On 13 December Ofcom became the first regulator in Europe to set out how the digital dividend spectrum will be made available and on what basis once the analog TV signal is switched off in 2012. The spectrum will be tradable, technology and service neutral, and will be allocated by auction before mid 2009.
The statement is in line with our expectations, and on the whole has been well-received by the market. The one area of contention concerns broadcasters who would like to have seen some spectrum reserved for digital terrestrial television (DTT) in high definition (HD). However, Ofcom is adamant that there is already enough spectrum set aside to allow a major expansion of the capacity and coverage of DTT, and that new technologies will enable a richer and more varied set of services, including HD, without needing extra spectrum.
The spectrum being released by the digital switchover (also known as the digital dividend) is in the sweet spot of 700-800MHz. This spectrum is particularly valuable since the propagation characteristics mean it can cover large geographical areas, penetrate buildings well, and carry a large volume of data. Essentially, this means lower opex and capex for operators since fewer base stations are required, which of course has added benefit for the environment.
Ofcom's decision to pursue a market-led approach to this spectrum is important. Spectrum is one of the few remaining areas where a "command and control" regime still exists, and to continue this approach could result in a significant missed opportunity for society. In terms of use, two of the most obvious candidates are DTT and mobile broadband. Certainly using the digital dividend offers a real opportunity to 'bridge the broadband gap' and make broadband more ubiquitous in rural areas.
Arguably the most interesting part of the story is yet to come when early in 2008 Ofcom will outline exactly how it intends to auction the spectrum.
Getting this detail right is just as important as the spectrum itself if we are to realise its true value. The auction could make for an interesting clash between traditional media (broadcasters) and telcos, and in this respect the auction of the 700MHz spectrum in the US in January could be a good test to see how much operators are willing to pay. As the year draws to a close it's comforting to know we already have something to look forward to in 2008!
Matthew Howett, senior analyst at Ovum