The Administration's Response on the New Section 32I
Relating to the Spectrum Utilization Fee

Radio frequency spectrum is a limited community resource. The levying of spectrum utilisation fees or "spectrum pricing" is an arrangement already implemented in many countries, including the US, the UK, Australia, New Zealand, etc. This is widely recognised as an arrangement based on sound economic principles to manage the radio spectrum efficiently.

2. The proposed section 32I is an enabling provision made for the levy of a spectrum utilization fee that reflects the value of the resource rather than the administrative costs for the management of the resource. It empowers the TA to levy such a fee for some frequency bands to be designated by the TA after consultation with the industry.

3. There are adequate safeguards built into the new provisions to ensure that -

  1. the industry will be given an opportunity to provide input in the drawing up of the method for determining the fee or the level of fees; and

  2. the legislature has adequate opportunity to consider the level or method for determining the fees.

4. While the new section 32I(1) empowers that the TA may designate, by order, certain frequency bands in which the use of spectrum is subject to the payment of a spectrum utilization fee, the TA is mandated to consult the telecommunications industry under the new section 32G(2) before his exercise of powers under the new section 32I(1). The TA will take into account the comments from the industry, including the impact on consumer prices in the market, as well as the methodology for determining the level of the fee. The order made by the TA under new section 32I(1) is subsidiary legislation subject to scrutiny by the legislature through negative vetting. The new section 32I(2) empowers the SITB to prescribe, by regulation, the level, or the method for determining the level, of spectrum utilization fees. Again, the regulation is subsidiary legislation subject to negative vetting. The new section 32I(3) sets out the basis for calculation of the spectrum utilization fee which may include a royalty basis or any other basis that includes an element in excess of the simple recovery of the cost of providing a service by the TA.

5. As explained at the last Bills Committee Meeting, the TA needs to carry out a study on the benefits and drawbacks and conduct consultations before he makes a proposal to designate certain frequency bands in which the spectrum use is subject to the spectrum utilization fee. The specific circumstances which may call for the introduction of the fee include private mobile radio systems, and links between fixed points maintained by telecommunications network operators or utilities companies. The spectrum for these uses are congested at present or the links can be provided by alternative means based on cables to encourage efficient use of the spectrum. We will only finalise which types of spectrum use should be subject to the fee by the TA after following the above statutory procedure (consultation to be followed by the legislature's scrutiny).

6. At the last Bills Committee Meeting, a Member asked whether the regulation to be made by the SITB to prescribe the level or the method for determining the level of the fee should be subject to positive or negative vetting. We consider that our proposal to require that the regulation under the new section 32(I)(2) be subject to negative vetting is in line with the existing practice to prescribe the licence fees in the Telecommunication Regulations as well as the majority of government fees and charges, which are also subject to negative vetting. Members who find such subsidiary legislation unsatisfactory can move a motion to amend the subsidiary legislation. We believe that the proposed arrangement will provide sufficient opportunity for the legislature to scrutinise the proposal and make amendments as appropriate.

Information Technology and Broadcasting Bureau
October 1999