
We note that
MBIE’s current consultation on Television white space devices: certification and licensing rules
states that use of television white space devices must not cause harmful interference to DTT
services, and so licensees that cause interference are required immediately to rectify the issue.
9
Vodafone submits that the same principle of approach should be included in the Act, such that all
licence holders become subject to a positive obligation not to cause interference and to remedy
any harmful interference that does occur.
E2.10 These suggested changes require amendment to the Act.
Arbitration process timeframes
E2.11 An arbitration process cannot be an effective vehicle for resolving interference disputes unless it
provides deadlines for reference, appointment of an arbitrator, consideration of a dispute and
decision. At present, the Act provides no such direction.
E2.12 At present, where harmful interference occurs:
(a) A licence holder affected by interference must serve notice under section 108(1) Act.
(b) The respondent then has 10 working days to do one of the following:
i. take action to remedy the interference (section 108(5)(a));
ii. defend allegation in the notice (section 108(5)(b));
iii. agree to a solution (section 108(5)(c));
iv. agree to arbitration (section 108(5)(d)).
(c) If the respondent defends the allegation or agrees to arbitration, but nothing happens
within 10 working days of this, the affected licence holder can give notice seeking
referral to arbitration (section 108(6)).
(d) Alternatively, if the respondent agrees to a solution, but resolution is not reached within
20 working days, the affected licence holder can give notice seeking referral to
arbitration (section 108(6)).
7
A transmission that complies with the terms of a licence is lawful. As MBIE notes, “…given the level of flexibility with the licensing
provisions in the [Act], there may be difficulty in determining whether a transmission is lawful or unlawful.”
8
Our recommendations regarding MBIE’s approach to compliance and enforcement are at section E3 below.
9
Television white space devices: certification and licensing rules (August – September 2014), page 2
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17 October 2014
(e) Following referral by the affected licence holder, the Act specifies is no deadline by which
the Chief Executive must actually decide to put a matter to arbitration.
(f) If a matter is ultimately put to arbitration, the Act specifies is no deadline by which certain
steps in the arbitration process (e.g. appointment of an arbitrator, initial hearing of
parties) must occur.
E2.13 Vodafone considers that alternative mandatory deadlines should be introduced into the
arbitration process as follows:
Affected licence holder serves notice Working day 0
Respondent must reply to notice Working day +5
Affected licence may give notice to Chief Executive
seeking referral to arbitration
Working day +1
Chief Executive must decide whether to refer to
arbitration
Working day +2
Arbitrator must be appointed (or Chief Executive must
appoint from specified list of arbitrators)
Working day +2
Arbitrator must complete initial hearing of parties and
consider whether an interim measure is appropriate
10
Working day +5
Arbitrator must issue draft findings Working day +5
Arbitrator must issue final findings and award Working day +5
Total timeframe 25 working days
E2.14 This suggested timetable should be subject to fast-tracking in appropriate cases and is
contingent on provision also being made for cease and desist orders, so that harmful interference
can be addressed more quickly where necessary.
E2.15 In addition to these tighter timeframes, we support the ability of the Chief Executive to resolve
any impasse in the process (e.g. regarding the appointment of an arbitrator) by making a decision
in lieu of agreement between the parties.
Chief Executive decisions
E2.16 In addition to specifying a clear and reduced timeframe, the Act should specify factors that the
Chief Executive must consider when reaching a decision on whether to refer an interference
dispute to arbitration.
E2.17 It should also specify the process that the Chief Executive must follow in reaching decisions and
the matters that must be taken into account. Given the narrow scope of these decisions (i.e.,
whether or not to refer a dispute to arbitration, and which arbitrator to appoint if parties cannot
agree on this) we do not think there is any requirement for the Chief Executive to undertake
substantive consultation prior to making them.
E2.18 Right of review against a decision of the Chief Executive exists via the inherent jurisdiction of the
courts to undertake judicial review of administrative decisions. In addition, in light of the narrow
10
Section 17A, Schedule 1 of the Arbitration Act 1996.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 21
17 October 2014
scope of the decisions to be made by the Chief Executive in respect of the arbitration process, and
potential for extensive appeal rights on procedural matters to subvert the timeliness and
effectiveness of any arbitration process, we do not believe that including a statutory right of
appeal against decisions by the Chief Executive is warranted.
Arbitration decisions
E2.19 The Act should specify mandatory considerations that an arbitrator should take account of when
considering an appropriate award. Arbitrators should be required to consider, for example:
(a) the application of IRRs (as if the licence holder/operators were member states);
(b) Government policy statements regarding the use of spectrum management rights; and
(c) ITU band allocation plans and recommendations.
E2.20 Beyond this however, an arbitrator should have freedom to identify relevant factors and should
not be constrained as to how that consider and weigh these factors.
E2.21 MBIE has asked whether the Act should include provision for an immediate cease and desist
mechanism where interference is occurring (prior to any discussions between parties or
arbitration reference to resolve the issue). Vodafone considers that such provision should be
available circumstances where interferences is likely to cause serious harm to the interests of
licence holders and/or consumers.
E2.22 As MBIE is aware, section 74A of the Commerce Act 1986 (‘CA86’) provides for the granting of
cease and desist orders in these circumstances, and we suggest that the Act should include
similar provisions and be modelled on section 74A, and also require similar qualifications for the
appointment of a person empowered to make a cease and desist order in respect of an
interference issue.
E2.23 We note that a licence holder affected by interference can currently seek injunctive relief from
the courts prior to discussion between parties or arbitration reference but only if there is a breach
of s103. However, we do not see the injunction process as a substitute for a cease and desist
process. Certain features of the injunction process, including the uncertainty over breaches of
s103, the requirement to provide an undertaking as to damages, and the fact that the matter will
be considered by a legal expert (judge) not a technical expert, in practice operate such that this
process is not a cheap option, is uncertain and may not be as quick as is necessary.
E2.24 The application of cease and desist process, and other processes relating to dispute resolution,
would be assisted by the inclusion in the Act of a general duty on licence holders not to cause
harmful interference, whether lawful or unlawful.
E3 Compliance and enforcement (DD4.3)
Interference investigations
E3.1 The Discussion Document records MBIE's view that owners of spectrum management rights
should themselves investigation interference issues and take action to protect the value of these
rights. However, there are practical limits to a licence holder's ability to do this, not least because
of the difficulty of distinguishing between lawful and unlawful interference.
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17 October 2014
E3.2 We consider there is a case for the Act to define the circumstances in which MBIE must act
against harmful interference. In particular, Vodafone submits that the Act should place a duty on
licence holders not to cause harmful interference, and should also provide that MBIE must take
action to prevent harmful interference where it arises in particular circumstances (e.g. where
interference results from a licence holder acting outside the terms of their licence
E3.3 Having MBIE adopt a stricter approach to enforcement action in specific circumstances is
consistent with the approach taken in other jurisdictions. For example, under the (UK) Wireless
Telegraphy Act 2006 Ofcom regulates the use of radio communications apparatus and takes a
variety of enforcement action to address interference. Apparatus can only be used under the
terms, limitations and provisions of a license or a licence-exemption. The person who owns or
uses apparatus is subject to a general duty to ensure that it does not cause harmful interference
to others and they may be required to rectify any interference issues that do occur.
E3.4 We do not see any issues arising from parallel processes under which MBIE takes enforcement
action and private enforcement by parties themselves (i.e., arbitration or injunction). In each case,
it will be for the claimant party to determine whether private enforcement action is appropriate. A
claimant is unlikely to take private action, except in the most extreme cases,
Enforcement action
E3.5 At present, the circumstances in which MBIE will take enforcement action in respect of an offence
under the Act is unclear. The Act should also provide for MBIE to take enforcement action where a
licence holder breaches a general duty to ensure no harmful interference. We agree that the
range of offences should be expanded to include those identified in section 3.3.4 of the
discussion document.
E3.6 Our view is that the regime’s focus should be on ex-ante compliance, to prevent interference.
However where interferences does occur across different parties, penalties should be set
proportionately to the actual interference occurring, and on a daily basis. We agree that current
fines for infringement offences into a band held by another party are likely to be too low and
would not provide any disincentive. In particular, daily penalties for ongoing offences do not
appear to be sufficient to incentivise an offender to take remediation steps in a timely way.
E4 Liability issues (DD4.4)
Who is liable for certification decisions?
E4.1 In Vodafone’s view, the most sensible approach is for MBIE to locate liability for the certification
process with licence holders. Licence holders engage approved radio engineers (AREs) and are in
the best position to ensure that they undertake a robust evaluation before certifying a licence,
subject to the assumption, that key requirements of the certification process are also better
specified in the Act).
E4.2 If these key requirements are specified in the Act, which we think is vital, a person seeking
certification is likely to incentivise an approved radio engineer contractually to undertake a
robust certification process, although the ARE will not face personal liability (except perhaps to
the holder who contracted them) in the event that certification is subsequently found
inadequate.
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17 October 2014
E4.3 We do not think it is sustainable for the Act to maintain the current position that, where a
proposed transmission has been certified as technically compatible, transmissions within the
licence are deemed to be lawful even if the certification process is flawed or contains a material
error. Where a certification error gives rise to a problem, e.g. an interference issue, that materially
affects the rights of another licence holder, MBIE should be able to address this, including –
potentially – by requiring change to be made to transmissions permitted by the licence.
Independence of approved radio engineers
E4.4 Provided the key requirements of the certification process are clear, and liability for adequate
certification vests in the licence holder, we do not consider the independence of AREs to be a
material issue.
Treating AREs and ARCs consistently
E4.5 In principle, we think that treatment of AREs and ARCs should be consistent as regards the key
requirements of functions that they perform.
Articulating the certification process
E4.6 It is not necessary for the Act to specify every element of the certification process (as outlined
above) but it should specify the factors that must be addressed when considering whether to
issue a certificate, and who is responsible for providing and warranting the information on which
any certification decision is based.
E4.7 As set out above, section 25A of the Act outlines matters relevant to the radio engineer’s
certificate (s25A) when registering a spectrum license. The current language is that an engineer
must ‘have regard to’ these factors. This does not, in Vodafone’s submission, provide sufficient
certainty as to the certification process and how certification decisions will be made in practice.
Greater certainty should be provided by:
(a) Recasting the requirement for the certificate (currently in section 25(5)) as a
requirements for an engineer to discharge when issuing the certificate (i.e., an engineer
must have regard to and, only if satisfied that requirements in section 25(5) are met,
issue certificate.
(b) Introducing a specific requirement to consider the technical compatibility of intended
and actual services/applications (by reference to the ITU and New Zealand table of
frequency allocations) should be added.
F Management Rights (DD5)
F1 Aggregation and transfer of management rights (DD5.2)
F1.1 When two management rights are being amalgamated, we agree that the protection limit should
be modified to remove the ‘spike’ at the common boundary. The limit should default to the lower
of the previous two limits.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 24
17 October 2014
F2 Modification and cancellation of management rights (DD5.3)
F2.1 Greater flexibility should be allowed for MBIE to modify management rights once they have been
created:
(a) Allowing the aggregation of management rights with differing expiry dates would offer
substantial productive efficiencies.
(b) The Crown should, with the consent of the holder of management rights, have the ability
to cancel or terminate management rights.
F2.2 The ability to modify management rights as described should apply to both existing management
rights and to new management rights.
F3 Power Floors (DD5.4)
F3.1 As noted in Section B above, as technology advances, handsets and networks are both becoming
more sensitive - new technology is increasingly sensitive and have higher technical requirements
making the latest devices more susceptible to performance degradation through interference.
‘Cleaner’ spectrum is required for the correct operation of these devices than was necessary even
a few years ago. Therefore, the operation of ‘foreign’ devices even below the specified power
floor, may cause interference.
F3.2 Our recommendation is that MBIE focus on the practical impact of interference that arise where
applications are used within a power floor and on how this affects right holders’ abilities to use
spectrum. A reasonable question to consider is whether power floor should be abolished. The
value of retaining power floors is unclear to us, provided that MBIE implements an effective
interference management regime as set out above.
F4 Conditions on management rights (DD5.5)
F4.1 Vodafone submits that, in order to retain the flexibility necessary to optimise use of spectrum
across users and technologies, few or no conditions on management rights (for example
ownership caps, limitations on the use of, or transfer of, management rights) should be imposed.
F4.2 In terms of the regulatory design question: if any conditions are to be imposed, these should be
through rules or guidance rather than stipulated the Act, again to provide the potential for
amendments should market conditions change.
F5 Geographic extent of management rights and spectrum licences (DD5.7)
F5.1 Vodafone submits that management rights for spectrum should be asserted outside the 12 mile
limit, ideally to the limits of the EEZ. Our cellsite coverage may extend to 120km, and so we often
have marine coverage to over 100km from shore, which is relied upon by users including
commercial fishermen and the NZ Navy, including for important safety reasons. We have
experienced interferences from cruise ship radiocommunications devices, outside of the 12mile
limit and yet within the area that mobile coverage is relied on by users.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 25
17 October 2014
G Licences (DD6)
G1 Unwanted emissions (DD6.1)
G1.1 Vodafone submits that unwanted emissions from transmitters operating under a spectrum
licence are not currently appropriately managed under the Act. As set out above, interference
(including where caused by ‘legal’ sources) must be better controlled and addressed.
G1.2 We agree that unwanted emissions in the spurious emission domain and outside specified UELs
should be explicitly managed under the Act, and that this could be achieved by clarifying the
application of the IRR to unwanted emissions, particularly in the spurious emissions domain, and
requiring that unwanted emissions meet international best practice.
G1.3 Right holders should have protection from harmful interference from unwanted emissions both
above and below the power floor. See Section F3 for our suggestion that the value of the
continued existence of power floors is worth considering.
H Competition (DD8)
H1 Regulatory overlap during allocation process (DD8.2)
H1.1 Currently, protection of competition when allocating spectrum is achieved through both MBIE’s
use of spectrum caps/acquisition limits and the application of provisions in the Commerce Act
1986 relating to the acquisition of business assets. Spectrum caps have been applied in the
700MHz, 2100MHz and 2.6GHz spectrum bands. We agree that spectrum caps can be an
appropriate instrument for protecting nascent competition, or for allowing competition to
emerge in a market that is not yet developed (subject to our comments at paragraph H2.1 below).
H1.2 Typically, the Commerce Commission plays a role only where a person seeking to acquire
spectrum management rights voluntarily applies to the Commission for clearance to do so.
H1.3 In Vodafone’s submission, maintaining a situation under which MBIE specifies an acquisition limit
for certain spectrum management rights (option 1), with the implication that an acquisition below
that cap is unlikely to harm competition, but in which the Commission may also reach a different
view on harm to competition when exercising functions under the Commerce Act, is not a tenable
option. The current duplication of roles between MBIE and the Commission, in which both plays a
role in protecting competition, is duplicative and unnecessary. It creates significant uncertainty
and is particularly problematic during the initial allocation of spectrum.
H1.4 This view is informed, in particular, by Vodafone’s experience with the auction of the 700MHz
spectrum band. This auction required bidders to reach a view pre-auction on whether they should
seek clearance to acquire spectrum management rights falling within the acquisition limit set by
MBIE. They could not assume that the Commission would conclude that an acquisition within the
relevant spectrum cap would be found not to result in an unlawful substantial lessening of
competition as only a Commission clearance or authorisation can provide this certainty. In
addition, bids could not be made on a conditional basis meaning that if bidders did acquire
spectrum at auction, and the Commission subsequently determined that this acquisition is
unlawful, the bid could not be unwound.
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17 October 2014
H1.5 In the context of the 700MHz auction, the Commission had previously indicated to MBIE that it
did not support the (potential) spectrum cap of 2x20MHz set for the 700MHz band.
11
The initial
acquisition limit of 2x15 MHz for 700MHz spectrum was able to be raised to 2x20 MHz during the
auction if insufficient bids above the reserve price were received for all spectrum blocks. However,
in this scenario any person bidding for the 2x20 MHz would proceed without clearance and then,
if the Commission judged that the acquisition lessened competition, would be required to divest
spectrum. The pool of potential buyers would (probably) be fewer, and so the divesting party
would likely suffer a loss.
H1.6 In terms of the remaining options, we can see the case for MBIE retaining an ability to specify
acquisition limits so as to provide for particular policy objectives (under option 2). In general, we
consider that the core objective of a spectrum auction should be the allocation of spectrum to
the bidder that assigns most value to it. To the extent that extraneous policy objectives are also
considered, they dilute this principle. But we accept that removing government’s ability to apply
controls could also make the design and running of auctions relatively more difficult than at
present. On balance therefore, we do not favour this option.
H1.7 We see little merit in option 4, which proposes regulatory coordination between MBIE and the
Commission in specifying acquisition limits. The Discussion Document notes that “[w]hile the
Commerce Act may still theoretically apply to spectrum allocations, the consultation with the
Commission during the setting of competition measures would ensure that parties acquiring
spectrum are not required to seek clearance or authorisation for an acquisition under the Act.” As
a preliminary point, we note that whether to seek clearance or authorisation is entirely voluntary,
there is no existing requirement to do so. What is more relevant is whether a person acquiring
spectrum management rights would remain of the view that clearance should be obtained under
the arrangements existing under this option. In Vodafone’s submission, they would.
H1.8 The fact that the Commission may have been consulted in the setting of an acquisition limit, as
happened in respect of the 700MHz auction, does not alter a potential bidders exposure to
Commerce Act risk. The fact that the Commission may have been consulted or otherwise
involved in the design of auction rules offers no legal protection.
12
At best, the involvement of the
Commission in determining auction rules is a factor that acquirers will consider when deciding
whether voluntary notification is necessary, but it does not remove the potential for overlapping
processes, nor does it reduce an acquisitions exposure to review under the Commerce Act.
H1.9 We see more merit in the remaining option 3, involving delineation of the application of
competition regulation under the Act and the Commerce Act, such that the latter would not
apply when specific provision is made in auction rules to protect competition (e.g. acquisition
limits). This option is particularly appropriate for the initial allocation of spectrum via auction
processes, as it avoids uncertainties that accompanied the 700MHz spectrum auction for
example. In Vodafone’s submission, during the initial allocation phase for spectrum competition
protection should be provided solely by the application of spectrum caps/acquisition limits. Once
initial allocation of spectrum has occurred, we see less case for ousting the application of the
Commerce Act as the interaction between allocation mechanisms (i.e. auctions) and Commission
processes is much less problematic. Transactions occurring as part of secondary market trading
11
The Commission said that: “[o]ur view is that allowing one party to exceed the 2x15MHz spectrum cap and achieve 2x20MHz
does not have clear competitive benefit” (Commission letter to MBIE, December 2011)
12
As noted above, only a Commission clearance or authorisation can provide this.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 27
17 October 2014
are, for example, relatively easier to manage in circumstances where there is overlapping
provision via both the Commerce Act and licence conditions.
H2 Spectrum caps (DD8.3)
H2.1 Vodafone accepts the continuing use of spectrum caps, provided that caps are subject to review
and are withdrawn when they no longer serve any useful purpose (i.e. when they are no longer
necessary to prevent concentration of spectrum holdings that would substantially harm
competition). However, we do not consider it appropriate to use such caps to promote equal
spectrum holdings by all operators as an end in itself. We do not believe that ‘spectrum equality’
is required as between operators in order to enable effective competition. Rather, a spectrum
caps should be imposed only where, on the basis of objective analysis, it is likely that a substantial
loss of competition would result if a single operator was not restricted in the amount of particular
spectrum they could acquire.
H2.2 The Discussion Document appears to recognise that, as technology evolves carrier aggregation
between spectrum bands will become more prominent and this evolution does affect the
continuing relevance of spectrum caps. In terms of future developments, operators will be able to
use a broad range of spectrum holdings (850/900MHz, 1800MHz, 2100MHz, 2600MHz and any
future bands) to deliver both 4G and 5G services. Therefore, any benefit from larger holdings of
any particular spectrum band will be limited going forward.
H2.3 In this context, a person’s holding of spectrum management rights in any single band is less
relevant. Rather, the necessity of imposing an acquisition limit in any specific spectrum band to
avoid competition problems should be determined with reference to a person’s total spectrum
holdings (i.e. whether, having regard to the persons total holdings, unfettered acquisition would
lead to material loss of competition having regard to the total holdings of that person’s
competitors).
H2.4 Where mobile telecommunications are concerned, operators will compete for customers in a
variety of ways (price, service, quality etc.). Customers are generally agnostic as to the technology
that is used to deliver retail services: their focus is the price and quality of end user experience.
Where an operator’s holding of a particular spectrum band is not equal to that of other operators,
this does not of itself indicate that their ability to compete in downstream markets is reduced in
any material way. Overseas jurisdictions clearly show that intense competition between licence
holders using spectrum occurs even where there is significant asymmetry between the spectrum
holdings of each operator.
H2.5 Assessing the capability offered by a person’s total spectrum holdings, in the context of mobile
telephony services, demonstrates that:
(a) there is frequently not parity of spectrum holdings across mobile operators;
13
(b) the operator with the largest market share may not have the largest spectrum holding;
13
For example in the Australian digital dividend auction only Telstra and Optus purchased digital dividend spectrum.
Vodafone did not purchase any digital dividend spectrum. This was not seen as problematic because Vodafone has
other spectrum holdings that would enable it to deliver equivalent services and compete effectively.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 28
17 October 2014
(c) operators use different combinations of spectrum to deliver services;
14
and
(d) operators can configure their networks to reflect their spectrum holdings where
necessary to compete in the market.
H2.6 This suggests that a spectrum cap should be applied to the acquisition of management rights in
any individual spectrum band only where the acquisition of rights by any existing operator would
cause a substantial lessening of competition (in a downstream market), or increase an existing
competition problem. Assessment of these matters should be based on an orthodox and
evidence based competition analysis. As carrier aggregation develops, there should be a general
presumption against the use of spectrum caps.
Process for imposing, reviewing and retaining caps
H2.7 As the Discussion Document notes, spectrum caps are currently applied via agreement with
parties and rely on civil law. Vodafone considers that the Act should make specific provision for
spectrum caps, and specifying the process for their implementation and review. It makes sense
for us statutory provision to be made in the form of an allowance for temporary conditions to be
applied to spectrum management rights. This scope of these conditions should be clearly applied
and, in Vodafone’s submissions, an acquisition limit condition should apply only where MBIE has
reasonable grounds for concluding that they are necessary to avoid a substantial lessening of
competition, and the condition imposed should be no more restrictive than is necessary to
achieve this purpose.
H2.8 MBIE may, when informing itself as to whether the acquisition of spectrum may result in a
substantial lessening of competition, consult with other parties (including the Commerce
Commission). If consultation on this issue is appropriate, then we think the Act should set out the
process and timeframe that will apply.
H2.9 When imposing a cap, MBIE must have reasonable grounds for concluding that the ex ante
controls on the acquisition of spectrum are necessary to prevent harm to competition that is
unlikely to be prevented via the application of general competition law (i.e. the merger control
provisions in the Commerce Act).
H2.10 Where spectrum caps are applied, Vodafone submits that they must be of fixed duration in every
case up to a maximum of 2-3 years. At the expiry of this period, the cap should lapse unless MBIE
considers that it should be extended. If MBIE wishes to retain a cap, then there must be a clear
process for review and confirmation of its terms. The process for review should be mirror the
process that applied to initial specification of the cap. This may include discussion between the
MBIE and the Commerce Commission regarding whether a cap remains necessary, but we do not
regard such discussion as necessary (i.e. it should be permitted but not mandatory).
H2.11 A decision to extend a cap must be justified on the basis of an ongoing need to protect
competition (i.e. subject to the same threshold test as initial application of the cap), again
reflecting input from other parties (including the Commission) where appropriate. We think there
is merit in guidance being provided on the process for review and decision on continuation of
14
For example in the UK Vodafone and O2 have large holdings of sub 1GHz spectrum. In comparison EverthingEverywhere has a
large holding of 2GHz spectrum. Each operator uses their different holdings to deliver identical competitive services.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 29
17 October 2014
spectrum caps. However, such guidance should not be instead of additional provision in the Act
specifying:
(a) the threshold conditions that must exist in order to retain or extend a cap. the threshold
conditions that must exist for a spectrum cap to be imposed;
(b) the duration of a cap; and
(c) the threshold conditions that must exist in order to retain or extend a cap.
H2.12 While legislative provision should be made to these matters, MBIE should – subject to these
provisions – retain flexibility to impose caps where appropriate and account for new technology.
H2.13 It is appropriate for spectrum caps to continue to be specified in deeds/agreements between the
Crown and licence holders. Legislation should not specify caps, but rather control the terms
under which they are applied.
H3 Secondary markets (DD8.6)
H3.1 Vodafone supports a regime that enables secondary trading in spectrum management rights. The
operation of a secondary market promotes efficiency objectives by enabling spectrum to be
allocated to its highest value use, and ensuring availability of spectrum resources where
necessary to support new technologies.
H3.2 As now, any transfer of management rights via secondary trading should be cleared through
MBIE. However, we do not consider that any specific provision is required in the Act to regulate
transactions in secondary markets. General measures in the form of spectrum caps/acquisition
limits, applied subject to the terms discussed above, and general application of the Commerce
Act.
I Spectrum sharing (DD9)
I1 Discussion (DD9.3)
I1.1 The general user radio licencing regime (GURL) should not allow potential interference to
adjacent management rights. By catering to low quality GURL device users, the Ministry must
take care not to amend the regime in such a way that will increase the interference risk to users
placing higher value on the spectrum, and creating substantial productive benefits to New
Zealand. Vodafone submits that the GURL regime could be made more stringent as at present
there is little control over who and how it is used.
I1.2 As discussed in section F above, we submit that power floors should be abolished. Power floors
are not an appropriate mechanism for spectrum sharing, and yet do create significant potential
risks of interference.
I1.3 Vodafone’s view is that spectrum licences are appropriately allocated by the rights holders, and
so the industry is best placed to manage any potential spectrum sharing.
I2 Dynamic spectrum access technologies (DD9.4)
I2.1 Vodafone’s view is that management rights holders should be left to determine the appropriate
degree of spectrum sharing. With the exception of competition concerns such as spectrum
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 30
17 October 2014
hoarding, we can expect that is a mutually beneficial (allocative efficient) arrangement exists, the
parties are likely to achieve an agreement to share spectrum.
I2.2 In contrast, Vodafone submits that the Act should be amended to allow a single spectrum licence
to cover multiple transmitters’ locations. This amendment would remove some of the current
productive inefficiencies by reducing excessive administrative costs.
J Other issues (DD10)
J1 Licences with multiple transmitter locations (DD10.2)
J1.1 Vodafone submits that the Act should not restrict licences to be for a single transmission
location. It is often the case that it is ether not practical, or cost-prohibiting, to licence individual
transmitters, for example where the transmitters are mobile and do not have a fixed location. The
Act should instead specifically allow and define a licence classes that covers multiple
transmitters locations.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 31
17 October 2014
K Discussion Document Questions with Short Responses
Discussion
Document
Question No
Question
& response
DD Q5. Should the Act be more prescriptive around particular matters or processes? If so, what
areas should be more prescribed and how?
Greater clarity on the relative weighting given to economic and social objectives would
create more certainty, contributing towards dynamic efficiency.
DD Q6. Should the application of the government policy statement issued under section 112 be
extended to cover the government’s intentions for the management rights regime?
Yes.
DD Q7. Should a requirement for a national table of frequency allocations, based on the IRRs,
and national band plans be included in the Act? If so, how?
No.
DD Q8. Should the requirements placed on radio engineers during the certification process be
made directly and be more specific and/or compulsory? If so, how?
No.
DD Q9. Are the matters that radio engineers must have regard to when certifying a licence
sufficiently defined under the Act or should there be further guidance provided to radio
engineers as they carry out their certification? If so, what form should this guidance take
and what issues should the guidance cover?
The current guidance is sufficient.
DD Q10. Should the Act require all relevant information to be included on a licence application to
enable a complete assessment of technical compatibility when creating future licences? If
so, what information should be required?
The current information requirements are sufficient.
DD Q11. When assessing whether a proposed licence is ‘technically compatible’, should radio
engineers take account of the potential cumulative effects of transmission sources? If so,
how can this be enabled under the legislation?
Yes, radio engineers should take into account the cumulative effects of transmission
sources
DD Q12. Should the beneficial position of being first in time be retained in the Act? If not, how
should this be addressed?
Yes, so long as allocative efficiency is not affected.
DD Q13. Should radio engineers be required to consider whether a proposed licence is technically
compatible with potential future uses of adjacent management rights? How should these
potential future uses be defined?
No, radio engineers can’t predict all feasibly future uses of a management right.
DD Q16. Should it be made an offence to inaccurately record or over-record parameters on a
licence? If so, should any tolerances be applied and how should this be done?
No.
DD Q21. Is an arbitration process appropriate for managing disputes between parties? If not, what
other process should be included in the Act?
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 32
17 October 2014
An arbitration process should be retained subject to changes to the process described in
our response.
DD Q22. Should the dispute resolution processes under the Act be updated? If so, how should the
process be updated?
Yes.
DD Q23. Are the matters an arbitrator must have regard to, in reaching a decision, appropriate? If
not, what other matters should the arbitrator consider?
An arbitrator should be specifically directed to consider, for example:
a) the application of IRRs (as if the licence holder/operators were member states);
b) Government policy statements regarding the use of spectrum management
rights; and
c) ITU band allocation plans and recommendations.
DD Q24. Should any resolution reached through a dispute resolution process be binding on the
participants?
Yes, subject to right of appeal to the courts on point of law only. Decisions resulting from
the dispute resolution process should stand pending the outcome of appeal.
DD Q25. Should injunction or other cease and desist mechanisms be provided for in the Act itself,
as a prelude to arbitration? If so, what limits and criteria should apply prior to such as
mechanism being used?
Yes.
DD Q26. Should timeframes in the Act be amended and should the actions of the Chief Executive
be bound by timeframes prescribed in the Act?
Yes.
DD Q27. Should the Act include a right of appeal against the Chief Executive’s decisions? If so, to
whom should the appeal be directed?
Yes. Chief Executive decisions should be subject to right of appeal to the courts on point
of law only.
DD Q28. Should disputes involving both lawful and unlawful emissions be able to be subject to
arbitration or other dispute resolution process? What limits of applicability would be
appropriate?
Yes.
DD Q29. Should the Crown, through the Ministry, be involved in interference management in
frequency bands subject to private management rights?
Yes.
DD Q30. Should any additional enforcement provisions be included in the Act?
Yes.
DD Q31. Should the maximum penalties for contravention of the Act be amended?
Yes, in particular increased penalties are required for ongoing offences.
DD Q32. Should the scope of section 2 of Schedule 1 be limited to purely capture the impact on
emergency and safety signals, and reduce unintended consequences? If not, why not?
Yes.
DD Q33. Should liability in regard to certification be introduced and should this rest with the
certifier, the licence holder, or the manager (as the actual licencing authority)?
The licence holder.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 33
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DD Q34. Should radio engineers be required to be independent of the entity on behalf of which
they are certifying spectrum?
No.
DD Q35. Should ARE’s and ARC’s be treated consistently in terms of liability, independence and
authorisation?
Yes.
DD Q36. Should the certification process be articulated independent of the responsibilities of the
Registrar under the Act?
Yes, up to a point.
DD Q37. Should the requirement under section 38 that AFELs are below the protection limit of
adjacent frequencies also apply when management rights are being modified,
amalgamated, or divided?
DD Q38. When two management rights are being amalgamated, should modification of the
protection limit to remove the ‘spike’ at the common boundary be included in the
amalgamation process? If so, what should the protection limit default to either side of
the common boundary?
Yes – to the lower of the previous two limits.
DD Q39. Should greater flexibility be allowed to modify management rights once they have been
created? If so, what modifications should be allowed with the agreement of whom (i.e.
managers, rightholders or others)? Should this include aggregation of rights with
different expiry dates?
Yes.
DD Q40. Should the Crown, with the consent of the manager and/or rightholder(s), have the
ability to cancel or terminate management rights? If so, what limitations, if any, should
be applied to this power?
Yes.
DD Q41. Should any changes to the ability to modify or cancel management rights be applicable to
existing management right or only as new management rights are created?
Yes for both existing and new rights.
DD Q42. Should power floors be retained? If so, are they appropriately defined?
No. Our recommendation is that power floors should be abolished.
DD Q43. Should reference bandwidths for power floors and other limits be specified? If so, should
these be specified in the Act, the Regulations or through conditions on management
rights?
No. Our recommendation is that power floors should be abolished.
DD Q49. Is there a need to assert management of spectrum outside the 12 mile limit?
Yes, management rights should hold outside the 12 mile limit, to the limits of the EEZ.
DD Q54. Are unwanted emissions from transmitters operating under a spectrum licence
appropriately managed under the Act?
No
DD Q55. Should unwanted emissions in the spurious emission domain and outside specified UELs
be explicitly managed under the Act? If so, how should this be achieved?
Yes.
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DD Q56. Should rightholders have protection from harmful interference from unwanted emissions
above and/or below the power floor?
Yes.
DD Q61. Should the current overlap between government policy setting and the role of the
Commerce Commission in spectrum allocations be clarified? If so, how?
Yes.
DD Q62. Are spectrum caps still necessary, either initially or for the longer term, and if so, should
they have a legislative basis?
Yes, caps remain necessary but the terms under which they apply must be subject to clear
statutory provision.
DD Q63. In setting spectrum caps, should total spectrum holdings be considered or should
spectrum caps solely relate to particular bands? How should broader caps be
determined?
Caps should be set with reference to total spectrum holdings.
DD Q64. Should any legislative mechanisms to apply spectrum caps be generic and flexible enough
to apply to all high-value spectrum uses, or should they be specific to particular uses?
How could flexibility for technology changes be incorporated?
Legislation should specify threshold conditions for imposing, retaining or extending a cap.
It should also specify the maximum duration of a cap.
DD Q65. What are the most appropriate mechanisms to implement competition safeguards in
radio spectrum using markets? Are the current deeds and agreements sufficient or
should competition safeguards have a legislative basis?
Spectrum caps should continue to be specified in agreements/deeds. Legislation should
specify those matters discussed above.
DD Q66. If spectrum caps are given a legislative basis, how should they be affected?
See above.
DD Q67. Should spectrum caps be applied at the initial allocation for a limited number of years
with a periodic review of whether they remain necessary, or for the entire length of the
management right?
Yes.
DD Q68. Should any process, criteria, or framework for the review of spectrum caps be included in
the Act?
Yes.
DD Q69. Should the Commerce Commission be involved in any review of spectrum caps? If so,
how?
MBIE should have the option consulting with the Commission, but this should not be a
mandatory requirement.
DD Q73. Are there changes to the general user radio licence regime that would facilitate greater
use of this mechanism without unduly affecting the rights of incumbent users?
No.
DD Q74. Are power floors in management rights effective in achieving spectrum sharing?
No.
DD Q75. Should management rights created in the future place more obligations on the owner to
allow spectrum sharing? Are there ways to increase sharing in management rights
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 35
17 October 2014
without decreasing the value of the right to the owner?
No.
DD Q76. Should the Act be amended to provide for greater flexibility to accommodate dynamic
spectrum sharing technologies? If so, how?
No.
DD Q78. Should the legislation be amended to restrict all classes of licence to be for transmission
from a single transmitter location? If so, should this be done in the Act by prescribing a
licence format consistent with spectrum licences or through changes to the Regulations?
The Act should not restrict licences to be for a single transmission location. The Act should
instead specifically allow and define a licence classes that covers multiple transmitters
locations.
doc_866236586.pdf
In contrast to most recent pieces of legislation, the Act does not contain a purpose statement, nor principles stating the policy objectives that the Act is aiming to achieve. Instead, the policy objectives influencing MBIE's spectrum management decisions will be directed by the government of the day.
VODAFONE NEW ZEALAND LIMITED
SUBMISSION TO THE MINISTRY OF BUSINESS, INNOVATION AND
EMPLOYMENT
IN RESPONSE TO
Review of the Radiocommunications Act 1989:
Discussion Document
Public version
17 October 2014
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 2
17 October 2014
Table of Contents
A Executive Summary ........................................................................................................................... 4
B Policy objectives and problem definition ..................................................................................... 5
B1 Policy objectives for the spectrum management regime ................................................................................................................................ 5
B2 Vodafone’s use of spectrum .......................................................................................................................................................................................... 5
B3 Challenges identified in Vodafone’s interaction with the spectrum management regime ............................................................... 6
C Spectrum management in New Zealand (DD1.2) ..................................................................... 11
C1 Radio spectrum management (DD2.3) .................................................................................................................................................................. 11
D Managing the potential for interference (DD 3) ....................................................................... 14
D1 Coordination of uses: frequency allocations and band plans (DD3.2) .................................................................................................... 14
D2 The licencing process (DD3.3) ................................................................................................................................................................................... 14
E When interference occurs (DD4) .................................................................................................. 15
E2 The arbitration process (DD4.2) ................................................................................................................................................................................ 17
E3 Compliance and enforcement (DD4.3) .................................................................................................................................................................. 21
E4 Liability issues (DD4.4) .................................................................................................................................................................................................. 22
F Management Rights (DD5) ............................................................................................................. 23
F1 Aggregation and transfer of management rights (DD5.2) ............................................................................................................................. 23
F2 Modification and cancellation of management rights (DD5.3) ................................................................................................................... 24
F3 Power Floors (DD5.4) ..................................................................................................................................................................................................... 24
F4 Conditions on management rights (DD5.5) ......................................................................................................................................................... 24
F5 Geographic extent of management rights and spectrum licences (DD5.7) .......................................................................................... 24
G Licences (DD6) .................................................................................................................................. 25
G1 Unwanted emissions (DD6.1) ..................................................................................................................................................................................... 25
H Competition (DD8) ........................................................................................................................... 25
H1 Regulatory overlap during allocation process (DD8.2) ................................................................................................................................... 25
H2 Spectrum caps (DD8.3) ................................................................................................................................................................................................. 27
H3 Secondary markets (DD8.6) ........................................................................................................................................................................................ 29
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 3
17 October 2014
I Spectrum sharing (DD9) ................................................................................................................. 29
I1 Discussion (DD9.3) .......................................................................................................................................................................................................... 29
I2 Dynamic spectrum access technologies (DD9.4) ............................................................................................................................................. 29
J Other issues (DD10) ......................................................................................................................... 30
J1 Licences with multiple transmitter locations (DD10.2) .................................................................................................................................. 30
K Discussion Document Questions with Short Responses ....................................................... 31
Confidentiality
This document contains confidential information. Confidentiality is asserted in respect of the
information that is highlighted in red and contained in square brackets, i.e. [xxx]. Confidentiality is
sought in respect of this information for the purposes of section 9(2)(b) of the Official Information
Act 1982 on the grounds that:
(a) the information is commercially sensitive and contains valuable information which is
confidential to Vodafone; and
(b) disclosure would be likely to unreasonably prejudice the commercial position of the
Vodafone, as the party providing the information.
Vodafone requests that it is notified of any request made to MBIE under the Official Information
Act 1982 for Vodafone confidential information, and that MBIE seeks its views as to whether the
information remains confidential and commercially sensitive at the time those requests are being
considered.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 4
17 October 2014
A Executive Summary
A1 Thank you for the opportunity to comment on the Ministry’s Review of the Radiocommunications
Act 1989 Discussion Document (the ‘Discussion Document’).
A2 Internationally, demand for spectrum continues to increase with the rapid growth in use of
smartphones and other wireless devices, as well as increasing use of machine-to-machine
communication. Similarly, demand for mobile services continues to increase rapidly in New
Zealand: expectations are that 90% of Vodafone customers will have a smartphone by 2015;
Vodafone’s 4G mobile data traffic will grow by 1200% in the next 3 years, and total mobile data
traffic will grow by 300% in next 3 years. It is essential that New Zealand spectrum is carefully
managed to address this increasing demand, and the spectrum regime provides certainty and
protection for management rights holders.
A3 Vodafone recognises the importance of MBIE’s role in managing New Zealand’s spectrum
resource. The Radiocommunications Act 1989 (‘the Act’) creates the framework for MBIE to
manage the Crown’s spectrum. In responding to the Discussion Document, we have assessed
whether the current Act delivers outcomes that are consistent with allocative, productive and
dynamic efficiency.
A4 Vodafone has two principal concerns with the current Act that we recommend are addressed in
the review:
(a) Interference is a key driver of productive inefficiency, and is not sufficiently guarded
against by the current management regime. Interference imposes significant cost on our
business, estimated at [_________________________________________]. Some
reflection of International Radio Regulations (‘IRR’), the International
Telecommunication Union (‘ITU’) spectrum planning rules is necessary, and checks and
balances in the licensing process are also required. Enforcement provisions must be
strengthened and more effective arbitration provisions introduced.
(b) Confusion and duplication in the regulatory regimes governing competition in
spectrum holdings exists because MBIE and the Commission currently both apply
measures that are directed at protecting competition. The functions of MBIE and the
Commission need to be more clearly differentiated. Retaining separate but overlapping
mechanisms that have the same goals results in confusion as to how they operate in
combination and tend to generate uncertainty that is particularly harmful during the
initial allocation phase for spectrum management rights.
A1.2 The comments in this submission are provided in the form of answers to some, but not all,
questions posed in the Discussion Document.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 5
17 October 2014
B Policy objectives and problem definition
B1 Policy objectives for the spectrum management regime
B1.1 In contrast to most recent pieces of legislation, the Act does not contain a purpose statement,
nor principles stating the policy objectives that the Act is aiming to achieve. Instead, the policy
objectives influencing MBIE’s spectrum management decisions will be directed by the
government of the day.
B1.2 As such, it appears to have been difficult for MBIE to clearly define the problem it seeks to address
by comparing the current experience to stated objectives. Similarly, respondents to the
Discussion Document do not have an objective ‘ideal’ against which to frame comments on
whether the Act is ‘working’ or not. Subject to this general caveat, this document sets out
Vodafone’s views on those areas where the current Act does not currently meet user needs.
B1.3 It is appropriate to assess the effectiveness of the Act and its implementation with reference to:
(a) the economic objectives of allocative, technical and dynamic efficiency Act; and
(b) the regime’s performance against any stated social objectives.
B1.4 The regulatory design objectives we propose MBIE must consider when presenting
recommendations to Ministers, or making spectrum management decisions within the Ministry,
include:
(a) Flexibility - ensuring spectrum can transition to the most efficient user over time
(allocative efficiency);
(b) Technology neutrality - ensuring that technically efficient changes in use can occur over
time (productive efficiency); and
(c) Certainty - ensuring that decisions provide for longer term investment decisions
(dynamic efficiency).
B1.5 To achieve certainty, the regime must protect management and user rights, allow spectrum use
without interference, and attach clear technical definitions to usage rights. Where interference
does happen, the regime must provide a clearer process to facilitate fast and effective resolution,
including the potential for immediate intervention and an effective set of remedies. Competition
concerns must be dealt with to ensure no duplication or confusion of regulatory oversight
responsibilities, and to ensure fast resolution if issues arise.
B2 Vodafone’s use of spectrum
B2.1 Vodafone holds management rights in the following bands:
Low Frequency
(MHz)
High Frequency
(MHz)
Bandwidth
(MHz) LTE Band
Intended Use by NZ
Government C_________________
723 738 15 28 LTE700UL
C_________________
778 793 15 28 LTE700DL
C_________________
899.8 915 15.2 8 GSM900 UL
C_________________
944.8 960 15.2 8 GSM900 DL
C_________________
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 6
17 October 2014
1,760 1,785 25 3 GSM1800 UL
C_________________
1,855 1,880 25 3 GSM1800 DL
C_________________
1,920 1,945 25 1 UMTS2100 UL
C_________________
2,015 2,020 5 UMTS TDD
2,020 2,025 5 UMTS TDD
2,025 2,053 28 ?
2,110 2,135 25 1 UMTS2100 DL C_________________
2,200 2,236 36.5
2,555 2,575 20 7 WiMax
C_________________
2,675 2,690 15 7 WiMax
C_________________
3,424 3,445 21 22 FDD or 42 TDD 3.5GHz fixed wireless
C_________________
3,445 3,452 7 22 FDD or 42 TDD 3.5GHz fixed wireless
C_________________
3,524 3,545 21 22 FDD or 42 TDD 3.5GHz fixed wireless
C_________________
3,545 3,552 7 22 FDD or 42 TDD 3.5GHz fixed wireless
C_________________
24,549 24,885 336 LMDS
C_________________
25,053 25,392 339 LMDS
C_________________
25,557 25,893 336 LMDS
C_________________
26,061 26,400 339 LMDS
C_________________
26,400 26,550 150 LMDS
26,550 26,700 150 LMDS
26,700 26,850 150 LMDS
26,850 27,350 500 LMDS
C_________________
27,350 27,850 500 LMDS
C_________________
27,850 28,350 500 LMDS
C_________________
B2.2 Under the Act, Vodafone creates spectrum licences for the transmission and reception of
radiocommunications within these bands, and is expected to manage any interference issues in
the range of frequencies covered by the management right.
B3 Challenges identified in Vodafone’s interaction with the spectrum
management regime
B3.1 Our assessment is that the current Act does not provide an effective spectrum management
regime that leads to the most efficient spectrum usage outcomes. The ways in which the current
spectrum management system impedes allocative efficiency, and our own productive and longer
term dynamic efficiencies is set out below.
Allocative efficiency problems
B3.2 Allocative efficiency problems exist where spectrum is allocated to a person that places lower
value on its use than another person, and where there is no effective mechanism for reallocating
the spectrum to its highest value use.
B3.3 Social policy goals may at times be balanced against allocative efficiency. For example, spectrum
caps (such as used in the recent 700MHz auction) may prioritise social policy goals, or be used as
an instrument to protect nascent competition in downstream markets or to allow competition to
emerge in a market that is not yet developed. We do not have any existing allocative efficiency
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 7
17 October 2014
issues to bring to MBIE’s attention; however recommend that allocative efficiency impacts be
considered when designing regulatory interventions such as spectrum caps. Allowing
technological neutrality for licences
1
will enhance allocative efficiency.
B3.4 The design of spectrum auctions will also impact on allocative (and productive) efficiency. When
multiple bands of spectrum packets are being auctioned, MBIE should consider all forms of
allocation mechanism, including using best practice combinatorial auction design, in order to
optimise efficiency.
Productive efficiency problems
B3.5 Productive efficiency problems exist if the spectrum management system either creates
unnecessary costs, or does not guard against the costs caused by others (e.g. interference).
B3.6 Vodafone takes pride in providing New Zealanders with the superfast mobile network that has
been independently recognised as one of the world’s most advanced. The global leader in
broadband speed testing, Ookla, ranked Vodafone New Zealand’s network as the fastest in the
world in its Global Net Index of telecommunications companies for May 2014,
2
and this lead
position was attained four times in the past five months. The Vodafone SuperNet is a key
competitive strategy for Vodafone’s business: combining the reliable coverage, reliable speed,
and reliable network services across New Zealand that our customers expect.
B3.7 Interference impacts network performance for all network providers, and every dropped call or
slow webpage download affects the ability to deliver a quality service. Degraded service capacity
due to legal and illegal interference poses a real problem, with very real business revenue
impacts for Vodafone. This is especially the case for operators such as Vodafone that have
pursued a deliberate strategy of investing significantly in being New Zealand’s reliable network.
B3.8 Interference is a driver of productive inefficiency that is not sufficiently guarded against by the
current spectrum management system. Interference often occurs through use of imported items
transmitting into our bands, and the users are often unaware of the impact or, in some cases
illegality of their activity. For example, while cellphone jammers are a prohibited import by NZ
Customs, in contrast baby monitors and videoconferencing audio-bridge equipment imported
from overseas and configured to operate within the 900 and 2100 MHz bands are not. Instead,
the illegality arises when the device is switched on, and starts to interfere. Vodafone is likely to
face more frequent interference issues than other mobile companies, as the American ‘free use
ISM’ band overlaps with the 900 MHz band, while the Digital Enhanced Cordless
Telecommunications (DECT) phone band overlaps with our 2100 MHz band.
B3.9 The effects of interference include reduced cellsite coverage and network capacity, a higher
proportion of calls that are either dropped or not connected, lower data activity, and voice calls
with problems of one-way speech
3
or voice distortions. It is extremely difficult to precisely
1
Vodafone strongly favours technology neutrality but it must be in conjunction with a best practice band plan which provides
guidance for the selection of technology to minimise the risk of interference from incompatible technologies located in adjacent
bands. See Section D.
2
The real time Global Net Index by Ookla uses five million tests each day with 350 million users in the past year and 2,600 testing
servers worldwide. The rankings can be found at http://www.netindex.com/mdownload/
3
One-way speech is when the person you are calling can hear you but you can't hear them or the same situation in reverse.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 8
17 October 2014
quantify the business impact on revenue lost due to service degradation, given that every
occurrence of interference varies in severity, duration and footprint.
B3.10 Vodafone has a dedicated team of specialist technicians that deal regularly with interference, and
thus we can estimate the cost to Vodafone of dealing with interference issues:
(a) [____________________________________________________________________.
(b) ____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
(c) ____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.
____________________________________________________________________.]
B3.11 Figure 1 presents a cost stack of the productive efficiency impacts faced by Vodafone when
experiencing interference.
[_______________________________________________________________________
_]
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 9
17 October 2014
B3.12 It is possible to provide estimates of the direct practical cost of managing interference. Table 1
shows types of interference dealt with by Vodafone, and the time to resolve.
_________________________________________________________________
___________________ ___________________ ___________________
___________________
___________________ ___________________
___________________
___________________ ___________________
___________________
___________________ ___________________
___________________
___________________ ___________________
Direct cost to Vodafone when dealing with interference
B3.13 ____________________________________________________________________._______
_________________________
B3.14 ____________________________________________________________________._______
_____________________________________________________________.______________
______________________________________________________._____________________
_______________________________________________..]
B3.15 While the costs highlighted show the significant impact of interference to Vodafone, such costs
are not unique and we expect that the other mobile operators will similarly be experiencing
interference impacts. Extrapolated across the industry, material productive inefficiency is being
experienced.
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B3.16 The problem and costs of interference is growing over time, due to factors including:
(a) The sensitivity of devices and networks is increasing. There are ever more wireless users
and spectrum is becoming more congested with devices operating in adjacent spectrum.
As technology advances to cater for the increasing demand and capabilities, handsets
and networks are both becoming more sensitive. The latest technologies are increasingly
sensitive and with higher technical requirements making these devices more susceptible
to performance degradation through interference.
(b) Individuals are increasingly importing devices for use in New Zealand, commonly
purchased through international websites. Also, a recurrent source of interfering
equipment is items which have been brought into the country by people moving to (or
back to) New Zealand to live. In our experience, many people are simply unaware that
overseas transmitting devices may cause interference when used in New Zealand. We
suggest MBIE increase its focus on education and awareness, and focus on upfront
compliance rather than remedying interferences ex-post.
[[_______________________________________________________________________
_]
System efficiency - Administrative costs (through fees) of the spectrum management system
B3.17 [___________________________________________________________________________
_____________________________________________________.]
B3.18 Our view is that these licence fees should be limited to cost recovery of administration activities
by MBIE, as well as a fair contribution to costs common across all stakeholders.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 11
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B3.19 We recommend MBIE revisit current licensing fees, and make adjustments to ensure that these
are limited to cost recovery and are fairly shared across the industry.
Examples of dynamic efficiency impact
B3.20 Dynamic efficiency problems exist where the spectrum management system does not create
sufficient certainty for longer term investment decisions to be made. Such problems could arise
where, for example, there is uncertainty as to whether the value of management rights acquired
can be adequately protected in circumstances, for example, where parties’ ability to enforce or
protect rights may be subject to uncertainty as regards procedure or the likelihood of outcomes.
In these circumstances, parties may be less willing to invest in management rights or, at the very
least, may adjust the value assigned to rights.
B3.21 A fundamental regulatory design concern is that without a clear framework prescribing the
balance between economic and social objectives in the spectrum management regime; it is
difficult to see how the regulatory certainty required for optimal longer term investments can be
attained. Greater clarity on the relative weighting given to economic and social objectives would
create more certainty, contributing towards dynamic efficiency.
B3.22 Clarifying MBIE’s objectives for spectrum management is discussed in the following section.
C Spectrum management in New Zealand (DD1.2)
C1 Radio spectrum management (DD2.3)
C1.1 In our response to the Productivity Commission’s Regulatory Institutions and Practices Issues
Paper (August 2013) we discussed the elements of a high quality regulatory framework:
a. a regulator which has clear functions and duties;
b. a framework within which the regulator makes decisions that are predictable and
transparent;
c. regulatory ‘solutions’ are only proposed in response to a clearly defined problem that
cannot be solved by any other means;
d. problems are well analysed and understood, and the regulator prefers the minimum
intervention necessary to address the problem (i.e. intervention is proportionate);
e. regulatory decisions are preceded by genuine discussion and consultation with
stakeholders;
f. decisions are based on broad and ‘best quality’ evidence, and competing evidence is
carefully weighed and analysed;
g. reasons for decisions are transparently explained;
h. there is a process for review of decisions by an independent entity; and
i. there is an express requirement for a regular stock-take of existing regulation, and
provisions that ensure that regulation is retained only if the ‘threshold conditions’ that
justified it being imposed originally remain in place.
C1.2 These elements are necessary to deliver consumer benefits, competition, certainty and
incentives. It follows that we endorse Treasury’s best practice principles for regulatory design and
implementation: good quality regulation is growth supporting, proportional, flexible, durable,
certain and predictable, and transparent and accountable.
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C1.3 The spectrum management regime does not contain a clear framework prescribing the balance
between economic and social objectives. Our strong preference is that primary legislation
provides for trade-offs between different objectives. In other words, legislation clearly specifies
the duties/objectives that a regulator must pursue in reaching any decision, and how these
should be prioritised where they may conflict. Provided that there is clarity on how a regulator will
proceed when reconciling different objectives, pursuing multiple goals need not undermine
predictability and certainty.
C1.4 The Act does not contain a purpose statement. In the absence of a purpose statement or other
means to state objectives, there is no guiding principle that directs how MBIE must discharge
various functions under the Act or resolve any conflict between different functions. This is in
contrast with the approach taken in the UK and Australia, where regulatory objectives are clearly
prescribed; covering both the economic and the social objectives decision-makers must adhere.
See Box 1 for information on the Australian and UK stated spectrum management objectives.
C1.5 Vodafone submits that the Act should include a clearer statement of MBIEs duties when making
spectrum allocation decisions and the factors that it must take into consideration when
performing this function. MBIE must also share clear and definite information about future
spectrum allocation plans (as expectations on future spectrum availability affects the (scarcity)
value users place on spectrum available today).
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Box 1: Policy objectives are clearly prescribed for Australia and the UK’s spectrum management authorities
The Australian Radiocommunications Act 1992
a
includes specific objectives that the Australian Communications and
Media Authority (ACMA) must consider in undertaking this task, as well as the regulatory tools that are available to it.
Part 1.2—Object of this Act
3. The object of this Act
The object of this Act is to provide for management of the radiofrequency spectrum in order to:
(a) maximise, by ensuring the efficient allocation and use of the spectrum, the overall public benefit
derived from using the radiofrequency spectrum;
(b) make adequate provision of the spectrum:
(i) for use by agencies involved in the defence or national security of Australia, law enforcement
or the provision of emergency services; and
(ii) for use by other public or community services;
(c) provide a responsive and flexible approach to meeting the needs of users of the spectrum;
(d) encourage the use of efficient radiocommunication technologies so that a wide range of services of an
adequate quality can be provided;
(e) provide an efficient, equitable and transparent system of charging for the use of spectrum, taking
account of the value of both commercial and non commercial use of spectrum;
(f) support the communications policy objectives of the Commonwealth Government;
(g) provide a regulatory environment that maximises opportunities for the Australian communications
industry in domestic and international markets;
(h) promote Australia’s interests concerning international agreements, treaties and conventions relating
to radiocommunications or the radiofrequency spectrum.
The UK Government’s recently published Spectrum Strategy,
b
states the ‘Core principles for spectrum management’
which include:
? Change of use within the UK: we will manage change of use within the UK, where it is required to meet
international commitments, or where it is deemed to be in the best interests of the UK, by taking account of
the economic and social impact on those affected and apportioning the costs of the change fairly
? Assignment of spectrum to new users: we will use the process to assign spectrum to new users which is
likely to deliver the best value to the UK, whether through auctions, comparative selection processes, ‘first
come, first served’, […]
? Continuing use of spectrum: all spectrum users will face incentives to use spectrum efficiently. For
spectrum not acquired through an auction, users should pay a market-based fee except where this fee
would be lower than the cost of managing the spectrum (whether by Ofcom or a Crown body). Users should
be free to innovate and make changes to how they use their spectrum, subject to any licence conditions and
not causing harmful interference to other legitimate users;
? Change of assignment to users: market mechanisms should incentivise the transfer of rights to use
spectrum between users, whether by outright sale of some or all of the spectrum, or by sharing. Sharing may
take the form of agreement to leasing on a time or location basis to a designated second user, or may be
through supporting dynamic spectrum access.
a
The Australian Radiocommunications Act 1992 (at http://www.comlaw.gov.au/Details/C2013C00586/Html/Text#_Toc368410007).
See also: ACMA, Principles for Spectrum Management, 31 March 2009. The ACMA also released the Response to the Submissions on the
Draft Spectrum Management Principles, which provides more information on the Principles.
b
UK Department for Culture, Media and Sport, The UK Spectrum Strategy, 10 March 2014.
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D Managing the potential for interference (DD 3)
D1 Coordination of uses: frequency allocations and band plans (DD3.2)
D1.1 Management rights are not technology specific, and the most efficient scenario will be that right
holders retain the current flexibility over which technology is deployed within spectrum bands
held.
D1.2 However, the trade-off of this flexibility is that it exposes investors to significant risk of
interference. A good example of this occurred when [_________________.________________
____________________________________________________________._______________
_____________________________________________________________.______________
_________________________________________________________].
D1.3 Vodafone strongly favours technology neutrality but it must be in conjunction with a best
practice band plan which provides guidance for the selection of technology, to minimise the risk
of interference from incompatible technologies located in adjacent bands. Although spectrum
management rights could in principle be allocated to a range of uses, Vodafone submits that
MBIE must take relevant considerations into account when determining the uses to which
spectrum will be put, including at a minimum, IRRs and best practice band plans.
D1.4 A band plan covering private management rights should not be included in the Act. However,
Vodafone supports the establishment of a band plan that does contemplate spectrum being
allocated to specific uses, to retain flexibility for future uses but also to provide protection and
guidance in the event of interference. The plan needs to be separate from the Act so that it may
be amended, as required, to reflect important considerations such as international best practice
and efficient use of spectrum. As discussed below, the Act should introduce a mandatory
requirement for radio engineers to consider such a band plan in issuing radio licences.
D2 The licencing process (DD3.3)
Certification of licences
D2.1 The requirements placed on radio engineers during the certification process must be made
directly, be more specific, and be compulsory. Most licences that Vodafone issues are to itself for
licences within its own management rights. We issue many licences (as each transmitter requires
a licence), for which the certification process is currently quick and easy. While Vodafone does not
support the increasing of licencing requirements (and associated costs) where there appears no
good reason, as the legality (or otherwise) of operations hinges, at least in part, on licence
certifications, it is necessary that some changes to this process occur.
D2.2 Vodafone’s view is that the matters set out in s25(5) of the Act must be satisfied, in the opinion of
the engineer, having regard to the matters in s25A, before he or she issues the certificate.
Satisfaction of these matters must be mandatory as presently all that is compulsory is for the
engineer to ‘have regard’ to s25A matters. A specific requirement to consider the technical
compatibility of intended and actual services/applications (by reference to the ITU and New
Zealand table of frequency allocations) should be added. As well as this, an addition must be
made to the requirements contained in s25(5) to ensure that the engineer is satisfied that the
exercise of the rights will be technically compatible.
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17 October 2014
Technically compatible and low power emissions
D2.3 Radio engineers should take into account the cumulative effects of transmission sources. To
retain flexibility within the regime, such requirements should be addressed outside of the Act, for
example via guidance.
Preventing interference with future users of adjacent bands
D2.4 The current system whereby the management right holder that first creates and registers
licences is able to protect its interests, will lead to regulatory certainty. However allocative and
productive efficiency may be impacted if a low value user precludes a higher value user from
operating within an adjacent band; such as occurred in the [_____________.________________
____]; or with a similar value user installing new equipment that interferes with existing rights,
such as occurred to the Vodafone and 2degrees networks when Spark rolled out its 3G network.
D2.5 Radio engineers should be required to consider whether a proposed licence is technically
compatible with potential future uses of adjacent management rights as discussed above. That is,
not speculatively but having regard to specific factors such as the proposed band plan, the IRR,
ITU band plans and ITU recommendations.
Required licence parameters
D2.6 It should not be unlawful to record broader parameters than deployed today as this would
remove the potential for flexibility in how a licence is used. Requiring the re-issuing of a licence
for every minor change in technology deployed would create significant administration
complexity and cost to rights holders. Moreover, there are situations in which it is impossible to
accurately specify a level, for example a cellular base transceiver station constantly changes
transmission power due to the transmission power control.
D2.7 We recommend that the licence should be certified for the maximum power allowed, rather than
expecting licence holders to state exact parameters (even with allowed tolerances).
E When interference occurs (DD4)
E1.1 In managing interference, we follow a two stage process:
(a) We investigate, and attempt to resolve any issues directly, using our internal team of
radio engineers and external contractors.
(b) When necessary, we involve the MBIE compliance unit’s Radio Inspectors.
Vodafone provides the material to MBIE, and MBIE then takes over efforts to resolve the
interference. MBIE has powers of intervention (e.g. the ability to engage with the judicial
system to obtain a warrant to access premises) that are not available to Vodafone.
E1.2 MBIE should give further consideration to whether changes should be made to the Act to provide
for effective management and resolution of interference issues. As discussed above, changes to
the licensing regime would assist in avoiding future interference issues but further changes are
still required to ensure that the Act delivers an efficient and effective regime for addressing
harmful interference of all kinds.
E1.3 Our comments are informed by our experiences under the current Act:
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(a) Interference dispute between Vodafone and Telecom (now Spark) resulting from Spark's
introduction of its 3G XT network. Spark was aware, before it deployed the new
equipment, that it was likely to interfere with existing services. The deployment of this
network resulted in Vodafone experiencing serious network deterioration at various
points in its own 3G network and this increased as the XT rollout progressed.
Investigations revealed that interference was caused by new equipment installed by
Spark. 2degrees also experienced similar interference but, at that time, it was in the early
stages of its network deployment, and MBIE intervened, requiring Spark to fit filters to its
transmitters to protect 2degrees. No commercial compromise could be reached
between Vodafone and Spark as Spark argued its operations and licences were legal. To
support its argument, Spark said that it was operating below the power floor and also that
the requirements of the IRR did not apply to it, so there was no breach of s103. Absent
any scope for a compromise solution, urgent injunction proceedings were commenced.
Ultimately, settlement was achieved part way through injunction hearing and no
judgment was issued.
(b) [____________________________________________________________________.
_____________________________________________________________________
______.______________________________________________________________
_____________._______________________________________________________
____________________.________________________________________________
___________________________._________________________________________
__________________________________.__________________________________
_________________________________________.___________________________
________________________________________________.____________________
_______________________________________________________._____
4
]
General observations regarding interference
E1.4 The common feature in each of the interference cases is that the Act provided little clarity on
how disputes could be resolved. This arose both in terms of how provisions in the Act apply when
interference occurs, and uncertainty as to whether they actually provide an effective remedy.
E1.5 At present, the Act does not give sufficient assurance that a person who has created harmful
interference will be required to remedy it in a timely manner, if at all. Where interference issues
arise, the Act provides no clear framework for their resolution and licence holders are often
forced to reach compromise solutions that may involve significant cost, and which do not
effectively protect the value of their investment in spectrum management rights.
E1.6 The Act currently makes no provision at all for the following important potential causes of
interference:
(a) unlicensed operation of spectrum, which is increasingly common as large numbers of
mass market devices make use of unlicensed spectrum; and
4
Frequencies sharing a common boundary at 2110 MHz.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 17
17 October 2014
(b) cumulative effects of interference from multiple (licenced or unlicensed) sources of
emissions, where it is difficult or impossible to attribute responsibility for interference to
a single person.
E1.7 As presented in section B above, Vodafone incurs a direct annual cost of [_____________] as a
result of interference with spectrum for which it is the licence holder. This includes the cost of
investigating and resolving interference where it does occur. But it does not include the
significant legal and expert expenses it incurred in each of the major interference instances
described above, nor the lost revenue or reputational impacts associated with degradation of
Vodafone services.
E1.8 In light of these issues, it is important that changes to the Act:
(a) encourage transmitters to avoid causing interference by imposing a positive obligation
(i.e. a general duty) to prevent harmful interference;
(b) provide sanctions where they do that are proportionate to the costs of interference for
other licence holders; and
(c) provide mechanisms for the resolution of interference in a timely and effective way.
E1.9 Vodafone's specific recommendations for amendments to the Act to better manage interference
are set out below. The recommendations focus in particular on:
(a) improving clarity as to when Act provisions for addressing interference are available;
(b) enhancing the remedies that are available to licence holders when interference occurs;
and
(c) addressing interference scenarios that the Act does not currently provide for.
E2 The arbitration process (DD4.2)
E2.1 The arbitration process provided in Part 12 of the Act is discussed in section 4.2 of the Discussion
Document. As the Discussion Document notes, this process has not been used since its
introduction in 2000,
5
with the majority of interference issues being resolved via negotiation.
E2.2 Vodafone submits that the reluctance of licence holders to refer interference to the Chief
Executive of MBIE pursuant to sections 108 and 109 of the Act illustrates the central problem
that:
(a) It is unclear whether the Chief Executive will in fact resolve an interference issue that is
referred. There is no transparent framework explaining the factors that the Chief
Executive will take into consideration when deciding whether an issue should go to
arbitration.
(b) There is no certainty as to how long resolution will take. The specified timeframes for the
Chief Executive to decide whether or not an issue should go to arbitration are too long,
5
Radiocommunications Amendment Act 2000.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 18
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given the urgency of resolving interference issues and the significant harm/cost to
licence holder that can accrue while these issues are ongoing.
(c) If an interference issue does go to arbitration, the timeframe and methodology to be
used to resolve it is unclear. This methodology is specified in general terms in the
Arbitration Act 1996, but disagreement on the appointment of an arbitrator can cause
delay. Where appointment is made, there is no certainty as to the specific factors that an
arbitrator will take into consideration when making an award. For example, to what extent
would an arbitrator be required to give effect to the principle that the license holder who
has caused interference must fix it?
(d) If there is a question as to whether the interference is lawful or unlawful, there is
uncertainty as to whether the provisions can be employed.
E2.3 In addition, as the Discussion Document notes, where interference issues have arisen, key
limitations in provisions of the Act have become apparent, including:
(a) a presumption in the dispute resolution process in favour of earlier licences, including
through the certification process;
(b) the absence of a general duty not to cause harmful interference (once a proposed
licence has been certified and the licence registered);
(c) failure to account for use of incompatible technologies in adjacent spectrum bands; and
(d) failure to fully account for IRR as they apply to licences.
E2.4 Finally, there is an underlying assumption in the Act that if an emission is below the power floor
then it will not cause harmful interference.
6
This assumption may have been correct 25 years
ago when the Act was introduced. However, modern receivers can detect signals that are
significantly lower than the power floor, and this sensitivity is important in maximising network
coverage. This increased sensitivity is significant for enabling efficient network design and,
amongst other things, limits the environmental impact by reducing the number of cell-sites
required to be deployed.
E2.5 In combination, these factors mean the arbitration process now provided in the Act is, in
Vodafone's submission, not fit for purpose. We support the creation of an effective and certain
arbitration process in place of the existing scheme. Our recommendations as to the changes that
should be made to the existing process in order to achieve this are set out below.
Availability of the arbitration process
E2.6 As MBIE notes, the arbitration process is not available where harmful interference is caused by
unlawful emissions. However, it can be difficult to determine whether emissions are consistent
with the terms of a licence, and therefore whether they are in fact unlawful. This creates serious
uncertainty about the jurisdiction of the courts, for an injunction, or the jurisdiction for arbitration
under the Act.
6
Accordingly, if there is harmful interference, the interferer can argue that so long as they have met the power floor threshold,
their interference and actions are lawful. If so, the affected licence holder may be deprived of the ability to seek relief.
Vodafone New Zealand Response to MBIE’s Review of the Act 1989: Discussion Document – Public version 19
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E2.7 The Act must provide an arbitration process that is generally available as a mechanism for dealing
with all harmful interference, irrespective of whether it is caused by lawful or unlawful emissions.
E2.8 Applying the same logic, licence holders should have the ability to seek an injunction (as a route
to dispute resolution in alternative to the arbitration route). At present, an injunction is available
only where there is a breach of section 103 of the Act, i.e. interference resulting from an unlawful
transmission.
7
Irrespective of whether interference is lawful, Vodafone submits that an injunction
should be available to cover all instances of harmful interference.
E2.9 Prompt and effective enforcement action by MBIE, assisted by the inclusion in the Act of a
general duty on licence holders not to cause harmful interference (which Vodafone supports),
offers the most timely and effective means of addressing unlawful emissions.
8
We note that
MBIE’s current consultation on Television white space devices: certification and licensing rules
states that use of television white space devices must not cause harmful interference to DTT
services, and so licensees that cause interference are required immediately to rectify the issue.
9
Vodafone submits that the same principle of approach should be included in the Act, such that all
licence holders become subject to a positive obligation not to cause interference and to remedy
any harmful interference that does occur.
E2.10 These suggested changes require amendment to the Act.
Arbitration process timeframes
E2.11 An arbitration process cannot be an effective vehicle for resolving interference disputes unless it
provides deadlines for reference, appointment of an arbitrator, consideration of a dispute and
decision. At present, the Act provides no such direction.
E2.12 At present, where harmful interference occurs:
(a) A licence holder affected by interference must serve notice under section 108(1) Act.
(b) The respondent then has 10 working days to do one of the following:
i. take action to remedy the interference (section 108(5)(a));
ii. defend allegation in the notice (section 108(5)(b));
iii. agree to a solution (section 108(5)(c));
iv. agree to arbitration (section 108(5)(d)).
(c) If the respondent defends the allegation or agrees to arbitration, but nothing happens
within 10 working days of this, the affected licence holder can give notice seeking
referral to arbitration (section 108(6)).
(d) Alternatively, if the respondent agrees to a solution, but resolution is not reached within
20 working days, the affected licence holder can give notice seeking referral to
arbitration (section 108(6)).
7
A transmission that complies with the terms of a licence is lawful. As MBIE notes, “…given the level of flexibility with the licensing
provisions in the [Act], there may be difficulty in determining whether a transmission is lawful or unlawful.”
8
Our recommendations regarding MBIE’s approach to compliance and enforcement are at section E3 below.
9
Television white space devices: certification and licensing rules (August – September 2014), page 2
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(e) Following referral by the affected licence holder, the Act specifies is no deadline by which
the Chief Executive must actually decide to put a matter to arbitration.
(f) If a matter is ultimately put to arbitration, the Act specifies is no deadline by which certain
steps in the arbitration process (e.g. appointment of an arbitrator, initial hearing of
parties) must occur.
E2.13 Vodafone considers that alternative mandatory deadlines should be introduced into the
arbitration process as follows:
Affected licence holder serves notice Working day 0
Respondent must reply to notice Working day +5
Affected licence may give notice to Chief Executive
seeking referral to arbitration
Working day +1
Chief Executive must decide whether to refer to
arbitration
Working day +2
Arbitrator must be appointed (or Chief Executive must
appoint from specified list of arbitrators)
Working day +2
Arbitrator must complete initial hearing of parties and
consider whether an interim measure is appropriate
10
Working day +5
Arbitrator must issue draft findings Working day +5
Arbitrator must issue final findings and award Working day +5
Total timeframe 25 working days
E2.14 This suggested timetable should be subject to fast-tracking in appropriate cases and is
contingent on provision also being made for cease and desist orders, so that harmful interference
can be addressed more quickly where necessary.
E2.15 In addition to these tighter timeframes, we support the ability of the Chief Executive to resolve
any impasse in the process (e.g. regarding the appointment of an arbitrator) by making a decision
in lieu of agreement between the parties.
Chief Executive decisions
E2.16 In addition to specifying a clear and reduced timeframe, the Act should specify factors that the
Chief Executive must consider when reaching a decision on whether to refer an interference
dispute to arbitration.
E2.17 It should also specify the process that the Chief Executive must follow in reaching decisions and
the matters that must be taken into account. Given the narrow scope of these decisions (i.e.,
whether or not to refer a dispute to arbitration, and which arbitrator to appoint if parties cannot
agree on this) we do not think there is any requirement for the Chief Executive to undertake
substantive consultation prior to making them.
E2.18 Right of review against a decision of the Chief Executive exists via the inherent jurisdiction of the
courts to undertake judicial review of administrative decisions. In addition, in light of the narrow
10
Section 17A, Schedule 1 of the Arbitration Act 1996.
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scope of the decisions to be made by the Chief Executive in respect of the arbitration process, and
potential for extensive appeal rights on procedural matters to subvert the timeliness and
effectiveness of any arbitration process, we do not believe that including a statutory right of
appeal against decisions by the Chief Executive is warranted.
Arbitration decisions
E2.19 The Act should specify mandatory considerations that an arbitrator should take account of when
considering an appropriate award. Arbitrators should be required to consider, for example:
(a) the application of IRRs (as if the licence holder/operators were member states);
(b) Government policy statements regarding the use of spectrum management rights; and
(c) ITU band allocation plans and recommendations.
E2.20 Beyond this however, an arbitrator should have freedom to identify relevant factors and should
not be constrained as to how that consider and weigh these factors.
E2.21 MBIE has asked whether the Act should include provision for an immediate cease and desist
mechanism where interference is occurring (prior to any discussions between parties or
arbitration reference to resolve the issue). Vodafone considers that such provision should be
available circumstances where interferences is likely to cause serious harm to the interests of
licence holders and/or consumers.
E2.22 As MBIE is aware, section 74A of the Commerce Act 1986 (‘CA86’) provides for the granting of
cease and desist orders in these circumstances, and we suggest that the Act should include
similar provisions and be modelled on section 74A, and also require similar qualifications for the
appointment of a person empowered to make a cease and desist order in respect of an
interference issue.
E2.23 We note that a licence holder affected by interference can currently seek injunctive relief from
the courts prior to discussion between parties or arbitration reference but only if there is a breach
of s103. However, we do not see the injunction process as a substitute for a cease and desist
process. Certain features of the injunction process, including the uncertainty over breaches of
s103, the requirement to provide an undertaking as to damages, and the fact that the matter will
be considered by a legal expert (judge) not a technical expert, in practice operate such that this
process is not a cheap option, is uncertain and may not be as quick as is necessary.
E2.24 The application of cease and desist process, and other processes relating to dispute resolution,
would be assisted by the inclusion in the Act of a general duty on licence holders not to cause
harmful interference, whether lawful or unlawful.
E3 Compliance and enforcement (DD4.3)
Interference investigations
E3.1 The Discussion Document records MBIE's view that owners of spectrum management rights
should themselves investigation interference issues and take action to protect the value of these
rights. However, there are practical limits to a licence holder's ability to do this, not least because
of the difficulty of distinguishing between lawful and unlawful interference.
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E3.2 We consider there is a case for the Act to define the circumstances in which MBIE must act
against harmful interference. In particular, Vodafone submits that the Act should place a duty on
licence holders not to cause harmful interference, and should also provide that MBIE must take
action to prevent harmful interference where it arises in particular circumstances (e.g. where
interference results from a licence holder acting outside the terms of their licence
E3.3 Having MBIE adopt a stricter approach to enforcement action in specific circumstances is
consistent with the approach taken in other jurisdictions. For example, under the (UK) Wireless
Telegraphy Act 2006 Ofcom regulates the use of radio communications apparatus and takes a
variety of enforcement action to address interference. Apparatus can only be used under the
terms, limitations and provisions of a license or a licence-exemption. The person who owns or
uses apparatus is subject to a general duty to ensure that it does not cause harmful interference
to others and they may be required to rectify any interference issues that do occur.
E3.4 We do not see any issues arising from parallel processes under which MBIE takes enforcement
action and private enforcement by parties themselves (i.e., arbitration or injunction). In each case,
it will be for the claimant party to determine whether private enforcement action is appropriate. A
claimant is unlikely to take private action, except in the most extreme cases,
Enforcement action
E3.5 At present, the circumstances in which MBIE will take enforcement action in respect of an offence
under the Act is unclear. The Act should also provide for MBIE to take enforcement action where a
licence holder breaches a general duty to ensure no harmful interference. We agree that the
range of offences should be expanded to include those identified in section 3.3.4 of the
discussion document.
E3.6 Our view is that the regime’s focus should be on ex-ante compliance, to prevent interference.
However where interferences does occur across different parties, penalties should be set
proportionately to the actual interference occurring, and on a daily basis. We agree that current
fines for infringement offences into a band held by another party are likely to be too low and
would not provide any disincentive. In particular, daily penalties for ongoing offences do not
appear to be sufficient to incentivise an offender to take remediation steps in a timely way.
E4 Liability issues (DD4.4)
Who is liable for certification decisions?
E4.1 In Vodafone’s view, the most sensible approach is for MBIE to locate liability for the certification
process with licence holders. Licence holders engage approved radio engineers (AREs) and are in
the best position to ensure that they undertake a robust evaluation before certifying a licence,
subject to the assumption, that key requirements of the certification process are also better
specified in the Act).
E4.2 If these key requirements are specified in the Act, which we think is vital, a person seeking
certification is likely to incentivise an approved radio engineer contractually to undertake a
robust certification process, although the ARE will not face personal liability (except perhaps to
the holder who contracted them) in the event that certification is subsequently found
inadequate.
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E4.3 We do not think it is sustainable for the Act to maintain the current position that, where a
proposed transmission has been certified as technically compatible, transmissions within the
licence are deemed to be lawful even if the certification process is flawed or contains a material
error. Where a certification error gives rise to a problem, e.g. an interference issue, that materially
affects the rights of another licence holder, MBIE should be able to address this, including –
potentially – by requiring change to be made to transmissions permitted by the licence.
Independence of approved radio engineers
E4.4 Provided the key requirements of the certification process are clear, and liability for adequate
certification vests in the licence holder, we do not consider the independence of AREs to be a
material issue.
Treating AREs and ARCs consistently
E4.5 In principle, we think that treatment of AREs and ARCs should be consistent as regards the key
requirements of functions that they perform.
Articulating the certification process
E4.6 It is not necessary for the Act to specify every element of the certification process (as outlined
above) but it should specify the factors that must be addressed when considering whether to
issue a certificate, and who is responsible for providing and warranting the information on which
any certification decision is based.
E4.7 As set out above, section 25A of the Act outlines matters relevant to the radio engineer’s
certificate (s25A) when registering a spectrum license. The current language is that an engineer
must ‘have regard to’ these factors. This does not, in Vodafone’s submission, provide sufficient
certainty as to the certification process and how certification decisions will be made in practice.
Greater certainty should be provided by:
(a) Recasting the requirement for the certificate (currently in section 25(5)) as a
requirements for an engineer to discharge when issuing the certificate (i.e., an engineer
must have regard to and, only if satisfied that requirements in section 25(5) are met,
issue certificate.
(b) Introducing a specific requirement to consider the technical compatibility of intended
and actual services/applications (by reference to the ITU and New Zealand table of
frequency allocations) should be added.
F Management Rights (DD5)
F1 Aggregation and transfer of management rights (DD5.2)
F1.1 When two management rights are being amalgamated, we agree that the protection limit should
be modified to remove the ‘spike’ at the common boundary. The limit should default to the lower
of the previous two limits.
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F2 Modification and cancellation of management rights (DD5.3)
F2.1 Greater flexibility should be allowed for MBIE to modify management rights once they have been
created:
(a) Allowing the aggregation of management rights with differing expiry dates would offer
substantial productive efficiencies.
(b) The Crown should, with the consent of the holder of management rights, have the ability
to cancel or terminate management rights.
F2.2 The ability to modify management rights as described should apply to both existing management
rights and to new management rights.
F3 Power Floors (DD5.4)
F3.1 As noted in Section B above, as technology advances, handsets and networks are both becoming
more sensitive - new technology is increasingly sensitive and have higher technical requirements
making the latest devices more susceptible to performance degradation through interference.
‘Cleaner’ spectrum is required for the correct operation of these devices than was necessary even
a few years ago. Therefore, the operation of ‘foreign’ devices even below the specified power
floor, may cause interference.
F3.2 Our recommendation is that MBIE focus on the practical impact of interference that arise where
applications are used within a power floor and on how this affects right holders’ abilities to use
spectrum. A reasonable question to consider is whether power floor should be abolished. The
value of retaining power floors is unclear to us, provided that MBIE implements an effective
interference management regime as set out above.
F4 Conditions on management rights (DD5.5)
F4.1 Vodafone submits that, in order to retain the flexibility necessary to optimise use of spectrum
across users and technologies, few or no conditions on management rights (for example
ownership caps, limitations on the use of, or transfer of, management rights) should be imposed.
F4.2 In terms of the regulatory design question: if any conditions are to be imposed, these should be
through rules or guidance rather than stipulated the Act, again to provide the potential for
amendments should market conditions change.
F5 Geographic extent of management rights and spectrum licences (DD5.7)
F5.1 Vodafone submits that management rights for spectrum should be asserted outside the 12 mile
limit, ideally to the limits of the EEZ. Our cellsite coverage may extend to 120km, and so we often
have marine coverage to over 100km from shore, which is relied upon by users including
commercial fishermen and the NZ Navy, including for important safety reasons. We have
experienced interferences from cruise ship radiocommunications devices, outside of the 12mile
limit and yet within the area that mobile coverage is relied on by users.
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G Licences (DD6)
G1 Unwanted emissions (DD6.1)
G1.1 Vodafone submits that unwanted emissions from transmitters operating under a spectrum
licence are not currently appropriately managed under the Act. As set out above, interference
(including where caused by ‘legal’ sources) must be better controlled and addressed.
G1.2 We agree that unwanted emissions in the spurious emission domain and outside specified UELs
should be explicitly managed under the Act, and that this could be achieved by clarifying the
application of the IRR to unwanted emissions, particularly in the spurious emissions domain, and
requiring that unwanted emissions meet international best practice.
G1.3 Right holders should have protection from harmful interference from unwanted emissions both
above and below the power floor. See Section F3 for our suggestion that the value of the
continued existence of power floors is worth considering.
H Competition (DD8)
H1 Regulatory overlap during allocation process (DD8.2)
H1.1 Currently, protection of competition when allocating spectrum is achieved through both MBIE’s
use of spectrum caps/acquisition limits and the application of provisions in the Commerce Act
1986 relating to the acquisition of business assets. Spectrum caps have been applied in the
700MHz, 2100MHz and 2.6GHz spectrum bands. We agree that spectrum caps can be an
appropriate instrument for protecting nascent competition, or for allowing competition to
emerge in a market that is not yet developed (subject to our comments at paragraph H2.1 below).
H1.2 Typically, the Commerce Commission plays a role only where a person seeking to acquire
spectrum management rights voluntarily applies to the Commission for clearance to do so.
H1.3 In Vodafone’s submission, maintaining a situation under which MBIE specifies an acquisition limit
for certain spectrum management rights (option 1), with the implication that an acquisition below
that cap is unlikely to harm competition, but in which the Commission may also reach a different
view on harm to competition when exercising functions under the Commerce Act, is not a tenable
option. The current duplication of roles between MBIE and the Commission, in which both plays a
role in protecting competition, is duplicative and unnecessary. It creates significant uncertainty
and is particularly problematic during the initial allocation of spectrum.
H1.4 This view is informed, in particular, by Vodafone’s experience with the auction of the 700MHz
spectrum band. This auction required bidders to reach a view pre-auction on whether they should
seek clearance to acquire spectrum management rights falling within the acquisition limit set by
MBIE. They could not assume that the Commission would conclude that an acquisition within the
relevant spectrum cap would be found not to result in an unlawful substantial lessening of
competition as only a Commission clearance or authorisation can provide this certainty. In
addition, bids could not be made on a conditional basis meaning that if bidders did acquire
spectrum at auction, and the Commission subsequently determined that this acquisition is
unlawful, the bid could not be unwound.
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H1.5 In the context of the 700MHz auction, the Commission had previously indicated to MBIE that it
did not support the (potential) spectrum cap of 2x20MHz set for the 700MHz band.
11
The initial
acquisition limit of 2x15 MHz for 700MHz spectrum was able to be raised to 2x20 MHz during the
auction if insufficient bids above the reserve price were received for all spectrum blocks. However,
in this scenario any person bidding for the 2x20 MHz would proceed without clearance and then,
if the Commission judged that the acquisition lessened competition, would be required to divest
spectrum. The pool of potential buyers would (probably) be fewer, and so the divesting party
would likely suffer a loss.
H1.6 In terms of the remaining options, we can see the case for MBIE retaining an ability to specify
acquisition limits so as to provide for particular policy objectives (under option 2). In general, we
consider that the core objective of a spectrum auction should be the allocation of spectrum to
the bidder that assigns most value to it. To the extent that extraneous policy objectives are also
considered, they dilute this principle. But we accept that removing government’s ability to apply
controls could also make the design and running of auctions relatively more difficult than at
present. On balance therefore, we do not favour this option.
H1.7 We see little merit in option 4, which proposes regulatory coordination between MBIE and the
Commission in specifying acquisition limits. The Discussion Document notes that “[w]hile the
Commerce Act may still theoretically apply to spectrum allocations, the consultation with the
Commission during the setting of competition measures would ensure that parties acquiring
spectrum are not required to seek clearance or authorisation for an acquisition under the Act.” As
a preliminary point, we note that whether to seek clearance or authorisation is entirely voluntary,
there is no existing requirement to do so. What is more relevant is whether a person acquiring
spectrum management rights would remain of the view that clearance should be obtained under
the arrangements existing under this option. In Vodafone’s submission, they would.
H1.8 The fact that the Commission may have been consulted in the setting of an acquisition limit, as
happened in respect of the 700MHz auction, does not alter a potential bidders exposure to
Commerce Act risk. The fact that the Commission may have been consulted or otherwise
involved in the design of auction rules offers no legal protection.
12
At best, the involvement of the
Commission in determining auction rules is a factor that acquirers will consider when deciding
whether voluntary notification is necessary, but it does not remove the potential for overlapping
processes, nor does it reduce an acquisitions exposure to review under the Commerce Act.
H1.9 We see more merit in the remaining option 3, involving delineation of the application of
competition regulation under the Act and the Commerce Act, such that the latter would not
apply when specific provision is made in auction rules to protect competition (e.g. acquisition
limits). This option is particularly appropriate for the initial allocation of spectrum via auction
processes, as it avoids uncertainties that accompanied the 700MHz spectrum auction for
example. In Vodafone’s submission, during the initial allocation phase for spectrum competition
protection should be provided solely by the application of spectrum caps/acquisition limits. Once
initial allocation of spectrum has occurred, we see less case for ousting the application of the
Commerce Act as the interaction between allocation mechanisms (i.e. auctions) and Commission
processes is much less problematic. Transactions occurring as part of secondary market trading
11
The Commission said that: “[o]ur view is that allowing one party to exceed the 2x15MHz spectrum cap and achieve 2x20MHz
does not have clear competitive benefit” (Commission letter to MBIE, December 2011)
12
As noted above, only a Commission clearance or authorisation can provide this.
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are, for example, relatively easier to manage in circumstances where there is overlapping
provision via both the Commerce Act and licence conditions.
H2 Spectrum caps (DD8.3)
H2.1 Vodafone accepts the continuing use of spectrum caps, provided that caps are subject to review
and are withdrawn when they no longer serve any useful purpose (i.e. when they are no longer
necessary to prevent concentration of spectrum holdings that would substantially harm
competition). However, we do not consider it appropriate to use such caps to promote equal
spectrum holdings by all operators as an end in itself. We do not believe that ‘spectrum equality’
is required as between operators in order to enable effective competition. Rather, a spectrum
caps should be imposed only where, on the basis of objective analysis, it is likely that a substantial
loss of competition would result if a single operator was not restricted in the amount of particular
spectrum they could acquire.
H2.2 The Discussion Document appears to recognise that, as technology evolves carrier aggregation
between spectrum bands will become more prominent and this evolution does affect the
continuing relevance of spectrum caps. In terms of future developments, operators will be able to
use a broad range of spectrum holdings (850/900MHz, 1800MHz, 2100MHz, 2600MHz and any
future bands) to deliver both 4G and 5G services. Therefore, any benefit from larger holdings of
any particular spectrum band will be limited going forward.
H2.3 In this context, a person’s holding of spectrum management rights in any single band is less
relevant. Rather, the necessity of imposing an acquisition limit in any specific spectrum band to
avoid competition problems should be determined with reference to a person’s total spectrum
holdings (i.e. whether, having regard to the persons total holdings, unfettered acquisition would
lead to material loss of competition having regard to the total holdings of that person’s
competitors).
H2.4 Where mobile telecommunications are concerned, operators will compete for customers in a
variety of ways (price, service, quality etc.). Customers are generally agnostic as to the technology
that is used to deliver retail services: their focus is the price and quality of end user experience.
Where an operator’s holding of a particular spectrum band is not equal to that of other operators,
this does not of itself indicate that their ability to compete in downstream markets is reduced in
any material way. Overseas jurisdictions clearly show that intense competition between licence
holders using spectrum occurs even where there is significant asymmetry between the spectrum
holdings of each operator.
H2.5 Assessing the capability offered by a person’s total spectrum holdings, in the context of mobile
telephony services, demonstrates that:
(a) there is frequently not parity of spectrum holdings across mobile operators;
13
(b) the operator with the largest market share may not have the largest spectrum holding;
13
For example in the Australian digital dividend auction only Telstra and Optus purchased digital dividend spectrum.
Vodafone did not purchase any digital dividend spectrum. This was not seen as problematic because Vodafone has
other spectrum holdings that would enable it to deliver equivalent services and compete effectively.
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(c) operators use different combinations of spectrum to deliver services;
14
and
(d) operators can configure their networks to reflect their spectrum holdings where
necessary to compete in the market.
H2.6 This suggests that a spectrum cap should be applied to the acquisition of management rights in
any individual spectrum band only where the acquisition of rights by any existing operator would
cause a substantial lessening of competition (in a downstream market), or increase an existing
competition problem. Assessment of these matters should be based on an orthodox and
evidence based competition analysis. As carrier aggregation develops, there should be a general
presumption against the use of spectrum caps.
Process for imposing, reviewing and retaining caps
H2.7 As the Discussion Document notes, spectrum caps are currently applied via agreement with
parties and rely on civil law. Vodafone considers that the Act should make specific provision for
spectrum caps, and specifying the process for their implementation and review. It makes sense
for us statutory provision to be made in the form of an allowance for temporary conditions to be
applied to spectrum management rights. This scope of these conditions should be clearly applied
and, in Vodafone’s submissions, an acquisition limit condition should apply only where MBIE has
reasonable grounds for concluding that they are necessary to avoid a substantial lessening of
competition, and the condition imposed should be no more restrictive than is necessary to
achieve this purpose.
H2.8 MBIE may, when informing itself as to whether the acquisition of spectrum may result in a
substantial lessening of competition, consult with other parties (including the Commerce
Commission). If consultation on this issue is appropriate, then we think the Act should set out the
process and timeframe that will apply.
H2.9 When imposing a cap, MBIE must have reasonable grounds for concluding that the ex ante
controls on the acquisition of spectrum are necessary to prevent harm to competition that is
unlikely to be prevented via the application of general competition law (i.e. the merger control
provisions in the Commerce Act).
H2.10 Where spectrum caps are applied, Vodafone submits that they must be of fixed duration in every
case up to a maximum of 2-3 years. At the expiry of this period, the cap should lapse unless MBIE
considers that it should be extended. If MBIE wishes to retain a cap, then there must be a clear
process for review and confirmation of its terms. The process for review should be mirror the
process that applied to initial specification of the cap. This may include discussion between the
MBIE and the Commerce Commission regarding whether a cap remains necessary, but we do not
regard such discussion as necessary (i.e. it should be permitted but not mandatory).
H2.11 A decision to extend a cap must be justified on the basis of an ongoing need to protect
competition (i.e. subject to the same threshold test as initial application of the cap), again
reflecting input from other parties (including the Commission) where appropriate. We think there
is merit in guidance being provided on the process for review and decision on continuation of
14
For example in the UK Vodafone and O2 have large holdings of sub 1GHz spectrum. In comparison EverthingEverywhere has a
large holding of 2GHz spectrum. Each operator uses their different holdings to deliver identical competitive services.
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spectrum caps. However, such guidance should not be instead of additional provision in the Act
specifying:
(a) the threshold conditions that must exist in order to retain or extend a cap. the threshold
conditions that must exist for a spectrum cap to be imposed;
(b) the duration of a cap; and
(c) the threshold conditions that must exist in order to retain or extend a cap.
H2.12 While legislative provision should be made to these matters, MBIE should – subject to these
provisions – retain flexibility to impose caps where appropriate and account for new technology.
H2.13 It is appropriate for spectrum caps to continue to be specified in deeds/agreements between the
Crown and licence holders. Legislation should not specify caps, but rather control the terms
under which they are applied.
H3 Secondary markets (DD8.6)
H3.1 Vodafone supports a regime that enables secondary trading in spectrum management rights. The
operation of a secondary market promotes efficiency objectives by enabling spectrum to be
allocated to its highest value use, and ensuring availability of spectrum resources where
necessary to support new technologies.
H3.2 As now, any transfer of management rights via secondary trading should be cleared through
MBIE. However, we do not consider that any specific provision is required in the Act to regulate
transactions in secondary markets. General measures in the form of spectrum caps/acquisition
limits, applied subject to the terms discussed above, and general application of the Commerce
Act.
I Spectrum sharing (DD9)
I1 Discussion (DD9.3)
I1.1 The general user radio licencing regime (GURL) should not allow potential interference to
adjacent management rights. By catering to low quality GURL device users, the Ministry must
take care not to amend the regime in such a way that will increase the interference risk to users
placing higher value on the spectrum, and creating substantial productive benefits to New
Zealand. Vodafone submits that the GURL regime could be made more stringent as at present
there is little control over who and how it is used.
I1.2 As discussed in section F above, we submit that power floors should be abolished. Power floors
are not an appropriate mechanism for spectrum sharing, and yet do create significant potential
risks of interference.
I1.3 Vodafone’s view is that spectrum licences are appropriately allocated by the rights holders, and
so the industry is best placed to manage any potential spectrum sharing.
I2 Dynamic spectrum access technologies (DD9.4)
I2.1 Vodafone’s view is that management rights holders should be left to determine the appropriate
degree of spectrum sharing. With the exception of competition concerns such as spectrum
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hoarding, we can expect that is a mutually beneficial (allocative efficient) arrangement exists, the
parties are likely to achieve an agreement to share spectrum.
I2.2 In contrast, Vodafone submits that the Act should be amended to allow a single spectrum licence
to cover multiple transmitters’ locations. This amendment would remove some of the current
productive inefficiencies by reducing excessive administrative costs.
J Other issues (DD10)
J1 Licences with multiple transmitter locations (DD10.2)
J1.1 Vodafone submits that the Act should not restrict licences to be for a single transmission
location. It is often the case that it is ether not practical, or cost-prohibiting, to licence individual
transmitters, for example where the transmitters are mobile and do not have a fixed location. The
Act should instead specifically allow and define a licence classes that covers multiple
transmitters locations.
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K Discussion Document Questions with Short Responses
Discussion
Document
Question No
Question
& response
DD Q5. Should the Act be more prescriptive around particular matters or processes? If so, what
areas should be more prescribed and how?
Greater clarity on the relative weighting given to economic and social objectives would
create more certainty, contributing towards dynamic efficiency.
DD Q6. Should the application of the government policy statement issued under section 112 be
extended to cover the government’s intentions for the management rights regime?
Yes.
DD Q7. Should a requirement for a national table of frequency allocations, based on the IRRs,
and national band plans be included in the Act? If so, how?
No.
DD Q8. Should the requirements placed on radio engineers during the certification process be
made directly and be more specific and/or compulsory? If so, how?
No.
DD Q9. Are the matters that radio engineers must have regard to when certifying a licence
sufficiently defined under the Act or should there be further guidance provided to radio
engineers as they carry out their certification? If so, what form should this guidance take
and what issues should the guidance cover?
The current guidance is sufficient.
DD Q10. Should the Act require all relevant information to be included on a licence application to
enable a complete assessment of technical compatibility when creating future licences? If
so, what information should be required?
The current information requirements are sufficient.
DD Q11. When assessing whether a proposed licence is ‘technically compatible’, should radio
engineers take account of the potential cumulative effects of transmission sources? If so,
how can this be enabled under the legislation?
Yes, radio engineers should take into account the cumulative effects of transmission
sources
DD Q12. Should the beneficial position of being first in time be retained in the Act? If not, how
should this be addressed?
Yes, so long as allocative efficiency is not affected.
DD Q13. Should radio engineers be required to consider whether a proposed licence is technically
compatible with potential future uses of adjacent management rights? How should these
potential future uses be defined?
No, radio engineers can’t predict all feasibly future uses of a management right.
DD Q16. Should it be made an offence to inaccurately record or over-record parameters on a
licence? If so, should any tolerances be applied and how should this be done?
No.
DD Q21. Is an arbitration process appropriate for managing disputes between parties? If not, what
other process should be included in the Act?
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An arbitration process should be retained subject to changes to the process described in
our response.
DD Q22. Should the dispute resolution processes under the Act be updated? If so, how should the
process be updated?
Yes.
DD Q23. Are the matters an arbitrator must have regard to, in reaching a decision, appropriate? If
not, what other matters should the arbitrator consider?
An arbitrator should be specifically directed to consider, for example:
a) the application of IRRs (as if the licence holder/operators were member states);
b) Government policy statements regarding the use of spectrum management
rights; and
c) ITU band allocation plans and recommendations.
DD Q24. Should any resolution reached through a dispute resolution process be binding on the
participants?
Yes, subject to right of appeal to the courts on point of law only. Decisions resulting from
the dispute resolution process should stand pending the outcome of appeal.
DD Q25. Should injunction or other cease and desist mechanisms be provided for in the Act itself,
as a prelude to arbitration? If so, what limits and criteria should apply prior to such as
mechanism being used?
Yes.
DD Q26. Should timeframes in the Act be amended and should the actions of the Chief Executive
be bound by timeframes prescribed in the Act?
Yes.
DD Q27. Should the Act include a right of appeal against the Chief Executive’s decisions? If so, to
whom should the appeal be directed?
Yes. Chief Executive decisions should be subject to right of appeal to the courts on point
of law only.
DD Q28. Should disputes involving both lawful and unlawful emissions be able to be subject to
arbitration or other dispute resolution process? What limits of applicability would be
appropriate?
Yes.
DD Q29. Should the Crown, through the Ministry, be involved in interference management in
frequency bands subject to private management rights?
Yes.
DD Q30. Should any additional enforcement provisions be included in the Act?
Yes.
DD Q31. Should the maximum penalties for contravention of the Act be amended?
Yes, in particular increased penalties are required for ongoing offences.
DD Q32. Should the scope of section 2 of Schedule 1 be limited to purely capture the impact on
emergency and safety signals, and reduce unintended consequences? If not, why not?
Yes.
DD Q33. Should liability in regard to certification be introduced and should this rest with the
certifier, the licence holder, or the manager (as the actual licencing authority)?
The licence holder.
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DD Q34. Should radio engineers be required to be independent of the entity on behalf of which
they are certifying spectrum?
No.
DD Q35. Should ARE’s and ARC’s be treated consistently in terms of liability, independence and
authorisation?
Yes.
DD Q36. Should the certification process be articulated independent of the responsibilities of the
Registrar under the Act?
Yes, up to a point.
DD Q37. Should the requirement under section 38 that AFELs are below the protection limit of
adjacent frequencies also apply when management rights are being modified,
amalgamated, or divided?
DD Q38. When two management rights are being amalgamated, should modification of the
protection limit to remove the ‘spike’ at the common boundary be included in the
amalgamation process? If so, what should the protection limit default to either side of
the common boundary?
Yes – to the lower of the previous two limits.
DD Q39. Should greater flexibility be allowed to modify management rights once they have been
created? If so, what modifications should be allowed with the agreement of whom (i.e.
managers, rightholders or others)? Should this include aggregation of rights with
different expiry dates?
Yes.
DD Q40. Should the Crown, with the consent of the manager and/or rightholder(s), have the
ability to cancel or terminate management rights? If so, what limitations, if any, should
be applied to this power?
Yes.
DD Q41. Should any changes to the ability to modify or cancel management rights be applicable to
existing management right or only as new management rights are created?
Yes for both existing and new rights.
DD Q42. Should power floors be retained? If so, are they appropriately defined?
No. Our recommendation is that power floors should be abolished.
DD Q43. Should reference bandwidths for power floors and other limits be specified? If so, should
these be specified in the Act, the Regulations or through conditions on management
rights?
No. Our recommendation is that power floors should be abolished.
DD Q49. Is there a need to assert management of spectrum outside the 12 mile limit?
Yes, management rights should hold outside the 12 mile limit, to the limits of the EEZ.
DD Q54. Are unwanted emissions from transmitters operating under a spectrum licence
appropriately managed under the Act?
No
DD Q55. Should unwanted emissions in the spurious emission domain and outside specified UELs
be explicitly managed under the Act? If so, how should this be achieved?
Yes.
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DD Q56. Should rightholders have protection from harmful interference from unwanted emissions
above and/or below the power floor?
Yes.
DD Q61. Should the current overlap between government policy setting and the role of the
Commerce Commission in spectrum allocations be clarified? If so, how?
Yes.
DD Q62. Are spectrum caps still necessary, either initially or for the longer term, and if so, should
they have a legislative basis?
Yes, caps remain necessary but the terms under which they apply must be subject to clear
statutory provision.
DD Q63. In setting spectrum caps, should total spectrum holdings be considered or should
spectrum caps solely relate to particular bands? How should broader caps be
determined?
Caps should be set with reference to total spectrum holdings.
DD Q64. Should any legislative mechanisms to apply spectrum caps be generic and flexible enough
to apply to all high-value spectrum uses, or should they be specific to particular uses?
How could flexibility for technology changes be incorporated?
Legislation should specify threshold conditions for imposing, retaining or extending a cap.
It should also specify the maximum duration of a cap.
DD Q65. What are the most appropriate mechanisms to implement competition safeguards in
radio spectrum using markets? Are the current deeds and agreements sufficient or
should competition safeguards have a legislative basis?
Spectrum caps should continue to be specified in agreements/deeds. Legislation should
specify those matters discussed above.
DD Q66. If spectrum caps are given a legislative basis, how should they be affected?
See above.
DD Q67. Should spectrum caps be applied at the initial allocation for a limited number of years
with a periodic review of whether they remain necessary, or for the entire length of the
management right?
Yes.
DD Q68. Should any process, criteria, or framework for the review of spectrum caps be included in
the Act?
Yes.
DD Q69. Should the Commerce Commission be involved in any review of spectrum caps? If so,
how?
MBIE should have the option consulting with the Commission, but this should not be a
mandatory requirement.
DD Q73. Are there changes to the general user radio licence regime that would facilitate greater
use of this mechanism without unduly affecting the rights of incumbent users?
No.
DD Q74. Are power floors in management rights effective in achieving spectrum sharing?
No.
DD Q75. Should management rights created in the future place more obligations on the owner to
allow spectrum sharing? Are there ways to increase sharing in management rights
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without decreasing the value of the right to the owner?
No.
DD Q76. Should the Act be amended to provide for greater flexibility to accommodate dynamic
spectrum sharing technologies? If so, how?
No.
DD Q78. Should the legislation be amended to restrict all classes of licence to be for transmission
from a single transmitter location? If so, should this be done in the Act by prescribing a
licence format consistent with spectrum licences or through changes to the Regulations?
The Act should not restrict licences to be for a single transmission location. The Act should
instead specifically allow and define a licence classes that covers multiple transmitters
locations.
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