DIGITAL SATELLITE TELEVISION - SPECTRUM MANAGEMENT (PAPER D)

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1 OFFICE OF THE MINISTER OF BROADCASTING OFFICE OF THE ASSOCIATE MINISTER OF COMMUNICATIONS The Chair CABINET ECONOMIC DEVELOPMENT COMMITTEE DIGITAL SATELLITE TELEVISION - SPECTRUM MANAGEMENT (PAPER D) PROPOSAL 1 This paper reports on a favoured option for allocating or designating spectrum suitable for digital satellite television. EXECUTIVE SUMMARY 2 In December 2002 Cabinet agreed on objectives to guide future digital TV policy development and directed officials to report back on various issues [CAB Min (02) 33/4 refers]. This paper considers spectrum suitable for digital satellite television. 3 The paper focuses on the current and potential use of spectrum suitable for satellite TV, particularly the 12 GHz band, which is currently used by Sky and TVNZ's broadcasting satellite services. 4 The paper recognises that the highest value use of the 12 GHz band is likely to be satellite operations and proposes that, consequently, the Crown should manage this band to maximise its potential use for satellite services. Three spectrum management options are considered, and the paper seeks agreement for the 12 GHz band to be managed through a Ministerial Directive, which, effectively, reserves the band for satellite use, and through the issue of receive protection licences (option 3). 5 Licences to operate terrestrial services limit use of parts of the 12 GHz band for satellite services and some of these services will be re-licensed in other bands. Moving these licences may enable additional digital satellite television services to be broadcast to New Zealand. BACKGROUND 6 In December 2002 Cabinet agreed on objectives to guide future digital TV policy development and directed departments to report back by 30 June 2003 (delayed to allow further consultation with industry) on various issues [CAB Min (02) 33/4 refers]. This paper proposes a favoured option for allocating or designating spectrum suitable for digital satellite television. 7 Cabinet also agreed that the development of digital television does not, of itself, require the revision of government s objectives of ensuring that radio spectrum

2 2 allocation policy maximises the value of spectrum to New Zealand society, or revision of the broadcasting content objectives agreed by Cabinet in July 2000 [CAB Min (00) M22 15A and C refers], but that digital television has the potential to assist the achievement of these government objectives. Cabinet also agreed that broadcasters and viewers should be free to choose the platform (eg satellite, terrestrial or cable) by which digital television is provided, based on factors such as cost, content and reliability. 8 In accordance with the above decisions, government can facilitate the efficient use of existing satellite infrastructure by appropriately managing the radio frequency spectrum bands capable of being used for satellite TV. Digital satellite television is already present in New Zealand, largely through the pay-tv subscription service offered by Sky. TVNZ has access to satellite transponder capacity on the same satellite as Sky currently uses, Optus B1 (160 east). 9 In digital satellite TV, the bit streams of different television programmes are brought together into a single bit stream and transmitted (the up-link ) using radio frequency to a satellite, which then retransmits those signals (the downlink ) on a different radio frequency to the desired area (eg New Zealand). The down-linked signals are then received by a consumer satellite dish, converted to analogue format by a set-top-box, and viewed on a television set. All consumer satellite television services covering New Zealand are in digital format. 10 Some parts of industry have recently made representations to MED about a possible New Zealand satellite. If a New Zealand satellite were widely supported by industry, the proponents would need to seek venture capital funding to progress the overall project. Such a satellite could provide some competition in satellite services, but the extent of demand and price elasticity in the overall market is not yet clear. A spectrum reservation process has been initiated with the International Telecommunications Union (ITU), but will take a number of years. 11 This paper considers two main questions regarding spectrum for satellite TV: What spectrum is available for satellite TV? How should this spectrum be managed? What spectrum is available for satellite TV? 12 The main radio frequency bands suitable for satellite television covering New Zealand are between 11.7 and GHz (the 12 GHz bands). Spectrum available for satellite TV is primarily determined by the ITU allocations for satellite bands and the present or potential frequency usage of the bands, which can be summarised as follows: GHz - international allocation gives priority to broadcast satellite, but no satellite is currently in place. This band contains (largely unused) terrestrial licences, which are issued on the basis that they must not interfere with internationally planned broadcast satellite use.

3 GHz - no international allocation priority, resulting in licensing on a first-come-first-served basis to fixed satellite and terrestrial services. Terrestrial licenses (IHUG, TVNZ) limits satellite use of two Optus B1 transponders GHz - no international allocation priority, but no terrestrial licences have been granted in this band, and it contains the main Optus B1 broadcast satellite capacity. 13 Other bands are allocated internationally for broadcasting satellite services, although they are not considered useful for commercial satellite TV services covering New Zealand at this time. 14 From a technical perspective, a satellite transponder may be used for either fixed satellite or broadcasting satellite with very little difference in the actual transmission. This means that the GHz band is being used for broadcasting satellite in New Zealand despite the international allocation making no mention of broadcasting satellite. This is a permitted action under Article 4.4 of the International Radio Regulations. Further, from an engineering perspective, the difference between fixed and broadcasting services can be academic, as a fixed satellite that services a large number of points has the same protection requirements as a broadcast satellite. 15 Terrestrial services are generally not compatible with satellite services in the same frequency band at the same geographic location, as the terrestrial services can prevent reception of the satellite service and vice versa. Present and potential frequency usage of the 12 GHz bands in New Zealand. 16 Currently, the main satellite suitable for digital TV coverage of New Zealand is Optus B1, which has down-links in the bands GHz (four transponders) and GHz bands (four transponders). The corresponding up-links are in the 14 GHz band. Sky and Television New Zealand have leases of transponder capacity (six transponders) on the Optus satellite. 17 The remaining two Optus B1 transponders are suitable for either broadcasting satellite or fixed satellite uses. However, the utility of these two transponders for broadcasting is severely restricted by terrestrial licensing in the GHz band. This means that although Optus has sufficient spectrum available on Optus B1 for current services, there is limited ability to expand the services, unless terrestrial services are removed from the band. 18 Other satellites, such as PanAmSat, also cover New Zealand, but at lower power levels which necessitate larger receiving antennas. Depending upon antenna size, satellite location and other technical parameters, it is possible to utilise two or more satellites at different orbital locations within the same frequency band. 19 The MED understands that the Optus B1 satellite is due to be replaced in the near future. MED also understands that negotiations are continuing between Sky and various satellite services providers on whether Sky will move to a replacement Optus satellite or to a different satellite. Any replacement

4 4 broadcasting satellite used by Sky is likely to downlink in the 12 GHz bands, but could well operate from a different orbital location. One possibility may be a New Zealand satellite which is currently being investigated by commercial interests. How should 12 GHz bands be managed? 20 Government's radio spectrum policy seeks, as its primary aim, to maximise the value of the radio spectrum to New Zealand, by ensuring that the radio spectrum is applied to its highest value use. 21 This paper seeks the Committee's agreement that the highest value use of the 12 GHz bands is likely to be satellite (broadcasting or fixed), at least in the medium term. With respect to GHz, this is primarily founded on the international designation. With respect to GHz and GHz, officials note significant investment of satellite owners in providing a satellite for these bands, considerable investment by Sky in satellite receiver antennas and other receiving equipment associated with its satellite service, and minimal actual use of the band for terrestrial fixed services. Furthermore, the 12 GHz bands are the only spectrum practicably available for broadcasting satellite, while terrestrial fixed services can be accommodated in other bands without major cost. Australia gives priority to satellite use with respect to these bands. 22 A number of management options are available for these bands, taking into account this assessment of highest value use. Option one: Continue current protection of downlinks 23 Currently, terrestrial and satellite use of the 12 GHz band is managed under the administrative licence regime. A difficulty with this is that the satellite transmits from outside New Zealand's jurisdiction, and is therefore not covered by the Radiocommunications Act Previously, recognition of these transmissions has been provided as a result of licensing the transmissions to the satellite and by ensuring the spectrum required for reception of the satellite transmission is available. Under current licensing policies, the terms of the up-link licence are drafted so as to protect the intended down-link frequency. 24 The current practice has limitations, the most important being that it does not provide a clear signal as to which of satellite and terrestrial services is the higher value use. Instead, licensing is essentially conducted on a first-come-first-served basis. This is problematic in the band GHz, where spectrum licensed for terrestrial use conflicts with some Optus B1 transponders. 25 Another limitation is that the current practice is only effective if the transmissions to the satellite originate within New Zealand. If the satellite up-link originates outside New Zealand, it is unclear whether the record keeping systems currently in place are sufficiently robust to prevent the registration of a terrestrial licence in the same frequency as the down-link.

5 Option Two: Competitive allocation of spectrum rights 5 26 Government s objectives of ensuring that radio spectrum allocation policy maximises the value of spectrum to New Zealand society suggest that where demand for spectrum exceeds supply, or there are competing uses, management rights or, in certain cases, spectrum licences should be allocated through a competitive process, such as an auction. Allocation of spectrum rights is intended to allow the market to determine the highest value use of the spectrum allocated. 27 The use of a property rights regime is difficult, although not impossible, in bands allocated to satellite services, as a result of the international coordination framework and the fact that satellites are outside New Zealand's territorial jurisdiction. A successful bidder at any auction held by the New Zealand government would not necessarily be able to acquire capacity on a satellite that is positioned in orbit above the equator and is owned and operated by an overseas company. Allocation of property rights could result in rightholders having no means of transmission, or conversely, lessees of transponder space being unable to obtain a licence. It is impractical to reserve satellite spectrum for public service broadcasting or other purposes for the same reasons. Instead, public broadcasters can negotiate access to satellite capacity on commercial terms, as Television New Zealand and the Māori Television Service have done. Option Three: managed use of the 12 GHz bands 28 If the Committee accepts that satellite reception, rather than terrestrial services, represents the highest value use of the 12 GHz bands for New Zealand, the government could actively manage these bands to maximise use for satellite services. Use of the 12 GHz bands can be managed through a Ministerial Directive 1 and/or receiver protection licences. A suitably drafted directive would prevent or restrict new terrestrial licensing in the 12 GHz bands. This change would be relatively simple to apply administratively. 29 Under this option, the 12 GHz bands would be applied to its highest value use (i.e. satellite), but would not necessarily be held by the user that valued the spectrum the most. Access to satellite spectrum would be determined through access to satellite capacity, not by government allocation. 30 Satellite users could also be given the opportunity to apply for a licence protecting their transmissions from interference, in addition to restricting use of the bands through a Ministerial Directive. This could be achieved through the current system of recognising down-links through the up-link licence, or alternatively, receiver protection licences could be granted to satellite operator. Although no licence is necessary to authorise a down-link signal from a satellite to New Zealand, it is possible to issue a receiver protection licence protecting the reception of satellite down-links from interference from terrestrial transmitters operating in the same frequency band. 1 A Ministerial Directive is a statement of the general policy of the government communicated by the Minister of Communications to the Chief Executive of the Ministry of Economic Development pursuant to section 112 of the Radiocommunications Act 1989.

6 6 Other Considerations 31 If the Committee accepts that satellite represents the highest value use of the 12 GHz bands existing terrestrial licence holders in these bands, who obtained their licences in accordance with the present policy will be affected. Under option three, existing terrestrial services would be moved to other bands over time, allowing existing satellites to be fully utilised for broadcasting. The broadcasting industry generally agrees with the option three approach. 32 Present terrestrial use of the 12 GHz bands is relatively limited and occurs largely in Auckland. This band has been selected to date because of the availability of equipment that can be adapted for this use. There are likely to be other nearby bands where equipment is also available and a transition process seems practicable. To minimise costs a period of up to three years may be required if subscriber churn is to be utilised, although the spectrum would be cleared progressively from commencement of the transition plan. Conclusion on Management of GHz 33 This paper seeks the Committee's agreement to option three. A Ministerial Directive restricting use of the 12 GHz bands to satellite (fixed or broadcasting) recognises that satellite reception, rather than terrestrial services represents the highest value use of the 12 GHz bands in New Zealand. Offering protection licences in the 12 GHz band provides broadcasters the opportunity to obtain more certain protection from interference. CONSULTATION 34 This paper has been prepared by the Ministry of Economic Development, in consultation with the Ministry for Culture and Heritage, Te Puni Kokiri and the Treasury. A draft of this paper was provided to CCMAU for its information. Details of consultation with industry are set out in the paper entitled Digital Television: Overview Paper. FISCAL, HUMAN RIGHTS AND LEGISLATIVE IMPLICATIONS 35 None. REGULATORY IMPACT AND COMPLIANCE COST STATEMENT 36 Not required. PUBLICITY 37 It is proposed that the Minister of Broadcasting and Associate Minister of Communications be invited to announce decisions on spectrum management for digital satellite TV and to arrange for this paper to be made publicly available. RECOMMENDATIONS 38 It is recommended that the Committee:

7 7 1 Note that in December 2002 Cabinet directed officials to report to the Committee on a favoured option for allocating or designating spectrum suitable for digital satellite television [CAB Min (02) 33/4 refers]; 2 Note that the main radio frequency bands suitable for satellite television covering New Zealand are between 11.7 and GHz, that use of these bands is primarily determined by International Telecommunications Union allocations and present and potential frequency usage of the bands, which can be summarised as follows: GHz - international allocation gives priority to broadcast satellite, but no satellite is currently in place. This band contains (largely unused) terrestrial licences, which are required to not interfere with internationally planned broadcast satellite use GHz - no international allocation priority, resulting in licensing on a first-come-first-served basis to fixed satellite and terrestrial services. Terrestrial licenses (IHUG, TVNZ) limits satellite use of two Optus B1 transponders GHz - no international allocation priority, but no terrestrial licences have been granted in this band, and it contains the main Optus B1 broadcast satellite capacity. 3 Note that government can manage potential interference in satellite bands by recognising the satellite downlink in licences granted for satellite uplinks (status quo), allocation of management rights, or direct management of the bands to achieve government's view of the highest value use. 4 Agree that the highest value use of the bands GHz is satellite use, whether fixed or broadcast. 5 Agree that the GHz bands be managed to maximise satellite use of the bands through a Ministerial Directive and the issue of receive protection licences on request (option three of the paper). 6 Agree that the Ministry of Economic Development should commence a transitional plan in order to vacate terrestrial uses of the band GHz as necessary to achieve the highest value use. 7 Invite the Minister of Broadcasting and Associate Minister of Communications to announce decisions on spectrum management for digital satellite and to arrange for this paper to be made publicly available. Steve Maharey Minister of Broadcasting Hon David Cunliffe Associate Minister of Communications

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