EXPLANATORY STATEMENT
Issued by the Australian Communications and Media Authority
Radiocommunications Act 1992
Radiocommunications (Spectrum Access Charges – 1800 MHz Band) Determination 2013 (No.1)
Purpose
The purpose of the Radiocommunications (Spectrum Access Charges – 1800 MHz Band) Determination 2013 (No. 1) (the Determination) is to fix spectrum access charges payable by a licensee for the re-issue of expiring spectrum licences in the 1800 MHz band.
Legislative Provisions
Subsection 82(1) of the Radiocommunications Act 1992 (the Act) provides for the Australian Communications and Media Authority (the ACMA) to re-issue a spectrum licence to the person to whom it was previously issued if the licence was used in the provision of a service included in a class of services specified in a determination under subsection 82(3) of the Act; or if the ACMA is satisfied that special circumstances exist as a result of which it is in the public interest for that person to continue to hold the licence.
Subsection 82(3) of the Act provides for the Minister to determine, by written instrument, a specified class of services for which re-issuing spectrum licences to the same licensees would be in the public interest.
Subsection 294(1) of the Act provides that the ACMA may make determinations to fix spectrum access charges payable by licensees for re-issuing spectrum licences and specify the times when spectrum access charges are payable.
Subsection 294(2) of the Act provides for the Minister to give written directions to the ACMA about the matters dealt with in determinations.
The Determination is a legislative instrument under the Legislative Instruments Act 2003.
Background
Spectrum licences in the 1800 MHz band were auctioned from 1998 onwards and expire in two tranches. Tranche 1 licences expired in June 2013, and Tranche 2 licences will expire in May 2015.
Tranche 1 licences were offered for re-issue in January 2013. The majority of Tranche 2 licences were also offered for re-issue at this time. Spectrum access charges relating to all those licences were determined in December 2012.
Vodafone Hutchison Australia Pty Limited (ACN 096 304 620) (“VHA”) currently holds five Tranche 2 licences that were not offered for re-issue in January 2013. This Determination relates to those five licences.
Under subsection 82(1) of the Act, the ACMA may re-issue licences to the same licensee without undertaking a price-based allocation process, if:
- the licence was used in the provision of a service included in a class of services specified in a determination made under subsection 82(3) of the Act; or
- the ACMA is satisfied that special circumstances exist as a result of which it is in the public interest for the existing licensee to continue to hold the licence.
On 9 February 2012, the then Minister for Broadband, Communications and the Digital Economy made the Radiocommunications (Class of Services) Determination 2012 under subsection 82(3) of the Act. In that determination, the then Minister specified several classes of services for which re-issuing spectrum licences to the same licensees would be in the public interest. The classes of services include:
- mobile voice and data communications services in the 800 MHz, 1800 MHz and 2 GHz bands;
- wireless broadband services in the 2.3 GHz and 3.4 GHz bands; and
- satellite services in the 27 GHz band.
In considering whether to reissue the relevant licences under paragraph 82(1)(a) of the Act, the ACMA has consulted with VHA and relied upon information provided, including:
- the number of registered and deployed devices under each relevant licence;
- maps detailing the cumulative coverage area of the services offered by VHA;
- information on the types of equipment and technology deployed; and
- links to promotional material regarding relevant services provided by VHA.
On 9 February 2012, the then Minister also made, under subsection 294(2) of the Act, the Radiocommunications (Spectrum Access Charges) 2012 Direction (the Pricing Direction). The Pricing Direction specifies the amount that the then Minister considered to be the value of the spectrum in relation to the spectrum bands specified, and directs the ACMA to ensure that the spectrum access charges for re-issued licences reflect that amount.
The Pricing Direction defines a formula for fixing the spectrum access charge payable by a licensee in relation to a re-issued spectrum licence. The formula is based on a “$/MHz/Pop” calculation where:
- $ = Australian dollars;
- MHz = the bandwidth of spectrum authorised for use in the relevant licence area; and
- Pop = the population of the licence area, to be determined by the ACMA at the time the ACMA determines the spectrum access charges under subsection 294(1) of the Act, having regard to the available population data at that time.
The amount set by the Pricing Direction for licences in the 1800 MHz band is $0.23/MHz/Pop, based on a 15-year licence period. However, the licences to which this Determination relates will be re-issued for a shorter duration of 13 years and 45 days, in order to align their expiry date with that of the Tranche 1 re-issued spectrum licences (17 June 2028).
In determining the spectrum access charge for the VHA licences to which this Determination relates, the ACMA assessed the value of the spectrum based on a licence that is re-issued for a period of 13 years and 45 days. The approach essentially first constructs annual cash flows that grow at a constant annual rate across an entire 15 year licence period and are consistent in net present value terms with the then Minister’s valuation ($0.23/MHz/Pop). These constructed cash flows are then re-valued over the shorter licence period.
The formula for the initial part-period valued at the beginning of the licence period is:
Where
denotes the nominal spectrum value of the initial part-period of n years at the beginning of the initial part-period
denotes the spectrum value over a licence period of 15 years ($0.23/MHz/Pop)
z denotes the estimated compound growth rate over a licence period of 15 years, and is analogous to the degree of “tilt” in a tilted annuity (2.5%)
n denotes the number of years in the initial part-period (13.12 years)
m denotes the number of years in the subsequent part-period (1.88 years)
r denotes the appropriate discount rate (8.4%).
Consultation
The ACMA sought comment from VHA about matters pertaining to the calculation of the spectrum access charges, the amounts of the spectrum access charges for each of the licences and the payment date. The comments received by the ACMA were considered in the making of the Determination.
Regulation impact
The ACMA has consulted with the Office of Best Practice Regulation (the OBPR) on the requirement for a Regulation Impact Statement (RIS). The OBPR advised that the Determination does not warrant the preparation of a RIS because it is likely to have only minor and machinery impacts. The reference for the OBPR’s assessment is ID 14048.
Detailed description of the Determination
Details of the provisions of the Determination are set out in Attachment A.
Statement of compatibility with human rights
In accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011, the ACMA has prepared a Statement of Compatibility with Human Rights to consider the human rights implications of this Determination. The Statement, set out in Attachment B, concludes that the content of this Determination does not raise any human rights issues and is therefore regarded as being compatible with human rights.
ATTACHMENT A
DETAILS OF THE PROVISIONS OF THE RADIOCOMMUNICATIONS (SPECTRUM ACCESS CHARGES –1800 MHz BAND) DETERMINATION 2013 (No. 1)
Section 1 – Name of Determination
This section names the Determination the Radiocommunications (Spectrum Access Charges – 1800 MHz Band) Determination 2013 (No. 1).
Section 2 - Commencement
This section provides that the Determination will commence on the day after it is registered.
Section 3 – Definitions
This section defines the terms used in the Determination.
Section 4 - Population of a licence area for a spectrum licence
This section provides that the population for a spectrum licence mentioned in column 1 of the table in section 6 is the corresponding number in column 2.
The ACMA is required to apply population estimates for each licence area at the time the Determination is made.
The ACMA first derives an estimated population count for each licence area consistent with the population count and dispersion enumerated in Census 2011.[1] To comply with the Pricing Direction the ACMA has considered how population numbers have grown across the intervening period (i.e. between the most recent available Census and a time proximate to the making of the Determination).
The ratio of the projected national resident population at September 2013 to the Census 2011 national population count provides an indicator of how population has grown across this intervening period.[2] This ratio is then applied to the estimate of population in each licence area at August 2011 to derive an estimate of population in the area as at September 2013 (being the end of the most recent complete quarter before the Determination is made).
The source of data and an example of the population calculation for a licence area is provided in the following table:
Section 5 – Unit amount applied
This section provides that the unit amount applied by the ACMA in calculating the spectrum access charges payable by VHA is $0.2106/MHz/Pop, being the value of the 1800 MHz spectrum for re-issue of a licence for a period of 13 years and 45 days.
Section 6 - Spectrum access charges payable by Vodafone Hutchison Australia Pty Limited
This section provides the amount of spectrum access charge payable by VHA for the re-issue of each spectrum licence.
Section 7 – When a spectrum access charge is payable
This section provides that the spectrum access charge fixed by the Determination for each licence is payable on or before 30 April 2014.
Section 8 – Expiry
This section provides that the Determination ceases to have effect at the end of 3 May 2015, which is the date on which the current spectrum licences expire.
ATTACHMENT B
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Radiocommunications (Spectrum Access Charges – 1800 MHz Band) Determination 2013 (No. 1)
This legislative instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
The Radiocommunications (Spectrum Access Charges – 1800 MHz Band) Determination 2013 (No. 1) (the Determination) fixes spectrum access charges payable by VHA for the re-issue of expiring spectrum licences in the 1800 MHz band.
Human Rights Implications
The Determination does not engage any of the applicable rights or freedoms.
Conclusion
The Determination is compatible with human rights as it does not raise any human rights issues.
[1] Australian Bureau of Statistics, Census 2011, Basic Community, Aboriginal and Torres Strait Islander Peoples (Indigenous) and Time Series Profiles (catalogue number 2069.0.30.008).
[2] This is based on information from the Australian Bureau of Statistics, Census 2011, Basic Community, Aboriginal and Torres Strait Islander Peoples (Indigenous) and Time Series Profiles (catalogue number 2069.0.30.008), the Australian Bureau of Statistics, Australian Demographic Statistics, March 2013, catalogue 3101.0, released 26 September 2013 and the Budget Paper No 3, Australia’s Federal Relations 2013-14; 14 May 2013, page 141.