Outline of the First Report of the "Study Group on Policies Concerning the Effective Radio Spectrum Use"



< Chapter I. Current Status and Challenges>

Paragraph 1. Current Status
  • In recent years, as the shortage of assignable radio spectrums has become a serious matter, a new demand for radio spectrums tends to require broader bandwidths. Up to now, in order to use radio spectrums effectively, R&D on measures for shifting frequencies, unused frequency bands, etc. has been carried out. With the existing measures, however, it becomes difficult to meet a new demand for radio spectrums without delay.
Paragraph 2. Challenges

  (1)  As measures for meeting a new demand for radio spectrums, the most realistic solution would be reallocation of radio spectrums, but meanwhile, the reallocation will impose a burden on the incumbent licensees. Accordingly, upon reallocation of radio spectrums, so as to minimize such burdens on the incumbent licensees, a 10-year preparatory period is set and alternative spectrums are ensured before implementing the reallocation. Henceforth, however, there would be cases where reallocation is to be implemented within a short period of time, e.g., three years, or where no alternative radio spectrums are reserved from the beginning.

  (2)  With regard to implementation of reallocation in such unprecedented way, it is vital to identify and organize basic concepts of reallocation. Specifically, deliberations shall be made on i) procedures for developing a reallocation plan, ii) whether the incumbent licensees are to be compensated or not, iii) desirable ways of cost sharing upon compensation.

  (3)  In addition to reallocation of radio spectrums, from the viewpoint of promoting effective use of radio spectrums, consideration shall be made on measures for introducing market principles, technological measures, etc.

<Chapter II. Policy for reallocating radio spectrums>

Section 1. Development of reallocation plan and whether to compensate

    Paragraph 1. Procedures for developing radio spectrum reallocation plan

  (1)  Upon development of a radio spectrum reallocation plan, adequately considering expectations of the incumbent licensees for continuous use of radio spectrums, deliberations shall be made so as to take prompt actions in order to meet a new demand for radio spectrums. In this case, procedures for developing the reallocation plan are to be considered so that transparency and fairness can be sufficiently ensured in the course of the development thereof.

  (2)  As regards this point, in line with the revision in 2002 of the Radio Law, a legal scheme was introduced (effective from October 31, 2002) for contributing to development of the radio spectrum reallocation plan under which the Minister for MPHPT i) conducts survey, etc. of actual radio spectrum usage, ii) publicizes the results thereof, iii) invites public opinions on them, and iv) assesses to what degree radio spectrums are being used effectively.

Upon the development of the reallocation plan, the Minister for MPHPT shall i) sufficiently utilize the newly introduced scheme for conducting survey, etc. of actual radio spectrum usage and publicizing the results thereof, ii) at the same time, clearly show objective criteria concerning appropriateness for implementing the reallocation and methods for implementation, then, iii) take into consideration public comments, etc.

Paragraph 2. Short-term reallocation

  (1)  Under the Radio Law, the valid term of licenses for radio stations is in principle within five years considering necessities for i) reviewing radio spectrum allocation on a regular basis along with changes in socioeconomic activities and development of science and technology, and ii) protecting the status of licensees for stably using radio spectrums. In principle, licenses may not be revoked within the valid term. In cases where the Minister for MPHPT requires licensees to terminate the use of radio spectrums within five years after setting forth the reallocation plan (short-term reallocation), the relationship between the valid term of licenses and the reallocation plan becomes a problem because some licensees are to terminate the use of radio spectrums within the valid term of licenses in question.

  (2)  It is essential to consider the fact that the significance of radio spectrums in socioeconomic activities, etc. has been growing much bigger in recent years. In cases where public interest which is high require new radio spectrums to meet demand for wireless access, mobile communications, etc., a new scheme shall be developed for enabling short-term reallocation.

  (3)  Upon introduction/operation of the new scheme, it is vital to comprehensively assess the public interest needs, taking into account appropriate consideration to various conditions of licensees, such as availability of alternative communications means. Furthermore, with regard to ensuring of consistency between the legal nature of the valid term of licenses, deliberations henceforth shall be delved into from the legal viewpoint.

Paragraph 3. Whether to compensate the incumbent licensees or not

  (1)  For instance, when implementing the short-term reallocation, as target incumbent licensees are to terminate the use of already-assigned radio spectrums after the elapsing of a comparatively short term since the development of the allocation plan, the incumbent licensees cannot use radio facilities compliant with said radio spectrums and have to shoulder costs for procuring alternative facilities.

  (2)  Radio frequencies are public resources. Thus, licensees are temporarily granted a status that allowed use of radio spectrums. Taking these into consideration, compensations for covering the right to use radio spectrums and purchase costs of alternative facilities, that, as a result, become assets of the licensees, are thought to be unnecessary.

  (3)  In reality, however, licensees are investing in radio facilities and installation thereof on the assumption that the use of radio spectrums is allowed to continue to some degree. Measures shall be considered for preventing substantial losses on licensees, such as a subsidization scheme under which the government compensates a portion of investment (remaining book value of facilities, etc.), which cannot be recovered by implementation of the reallocation.

Paragraph 4. Others

  (1)  From now on, as regards frequency bands used by radio stations requiring no licenses, it is foreseeable that deliberations shall be made on implementation of prompt reallocation. In this case, as the Minister for MPHPT has no means to know the whereabouts, etc. of radio stations requiring no licenses, it becomes difficult to ensure effectiveness of the reallocation plan, such as publication, etc. of the implementation of the reallocation plan.

  (2)  Meanwhile, from the viewpoint of promoting development of radio LANs, ICT consumer electronics, etc., convenience of radio spectrum users brought about procedures requiring no licenses shall be taken into consideration.

  (3)  Accordingly, taking into account concrete usage modes of radio spectrums, it is an important task to develop desirable measures for both ensuring effectiveness of prompt reallocation and improving convenience of radio spectrum users.

  (4)  In addition, upon reallocation of radio spectrums, considering that status of the shortage of assignable radio spectrums varies in different areas, such as rural or urban areas, measures for the reallocation shall be geared to the realities of each local area.

  (5)  As regards this point, in line with the revision in 2002 of the Radio Law, a legal scheme was introduced for conducting survey, etc. of actual radio spectrum usage and publicizing the results thereof. Thus, taking into consideration the area-by-area results of the survey, after ensuring technological possibilities for sharing frequencies with other radio stations, the administration shall reallocate frequencies in accordance with the realities of each local area, so as to promote effective use of radio spectrums.

Section 2. Introduction of Compensation Scheme

    Paragraph 1. Outline of Compensation Scheme

  (1)  Toward licensees who will not be allowed to use the existing radio spectrums, it is appropriate that, within a given period of time from the development of a radio spectrum reallocation plan, a compensation scheme under which the government mainly compensate a portion of unrecoverable investment (remaining book value of facilities, etc.) in purchase, etc. of radio facilities, is to be introduced.

  (2)  It is appropriate that the "given period of time" under the abovementioned (1) is five years, considering that, under the Radio Law, the valid term of a license is in principle five years and the government is required to compensate for losses caused by implementation of frequency changes within the valid term of a license.

  (3)  As for radio stations including facilities with a huge amount of investment such as buildings with microwave-band fixed stations and steel towers for telecommunications business, there are cases however where, even if radio spectrums are used for more than five years after the development of a reallocation plan, a large amount of book value still remains. Thus, as regards specific radio stations, even in cases where the allocation plan is to be implemented for more than five years, deliberations shall be made on exemptions to be compensated including objective standards for judging the exemptions.

Paragraph 2. Factors, etc. for calculating amounts of compensations

  (1)  With regard to losses generally imposed on licensees through implementation of the reallocation plan, it is appropriate that factors for calculating amounts of compensations are those that can be typified beforehand. Specifically, it is appropriate that i) the remaining book value, etc. are to be basic factors for calculation, and ii) costs for acquisition of new facilities and operating losses shall not be included in basic factors for calculation.

  (2)  In addition, with respect to the treatment of the scope of object facilities including remaining book values, dismantlement cost of facilities, etc. to be ceased to operate, financial expenses accompanying acquisition of new facilities ahead of schedule, etc., henceforth the government shall make specialized deliberations thereon, in reference to similar domestic schemes.

  (3)  It is appropriate that the amount of compensations is to be calculated based on remaining book values, etc. at the end of the time of radio spectrum use as set forth in the reallocation plan, and the time of compensation payment is at the end of the time of radio spectrum use. However, in order to make incentives for encouraging licensees to voluntarily terminate the use of radio spectrums ahead of schedule, it shall be considered whether the time of compensation payment is to be the time when the licensees actually terminate the use of radio spectrums or not.

Paragraph 3. Others
  • With respect to the economic lifespan upon calculation of the amount, etc. of compensation, there are some cases where the statutory useful lifespan of similar radio facilities differs from each other according to purposes, such as for use of telecommunications or that of power utilities. Thus, object calculation standards shall be separately developed.

Section 3. Desirable cost sharing pertaining to compensation scheme

    Paragraph 1. Cost sharing by new/incumbent licensees

  (1)  Focusing on the point that new applications of radio spectrum use can be realized through reallocation of radio spectrums, it is appropriate to require new licensees as beneficiaries therefrom to shoulder a given portion of the reallocation cost. On the other hand, focusing on the point that the reallocation of radio spectrums will prevent the shortage of available radio spectrums from getting worse, the incumbent licensees as a whole will benefit therefrom.

  (2)  Accordingly, it is appropriate that i) the Spectrum User Fees for covering common administrative costs for all radio station licensees be allocated to cover costs for the reallocation, and ii) in addition to the ordinary Spectrum User Fees, new licensees be made to pay additional Spectrum User Fees to cover the costs for said reallocation.

  (3)  With regard to the ratio of cost sharing between new licensees and incumbent licensees, as both sides can benefit from the reallocation of radio spectrums, for the time being it is appropriate that a scheme be established based on a 50-50 basis.

  (4)  As regards the timing of cost sharing by new licensees, there are cases where it is difficult to require cost sharing upon implementation of the reallocation, such as in cases where modes of radio spectrum use are shared use, etc. Thus, with the purpose of encouraging new entries through reductions of cost burden on the new licensees, it is appropriate that i) the reallocation cost is to be covered temporarily by the Spectrum User Fees, so that ii) the cost may be recovered with the new licensees within two or more years.

Paragraph 2. Desirable way of cost sharing for new licensees

  (1)  With respect to specific ways of cost sharing for new licensees, it is appropriate that a legal scheme be established according to the following two modes:
(a)  Like cases of cellular telephones, a "mode for exclusive use of radio spectrums" under which i) the number of licenses is set forth beforehand and upon implementation of the reallocation an amount of shared cost for new licensees can be decided upon, and ii) licensees can exclusively use radio spectrums; and

(b)  Like cases of wireless access systems, a "mode for shared use of radio spectrums" under which i) the number of licenses is not set forth beforehand and upon implementation of the reallocation an amount of shared cost for new licensees is difficult to be decided upon because new entries are allowed at anytime, and ii) licensees cannot exclusively make use of radio spectrums.

  (2)  With respect to the "mode for exclusive use of radio spectrums," it is appropriate that an amount of shared cost be specified through introduction of licensing procedures for evaluating a proposed amount of shared cost from new license applicants. Under the licensing procedures, upon application for licenses the new license applicants are requested to offer cost sharing proposals within a range of cost between the lower limit of 50% and the upper limit of 100%. In addition, it is appropriate that the timing of payment of shared cost be installments within five years or lump-sum payment upon licensing. In cases of payment in installments, interests shall be considered.

  (3)  With respect to the "mode for shared use of radio spectrums," it is appropriate that a specific amount of money as additional Spectrum User Fees be collected annually from licensees; in this case, a specific amount of shared cost shall be set forth with the target of collecting 50% of the reallocation cost for ten years. It is also appropriate that the term for collection be continued to the extent that the total of collected amount reaches at least 100% of the reallocation cost.

Paragraph 3. Spectrum User Fee

  (1)  Up to now, the Spectrum User Fee system, which covers costs of radio monitoring service and technical test service for effective use of radio spectrums, has been contributing to effective use of radio spectrums. From now on, considering its ever-increasing importance, in order to further develop the system, it shall be maintained so that radio station licensees can understand and support the system.

  (2)  To this end, upon appropriation of the Spectrum User Fees to the reallocation cost through expansion of application fields, it is appropriate that new licensees be requested to shoulder costs as additional Spectrum User Fees concerning a specific portion of the reallocation cost. In this case, considering the balance between benefits and burdens of the Spectrum User Fees and prevention of hindrances against ordinary operations of other services such as radio monitoring, it shall be focused on the point that the new licensees will enjoy benefits from implementation of the reallocation.

Since applicable fields of radio spectrums among new licensees are common, when calculating the amount of the fees, deliberations shall be made on whether calculation factors contain circumstances such as frequency bands and antenna powers based on specific cases.

  (3)  Taking into consideration the intention of the supplementary resolution of the Diet concerning the Spectrum User Fee, public opinions, and the abovementioned deliberations, the government shall consider desirable calculation methods of the Spectrum User Fee in an adequate and appropriate manner.

Paragraph 4. Desirable way of cost sharing for radio stations requiring no licenses

  (1)  With respect to ICT consumer electronics requiring no license and wireless LANs, it is foreseeable in the near future that specific frequencies shall be promptly ensured in order to encourage diffusion and development of those services. Where reallocation cost is required along with implementation of radio spectrum reallocation, deliberations shall be made on whether even radio stations requiring no license are to be requested to shoulder said cost because such stations enjoy benefit from the reallocation.

  (2)  However, as radio stations requiring no license need not file notification, the problem is how to collect such a fee. The following two methods are considered as realistic solutions:

(Method A) Telecommunications carriers, and private-system users excluding individual users, etc.

Methods: In cases of telecommunications service, telecommunications carriers are requested to shoulder the cost. In cases of private systems, users to shoulder the cost are limited to large-scale users, etc.

(Method B) Manufacturers, etc.

Methods: Costs shouldered by manufacturers, etc. are shifted onto prices for end users. As a result, radio spectrum users come to shoulder those costs.

  (3)  Upon considering the preceding conditions, trends in service development shall be taken into account. For instance, Method A will require telecommunications carriers to shoulder a larger portion of cost burden, resulting in unequal cost sharing between individual users, etc. Method B require manufacturers, etc. who do not directly use radio spectrums to shoulder a cost burden, meaning new rulemaking in a sense. Thus, which one is to be employed shall be further considered, based on public opinions, etc.

  (4)  Accordingly, continuing deliberations are to be made on measures for collecting the cost from radio stations requiring no license, including Methods A and B above and others.



<
Chapter III. Measures for introducing market principles for promotion of effective use of radio spectrums>

Paragraph 1. Value of radio spectrums and introduction of market principles
  • Basic ideas of radio regulatory policies are to maximize integral value as public interest of radio spectrums based on multifaceted use of radio spectrums through promotion of effective use of radio spectrums.

    As measures for maximizing integral value as public interest of radio spectrums, there are many cases where the U.S. and European countries have introduced measures utilizing market principles, for example, collection of user fees' worth of economic value of radio spectrums, auction systems, etc.
Paragraph 2. Collection of spectrum user fees

  (1)  Collection of user fees is an idea that a government specifies an amount of spectrum user fees' worth of economic value of radio spectrums, and licensees judge whether to use radio spectrums from the user fees, so the effective use of radio spectrums will be promoted.

  (2)  Collection of user fees without explaining the earmarking of the fees, however, will be hardly accepted by radio spectrum users. Upon calculation of the amount of user fees, in addition to "quantity of radio spectrums" such as bandwidths and antenna power, "use of radio spectrums," etc. are to be considered. Deliberations on calculation methods are to be made.

  (3)  As mentioned above, collection of user fees involves difficult problems.

Paragraph 3. Auction system

  (1)  In cases where the number of licenses is limited such as cellular telephones, the U.S. and European countries are introducing auction systems, focusing on the fact that licensees are able to achieve higher profits through use of radio spectrums being common resources of Japanese nationals as exclusive infrastructures, based on the following viewpoints:

1)  Promotion methods for effective use radio spectrums, through selection of licensees who evaluate radio spectrum at thehighest prices

2)  Effective methods for setting spectrum user fees, and enabling the return of revenues to Japanese nationals

3)  Methods for ensuring transparency, fairness and promptness in selection procedures for licensees who are to be granted a special status to exclusively use radio spectrums

  (2)  Once bidding prices go too high, auction systems, however, will cause the following problems as exemplified by European countries:

1)  Services will be postponed, the population coverage rate will be sacrificed, and furthermore, service itself has hardly started up.

2)  As a result, the ICT industry, a national leading/strategic industry, will go into a decline.

3)  Where collecting higher license fees, the valid term of license tends to be set 20 years. Strengthened rights of licensees will be hazardous to prompt reallocation of radio spectrums in the future.

Thus, setting aside the viewpoint from financial aspects, auction systems contain a risk of seriously hindering effective use of radio spectrums.
  (3)  Accordingly, from the viewpoint of promoting effective use of radio spectrums, where it is appropriate to utilize market principles in licensing procedures, while taking advantages of auction systems incorporating market principles, other possible measures for overcoming potential risks are to be considered.

Paragraph 4. Comparative examination system based on market principles

  (1)  Licensee's assessed value concerning economic value of radio spectrums can be reflected on an amount of shared cost proposed by new licensees. The assessed value can be calculated not necessarily by license fees but by the rate of population coverage, which telecommunications carriers decide beforehand by considering necessary amounts of facilities investment, etc., and reallocation cost sharing. In the case where these items are employed as assessment items in licensing procedures, advantages of market principles can be incorporated. In this case, risks that skyrocketing license fees cause delay/withdrawal of launching services or strong vested rights, etc. are reduced. Thus, risks accompanying auction systems can be overcome.

<Relationship between economic value of radio spectrums and the rate of population coverage>

Relationship between economic value of radio spectrums and the rate of population coverage

  (2)  In order to select optimum radio spectrum users, viewpoints of not only being higher evaluation of licensees concerning economic value of radio spectrums but also ensuring appropriateness of business plans and technical capabilities shall be considered. Therefore, comparative examination systems are appropriate as licensing procedures. From the viewpoint of ensuring transparency, fairness, promptness, etc. in licensing procedures, however, figures concerning examination criteria shall be open to the public prior to the examination.

  (3)  Thus, in cases where it is appropriate to incorporate market principles considering modes of radio spectrum use, it is appropriate to introduce not auction systems but comparative examination systems based on market principles. In particular, in cases where new modes of radio spectrum use with compensations after reallocation are exclusive use, it is appropriate to introduce comparative examination systems based on market principles, considering that it is strongly required to ensure transparency, etc. in the examination of licensing process and it is effective upon deciding amounts of shared cost for new licensees.

  (4)  In comparative examination systems based on market principles, when the population coverage rate is employed as an examination criterion, it is vital to consider i) whether service areas are to be expanded per individual mode of radio spectrum use, and ii) measures for ensuring implementation of population coverage rate plans. In these cases, it is essential to ensure transparency of deliberation process.

<
Chapter IV. Technical measures for promoting effective usage of radio spectrums>

Paragraph 1. Promotion of technical developments for smooth spectrum reallocation, etc.

Software defined radio (SDR) technology, which realizes frequency changes by only changing software, enables i) reductions of economic burdens, etc. on incumbent licensees when implementing reallocation of radio spectrums, ii) prompt and smooth transition of frequencies, and iii) contribution to facilitation of reallocation of radio spectrums. Thus, such technology as SDR shall be positioned as one of the technologies contributing to reallocation of radio spectrums, from now on, R&D thereon shall be promoted actively.

Paragraph 2. Promotion of spectrum sharing with other kinds of radio stations

When considering trends in new demand for broadband applications and costs for introducing new technologies, for the time being, it is appropriate to deliberate technological measures for promoting shared use between radio stations thought to be affordable in available radio spectrums in usual (e.g., trunk line system fixed stations, using frequency bands above 1-GHz band, for emergency use) and radio stations for other purposes.

Paragraph 3. Special exemptions of short-term experimental stations

  (1)  In order to prepare an environment for promoting R&D on technologies for effective use of radio spectrums, it is a vital task to encourage the opening of experimental stations. To this end, while preventing interference between existing radio stations, it is appropriate to i) stipulate test stations (short-term experimental stations) with a limited valid term such as one year and ii) set forth exemptions for short-term experimental stations in order to ensure frequencies and simplify licensing procedures. For this, the following measures, etc. shall be taken:
1)  Specify areas and frequency bands beforehand, and limit antenna powers, etc.
2)  Limit the valid term of licenses to one year or the like, and, ensure assurance of ceasing transmission of waves.

  (2)  For example, with respect to the short-term experimental stations, frequency environments are to be prepared for enabling experiments comparatively freely even in Japan's frequency environments with shortage of available frequencies. (It can be called a "green frequency environment" as in greenification of skyscrapers.) In this case, i) purposes of experiments shall not be limited, ii) procedures for confirming technical standard compliance are to be simplified, including omission of completion inspection, through confirmation of technical capabilities of experimenters, manufacturers, etc. Thus, it is appropriate to enable accelerated licensing procedures through the abovementioned measures.

< Chapter V. Remaining issues to be deliberated upon>

Paragraph 1. Spectrum User Fees

The Spectrum User Fee System has been contributing to the effective use of radio spectrums to date. Considering that the System will have greater significance in the future, it is vital to continuously gain understanding and cooperation from radio station licensees, so as to further develop the System.
As regards the desirable Spectrum User Fee System, from now on, in-depth deliberations shall be continuously made thereon, taking into consideration opinions presented at this Study Group to date and various public comments toward this Report.

Paragraph 2. Desirable methods for imposing cost on radio stations requiring no license

With respect to desirable methods for imposing cost on radio stations requiring no license, Chapter II, Section 3, Paragraph 4 contains results of deliberations. In-depth deliberations shall be continuously made thereon, taking into consideration various public comments toward this Report, including whether it is appropriate or not to collect cost on radio stations requiring no license.