Spectrum Management for Digital Development in Peru LIMA, 2018 WITH SUPPORT FROM: Spectrum Management for Digital Development in Peru LIMA, 2018 WITH SUPPORT FROM: © 2019 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved. This work is a product of The World Bank staff with external contributions. The findings, interpretations, and conclusions ex- pressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the govern- ments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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The risk of claims resulting from such infringement rests solely with you. If you wish to reuse a component of the work, it is your responsibility to determine whether permission is needed for that reuse and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org. Cover and layout design: Diego Catto Contents Forward 8 Acknowledgments 9 Preface 11 Executive Summary 13 Abbreviations 17 1. Best Practice in Spectrum Allocation and Management 19 Introduction 20 Spectrum Policy Models 21 Key Spectrum Management Strategies 26 Best Practice 32 Conclusions 34 2. The Peruvian Context 37 Market Overview 38 Institutional Framework 45 Regulatory Framework 48 Public Agenda 50 Assessment of the Current Situation 57 Findings 65 3. Preparation for Future Actions 67 Initial Assessment of Initiatives 69 4. Roadmap and Work Plan 73 Spectrum Demand and Regulatory Caps for Wireless Broadband Services 77 Develop a Long-term Plan for IMT Bands and Alternatives to Promote Rural 78 Study Potential Development of Public Protection and Disaster Relief 81 Internet of Things for Smart Cities in Peru 84 References 85 Appendixes 85 Annex I 101 TABLES TABLE 1.1. Advantages and Disadvantages of Different Spectrum Management Models 23 TABLE 1.2. Summary of Different Spectrum Management Models 35 TABLE 2.1. Active Mobile Connections by Company, September 2017 39 TABLE 2.2. Number of Internet Connections, September 2017 40 TABLE 2.3. Service Classification by Type 49 TABLE 2.4. New Frequencies Under Evaluation 52 TABLE 2.5. Master Plan for DTT 55 TABLE 2.6. ITU Recommendation for an Optimal Mobile Broadband Connection (2020) 58 TABLE 2.7. Terrestrial Services (Fixed and Mobile) 59 TABLE 2.8. Spectrum Identified for Use as IMT 60 TABLE 2.9. Licensing Title 61 TABLE 2.10. Spectrum Fees Scheme 62 TABLE 2.11. Canon for use of radio spectrum for other services 64 TABLE 3.1. Potential Identification of 250 MHz of Additional Spectrum for IMT 69 TABLE 3.2. Current Ongoing Studies for the Identification of an Additional 510 MHz for IMT 70 TABLE 3.3. Spectrum Availability for Potential Unlicensed Bands 71 FIGURES FIGURE 1.1. Spectrum Management Models According to Type of Service and Band 24 FIGURE 1.2. International Experiences 28 FIGURE 1.3. Spectrum Management Evolution 32 FIGURE 1.4. Steps for Sptectrum Management Process 33 FIGURE 2.1. Mobile Internet Access Penetration 41 FIGURE 2.2. Data Plan Penetration 42 FIGURE 2.3. Number of Population Centers Covered by 4G, by Operator 43 FIGURE 2.4. Fixed and Mobile Broadband Subscriptions per 100 Inhabitants, 2016 44 FIGURE 2.5. Spectrum Management Institutions in Peru 45 FIGURE 2.6. DTT Implementation 54 FIGURE 2.7. The Four Stages of Spectrum Management 57 FIGURE 3.1. mmWave bands for 5G 70 FIGURE 4.1. Assessment of Initiatives 76 FIGURE 4.2. Spectrum Demand and Caps Definition 77 FIGURE 4.3. Activities for the Road Map for Spectrum Assignment 79 FIGURE 4.4. Broadband Access in Rural Areas 80 FIGURE 4.5. Estimating PPDR Spectrum Demand – International Benchmarking 82 FIGURE 4.6. Network Architecture Alternatives for Broadband PPDR 83 Forward It is my pleasure to present this important report on “Spec- Using Peru as an analytical case, this report will support trum Management for Digital Development in Peru”. governments interested in using emerging technology, new frequencies, and resourceful regulation on spectrum With the rise in global demand for high-speed wireless allocation to spread digital dividends across its population broadband, infrastructure deployment alone is no longer at lower cost and higher adoption rates. sufficient to ensure affordable, accessible, high quality In- ternet in rural or densely populated urban areas. I am confident it can become a powerful tool for coun- tries to fulfill their digital potential and build the founda- Growing traffic on licensed spectrum frequencies tions for vibrant, inclusive digital economies. causes interference and slows down quality connectiv- ity, and spectrum managers globally face pressure to ad- just current licensing regimes and free up access to more spectrum for broadband wireless network access. Exploring new approaches to spectrum management Boutheina Guermazi and expanding upon the opportunities offered by licensed Director, Digital Development and unlicensed spectrum could unlock opportunities for World Bank governments to expand affordable broadband services to unserved areas. More efficient allocation of existing licensed spec- trum bands would offer unprecedented opportunities to both meet the need for more and better spectrum, and at signals that reach remote areas at lower cost and higher quality. 8 DI GI TAL DEV E LOP ME N T PART NE RSH I P Acknowledgments The report was prepared under the framework of the Digital Development Partnership (DDP) and was led by Doyle Gallegos (Global Lead for Broadband Access for All), and World Bank Group team consisting of Juan Manuel Galarza Tohen (Consul- tant GDDDR), Rocio Sanchez Vigueras (ICT Policy Specialist), Rachel Firestone, Marisol Ruelas (Team Assistant), and Marisol Gisel Noriega Ramos (Program Assistant Lima) in partnership with Juan Ignacio Crosta and Lorena Torres López (BlueNote Management Consulting). The team would also like to thank the following World Bank Group staff for their valuable advice and inputs: Tim Kelly, Je Myung Ryu, and Jan Van Rees (External Spectrum Expert). The team is grateful for the overall guidance provided by Boutheina Guermazi (Director, Digital Development), and Jane Treadwell (Practice Manager, Digital Development) of the World Bank, and the insightful guidance and support in Peru from the Lady Vice Minister, Rosa Virginia Nakagawa Morales, Ing. Jose Aguilar, Director General of Regulation, and the expert team from the Ministry of Transport and Communications (MTC). The findings and analysis presented in this report would not have been possible without the various consultation op- portunities supported under the Digital Development Partnership. The workshops in Lima in December 2017 and May 2018 included over 150 participants from the Government of Peru, Mobile Network Operators, industry experts and high-level panel participants from Argentina, Colombia, Mexico, and the United States. We are especially grateful to the DDP partners who remained engaged throughout the process and participated in the first workshop in Lima, including representatives of the GSMA and Microsoft. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 9 Preface The development objective of this Technical Assistance is the acceleration of the digital development process in Peru by increased ICT usage. With preparatory funding from the Digital Development Partnership (DDP), this engagement aims to support the development of an action plan for using emerging technologies, frequencies, and licensing approaches to ac- commodate new broadband spectrum access, while not harming existing services. The current project has two components: COMPONENT 1: COMPONENT 2: (i) An analytical study of the Preparation of a context-driven regulatory, commercial and menu of options for more technological context of efficient spectrum use, geared spectrum management in Peru, towards improving connectivity combined with and developing data driven (ii) a stocktaking of emerging digital services critical for global best practice in spectrum Peru’s equitable economic allocation, monitoring, and development. management. Under this framework, the World Bank team, and BlueNote MC as consulting support, conducted several activities to un- derstand the regulatory context in Peru, including meetings with relevant stakeholders from the public sector, specifically from the Ministry of Transport and Communications (MTC), the telecommunications regulator (OSIPTEL), the Universal Ser- vice Fund (FITEL), the Private Investment Promotion Agency (ProInversión), and the private sector. In addition, a technical workshop was held in Peru in December 2017 to facilitate an open discussion with relevant stake- holders and other interested people. The main findings and conclusions from the two components described above were presented to participants (see Appendix H for a workshop summary). This report includes a summary of best practice in spectrum allocation and management, the findings related to the regulatory, commercial, and technological context in Peru, the workshop results, alternatives for future actions, and the Work Plan Proposal. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 11 Executive Summary Stakeholders increasingly expect regulators to ensure the rational, equitable, efficient and economic use of the radio frequency spectrum. In consequence, the models and technologies that enable spec- trum management are coming under increasing scrutiny. Accordingly, this report reviews the existing models used by regulators in spectrum management. In the traditional ap- proach, the command and control model, the regulator centralizes both spectrum management and control, and also de- cides priorities relative to the different services wishing to use the spectrum. The desire for harmonization and economies of scale are the main strengths of this approach, although the rigidness of the model in generating technical, economic and social inefficiency in the face of growing demand is highlighted. In search of more flexibility, the market-based model involves market dynamics derived from the law of supply and demand as well as considering guidelines established by the regulator to allow flexible rights within the given licenses granting permission for the creation of a secondary market for spectrum use. As a complement, the commons model responds to the need to regulate unlicensed spectrum to guaran- tee the correct functioning of the services and applications that use it, guaranteeing also free competition and negotiation between users of the resource. However, there is the risk of deterioration in the quality of the services because of the lack of surveillance and the excessive use of the resource. Last, the hybrid model appears as a means to balance license and unlicensed spectrum policies, promoting a policy framework which facilitates sharing of unlicensed spectrum that coexists with exclusive usage procedures given by specific licenses for other bands through command and control or a market- based approach. Enabling spectrum sharing technologies is key for its successful implementation. Moving on to spectrum management strategies, the report lists the key strategies identified within the scope. Starting with the secondary market, it motivates efficient use of the spectrum by enabling the trade and transfer of licenses between network and services providers, usually with the endorsement of the regulator. It provides operators and other licensees with a market-based, economic incentive to use spectrum efficiently or allocate it to others. On the other hand, spectrum refarming aims to increase spectrum efficiency. It combines administrative, financial, and technical measures aimed at re- moving users or equipment from existing frequency assignments, so the frequency band may then be reallocated to the same or different service(s). In the review of international experiences and as countries begin to seek flexibility to respond to the rapidly rising de- mand for radio spectrum, the focus is given to Latin American benchmarks, highlighting the recent Colombian regulation related to the use of TV white space; the experience of Mexico with the enablement of the secondary market with its guide- lines approved in 2016; and the Guatemalan spectrum deregulation measure adopted early in 1996. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 13 In reviewing the Peruvian context, the study highlights the main sociodemographic characteristics as well as the most relevant economic indicators, exposing the highly concentrated population in urban areas and main cities (Lima accounts for 32 percent of the population) and the elevated inequality for average income across regions. On average, incomes in Lima are 35 percent higher than the national income, in contrast to rural areas that account for only 50 percent of the na- tional income, although the gap has been decreasing over the past decade. Regarding the telecommunications market, the mobile service penetration rate for Peru was 132,2 percent in June 2018), with Telefónica de Perú and América Movil accounting for more than 70 percent of the mobile market, with new players gaining importance in the recent years. In 2016, about two-thirds of households had either fixed or mobile access to the In- ternet while penetration in rural areas reached 38 percent, an increase of more than 12 percentage points over the previous year. Twenty-seven percent of households had fixed Internet access, although fixed access is almost non-existent in rural areas. From an individual standpoint, 41 percent of people aged six years and older use the internet (fixed access), while only 12 percent in rural areas do so. The fixed market is dominated by Telefónica (75 percent market share) and América Movil (18 percent market share). With regard to mobile Internet access, 59 percent of inhabitants accessed the Internet and penetration of data plans for the last quarter of 2016 was 52 percent, with 3G being the most widespread access technol- ogy (57 percent). Concerning the institutional framework of the country, telecommunications are regulated by the Vice Ministry of Com- munications within the Ministry of Transport and Communications (MTC). Specifically, spectrum management functions spread across the four General Cabinets within the Vice Ministry. Additional institutions that have a significant role in sup- porting spectrum management activities are OSIPTEL (telecommunications regulator) and ProInversión (investment pro- motion agency). Additionally, a Permanent Multisector Commission (NAT-PNAF Commission) has been created to issue specialized technical reports and recommendations for the planning and management of the radio frequency spectrum and the adjustments of the National Frequency Allocation Plan. The Commission comprises four members from the MTC, one member from each of the general cabinets, and one member from the Policy Regulations Direction of OSIPTEL. The president of the commission is the member of the Concessions cabinet from MTC. Within the public agenda, aiming to reduce the telecommunications infrastructure gap for the improvement of the quality of life of the population, the main projects that stand out are the deployment of the national fiber optics network (RDNFO) along with 21 regional projects that will allow Internet access to the districts and localities in the interior of the country, complemented by the entry of a fourth mobile operator. Particularly regarding spectrum management, the public agenda in Peru is focused on the current evaluation of 510 MHz of spectrum to be designated for International Mobile Telecommunications (IMT) in the medium term, which includes consideration for wireless broadband fixed access. In addition, the intention is to expand the reach of 4G/LTE high-speed mobile Internet ser- vices so that, in less than four years, two-thirds of the population will benefit from 4G/LTE coverage. Furthermore, the implementation of digital terrestri- al television (DTT) is progressing, with complete analog switch off scheduled by 20281, although Lima and Callao will be ready in 2020. 1 - The analog TV switchoff schedule is determined by the political agenda of the Peruvian government. The sched- ule considers the digital TV deployment plan and the penetration of digital receivers throughout the country. 14 DI GI TAL DEV E LOP ME N T PART NE RSH I P When considering the spectrum management cycle and how it has developed in Peru, there is little evidence of innova- tive practice towards a more flexible and efficient use of the spectrum. While spectrum planning in Peru is primarily based upon recommendations from the International Telecommunication Union’s (ITU) World Radiocommunication Conferences (WRC), activities such as assessing spectrum demand, planning for new bands, spectrum caps, and migration plans are lim- ited. Spectrum management has been focused on a traditional approach through the command and control model, without regulations that consider competition factors. In consequence, the spectrum assignment process responds to this model and can be qualified as rigid, although there are procedures in place that ensure consistency. Assignment and concessions processes are based on the National Allocation Table (PNAF), in which assigned spectrum in Peru for mobile services is 370 MHz, that is, equivalent to 28 percent of the ITU recommendation for IMT-2020, for lower user density settings. The need for a spectrum valuation methodology was identified as it is currently nonexistent in the country, and without the use of an ef- ficient price point for spectrum assignment, the benefit for the nation derived from spectrum use is most unlikely to improve. There is a pressing need for innovative approaches to reduce the spectrum availability gap, particularly because IMT is exacerbating the spectrum shortage, which is worsened by the rigid assignment process. Additionally, the deployment and use of technologies that operate in spectrum of free use (e.g. WiFi) has generated high levels of congestion in non-licensed frequency bands (i.e. 2, 4 GHz and 5 GHZ) The main implication for Peru arising from this study derives from two approaches focused on the review of the current regulatory framework to promote efficiency in the management of the spectrum: allowing more flexibility and encourage the deployment of new technologies (cognitive radio, Software Defined Radio -SDR, spaces blank television-TVWS, Inter- net Things - IoT off). Aiming to provide a prioritized approach for implementation, the study performs an initial assessment of all the potential initiatives identified throughout the study, analyzing two aspects: Potential impact versus Implementation Feasibility. The figure below summarizes the assessment results. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 15 ASSESSMENT OF INITIATIVES 1 Develop long term plan on IMT bands 2 Estimate spectrum demand and caps regulation • Study on secondary market • Study on atomatic licensing • Study on license flexibility 3 Study potential development of PPDR HIGH • Methodology to determine spectrum pricing Relevance to stakeholders • Potential Identification of 250 MHz as IMT Potential Impact • Explore alternatives for traditional pricing (Short run) • Develop methodology to measure spectrum efficiency usage • Develop regulation framework to promote access sharing technologies LOW 4 Leverage Peru’s involvement in ITU Smart Sustainable Cities studies (high impact • TVWS analysis in long run) LOW HIGH implementation feasibility Source: BlueNote. As a result of this assessment, four initiatives were selected as priorities: 1 2 3 4 Developing Estimating Studying the Leveraging Peru’s a long-term plan spectrum demand potential development involvement in the ITU for IMT bands; and caps regulation; for PPDR; and, Smart Sustainable Cities studies. The study concludes by outlining the main activities required for implementation of each of the four initiatives. 16 DI GI TAL DEV E LOP ME N T PART NE RSH I P Abbreviations ANE Colombia’s National Spectrum Agency AWS Advanced Wireless Services DDP Digital Development Partnership DTT Digital Terrestrial Television ERESTEL Residential Survey of Telecommunications Services FITEL Universal Service Fund IFT Mexico’s Federal Institute of Telecommunications IMT International Mobile Telecommunications IoT Internet of Things ITU International Telecommunication Union MMDS Multichannel Multipoint Distribution Service MTC Ministry of Transport and Communications NAT-PNAF Permanent Multisector Commission OSIPTEL Supervisory Agency for Private Investment in Telecommunications PCS Personal Communications Service PNAF National Allocation Table PPDR Public Protection and Disaster Relief ProInversión Private Investment Promotion Agency RDNFO National Dorsal Fiber Optic Network RRFO Regional Fiber Optic Networks SDR Software-Defined Radio UIT Unidad Impositiva Tributaria: Tax Unit TVWS TV White Space WRC World Radiocommunication Conferences All dollar amounts are U.S. dollars unless otherwise indicated S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 17 Best Practice in Spectrum Allocation and Management Introduction The radio spectrum is a resource that enables the development of various applications, from the economic and social fields to the cultural and scientific. As demand for spectrum increases, the technological evolution and the telecommunications industry have developed a variety of products to expand its potential. Although it is an inexhaustible resource, its scarcity and impossibility of storage for future use, along with the increasing demand for radio spectrum, can lead to problems because of congestion in use. In consequence, in an interconnected world with rapid technological development and growing demand for access to radio frequencies, efficient spectrum management becomes vital in fostering the development of underlying services, avoiding the formation of entry barriers, and promoting technological innovation (Blackman and Srivastava 2011). This worldwide growth in demand requires an effort from national administrations to achieve its efficient management by carrying out various functions, which are: • Developing and implementing policies and plans related to the use of spectrum, as well as undertaking studies to determine current and future needs of the telecommunications industry. The main result of this function is to elaborate a plan for the attribution of frequencies. • Assigning frequencies to the different network and service providers interested in participating in the telecommunications market by determining the most appropriate frequencies for radiocommunication systems. • Communicating and receiving feedback from sector participants concerning telecommunications policies, regulations, and practices with the aim of evaluating the initiatives adopted. • Analyzing problems related to interference in frequencies, technical aspects of radio equipment, compatibility in the systems used, and so on. 20 DI GI TAL DEV E LOP ME N T PART NE RSH I P Technological evolution as well as the characteristics of each market call for the need to review the radio spectrum management model used to develop these functions, allowing the objectives and goals defined by the regulator to be achieved. Traditionally, regulators managed and controlled the spectrum using a command and control model, which stipulates guidelines for all users in a centralized manner for the obligatory use of the spectrum. However, the dynamism of the industry presents a series of challenges to this historic management model as a result of the constant evolution of technologies that broaden the range of services that can be provided through the radio spectrum. In response to growing demand, proposals to modify this traditional management model are arising as well as new admin- istration mechanisms in order to provide regulators with greater flexibility in the management and control of the resource to achieve more efficient use and greater benefits for both end users and society in general. Spectrum Policy Models National administrations adopt different models for spectrum management based on public policies and considering the type of communications services. There are three core spectrum management models: COMMAND AND CONTROL This model considers spectrum as a scarce resource, which justifies the conscious and detailed planning in order to rationalize the use of frequencies.2 It centralizes spectrum management and control, specifically determining the conditions by which users will make use of the requested resource, as well as having the right to exploit the bands it manages. MARKET BASED An alternative model has arisen by involving the market dynamics produced by the law of supply and demand, giving priority to the operation of general interest services as well as the guidelines established by the regulator through norms, regulations, or international agreements.3 In this way, the administrations incorporate market criteria into the processes of allocation, allotment, and assignment, redefining the rights established by licenses for the use of frequencies and introducing new measures that not only make the use of the radio spectrum more flexible but also promotes its efficient use. This model allows the incorporation of dynamic and transparent mechanisms for the process of assigning frequencies to users. Regulators have a variety of tools that allow them to promote the emergence of new services in pursuit of efficient use of the spectrum. Through the sharing of frequencies, for example, administrations will be able to attribute bands to a greater number of services as well as encourage the use of the same band for different applications within the same service. The sharing of infrastructure will also reduce and optimize the costs generated by the deployment, operation, and maintenance of the networks. The reorganization of the spectrum allows the entry of new services of significant social value as well as restructuring the distribution of bands to make more efficient use of the spectrum based on new transmission technologies. 2 - The Command and Control model is usually adopted by regulators at the beginning of the radio spectrum administration, when the first problems that forced the establishment of a license allocation process arose. Hence, this is the most widespread model at the international level and has a higher maturity. The processes that involve using this model require a detailed planning of the use for each band, analyzing in depth its allocation, allotment, and assignment. The objective of these procedures is to guarantee a tolerable level of interference between the assigned frequencies, ensuring a correct operation of the services that make use of the radio spectrum. Therefore, the regulator decides priorities with respect to the different services that can use the spectrum, defining the specific guidelines on exploitation, planning the distribution of services in the spectrum, determining the technology to be used in each assigned band, and awarding licenses under carefully detailed conditions of use. These conditions allow for harmonized spectrum use for international interoperability which also enables the achievement of economies of scale in the development of both equipment and international services. 3 - This new model considers the spectrum as a limited resource, introducing prerogatives aimed at modifying the uses and technologies attributed to the frequency bands, tending towards efficient use. On the other hand, by granting licenses with flexible and dynamic rights regarding conditions of use, technology, and services, the regulator transfers the burden of the decision to users, who will decide according to the most efficient technical, economic, and social conditions about the service they offer across the spectrum. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 21 COMMONS MODEL Usually, within the limits of band allocations, regulating entities reserve some bands of spectrum for operations on a noninterference basis for free use by the public. This “unlicensed spectrum” is the origin of the commons model,4 which follows a paradigm of deregulation and liberalization of the radio spectrum.5 Its main characteristic is its focus on the reduction or elimination of restrictions determined by regulators related to use, technologies, and services associated with the licenses given for spectrum use.6 The commons model sustains free spectrum access, also guaranteeing free competition and negotiation between users of the resource without the need for a license or authorization that specifically determines the rights and obligations (of use and technology) related to the frequency. Under the methodology imposed by this model, the regulator’s task is to control and monitor that spectrum users operate within the established conditions protecting the spectrum as a public good; verify compliance according to regulations related to electromagnetic compatibility and radio frequency emissions; and, monitor negotiations between spectrum users to ensure free competition. In addition, some administrations adopt hybrid models to satisfy their needs. Given the industry’s condi- tions and their interrelation with the advantages and disadvantages of the models presented above, a new model emerges which presents a balance between licensed and unlicensed spectrum policies. The hybrid model, also referred to as the easement model, promotes a policy framework which facilitates sharing of unlicensed spectrum that coexists with exclusive usage procedures given by specific licenses for other bands through command and control or of market-based approaches. Spectrum-sharing technologies are key to the successful implementation of this model, such as cogni- tive radio7 and dynamic spectrum-sensing equipment.8 TV white spaces is the most widespread example of how this policy is put into practice, by allowing unlicensed cognitive radio devices to operate in unused licensed broadcast TV spectrum on a secondary basis. Using smaller cells allows for more devices op- erating on smaller amounts of spectrum with less buffer space of time and geographical spacing, which requires lower power deployments and generates less interference. Efficiency in spectrum sharing can be increased by such technological innovation and development but regulatory policies regarding their development and usage must be conducive to research, innova- tion, and new incumbent market entry in order to facilitate this growth. Table 1.1 describes the main advantages and disadvantages of each model. 4. Lately, the services that use these frequencies most are low-power and short-range radio applications, such as radios, access systems and wireless local area networks, and short-range devices used as industrial, scientific, and medical applications (ISM). 5. Technology development has led to the existence of a wide variety of wireless items that make use of the unlicensed spectrum. In addition, progress within the framework of radiocommunica- tions generated a series of emerging technologies as well as new uses and applications that are able to exploit the benefits of these free frequency bands. Consequently, there is a need to regulate unlicensed spectrum in order to guarantee the correct functioning of the services and applications that use it, through the commons management model. 6. Beyond certain regulatory relaxation, administrations continue to regulate aspects related to the power of transmissions to determine acceptable levels of interference for its operation. 7. Cognitive radio: Devices sensing spectrum use and choosing to avoid sending signals or to use a different frequency. 8. Dynamic spectrum: radio devices that coordinate with a central database that can assign spectrum use on the fly and can negotiate power levels and interference. 22 DI GI TAL DEV E LOP ME N T PART NE RSH I P TA B L E 1 .1 . Advantages and Disadvantages of Different Spectrum Management Models ADVANTAGES DISADVANTAGES • Determines the primary market of the radio spectrum, controlling the allocation, allotment and assignment of • Faces challenges with respect to the increase in demand for the COMMAND AND CONTROL licensesa resource because of the rapid technological development that drives the emergence of new operators and services that exert • Controls the level of interferenceb greater pressure on regulators • Coordinates the table of allocation of bands • The scarcity of the resource might be with the main international regulations under discussiond • Procures the technical efficiency of the spectrum by • The centralization required makes the model rigid, generating ensuring the greatest number of frequencies assignment technical, economic and social inefficiency in the face of growing with acceptable interference levels between transmitted demand, which undermines the development and innovation not signals only for the sector but also for the entire economy • Applies control measures and management • Technical conditions for the use of frequencies of the resourcec are not flexiblee • Defines ceilings for the number of licenses to avoid the • Little incentive for incumbents to return unused spectrum or concentration of frequencies in a group of determined replace old technologies with new solutions requiring less users and encourages the entry of new operators to spectrum promote competition • No definitive solution to the problem of interference since it does MARKET BASED Introduction of flexible rights within not guarantee that licenses allows implementation of the following elements it will remain within tolerable limits that encourage efficient spectrum use: • Not applicable to all areas covered by spectrum management, • Secondary marketf so its principles must be combined with a series of guidelines stipulated under the precepts of the command and control • Reduction of the role of the regulator in the model commercialization of licensesg • Flexible rights that allow the user greater discretion regarding the • Private propertyh use of frequencies cannot be applicable to all participantsi • Technology development: Wide variety of wireless items • By liberalizing the spectrum and reducing the level of and emerging technologies use unlicensed spectrum. regulations, a deterioration process may occur that affects the COMMONS appropriate operations of the services within its bandsj • Lower barriers of entry, foster competition. • Can lead to overuse and overabundance • Foster technological innovation of demand • Significant public value and social-economic • Interference risks contribution • The process of spectrum liberalization is still in a growth stage, • Growing importance of license-exempt spectrum in IoT by which the opportunities for applying this management model connectivity are not yet clearly specifiedk • More flexibility adapting to the sector and industry needs. HYBRID • Balance between licensed and unlicensed spectrum • It requires the use of cognitive radio techniques policies. • Modification in the regulatory and public policy framework. • Encourages spectrum sharing (e. g. TV Spaces Blank, Citizen Broadband Radio Services - CBRS) • Promotes innovation NOTE: a. The allocation may be exclusive for a single service or shared among different types of spectrum users. In addition, it defines the technical conditions under which it will grant the right to use the spectrum in a band and specific geographical area in the form of exploitation licenses or authorizations. b. Establish- ing tolerable levels and improving the conditions in the receiving devices that are the causes of this problem. c. This ensures an optimal collection due to estab- lished fees for the use of the radio spectrum. d. Given the technological evolution, there has been an increase in the amount of services that use the spectrum to reach their consumers. Systems are also emerging to optimize spectrum use, facilitating band sharing and improving administration by the mechanisms used. In short, they make it possible to increase the offer of the radio spectrum, which makes it a limited resource. e. Some barriers are created for users since it limits the decision margin related to a possible change in the use of the spectrum or in the technology used for the service provision. f. Once the allocation has been made by the regulator, the licensee may market it, by the sale or transfer (total or partial) of the spectrum rights of use to other operators. g. flexibility is encour- aged if the regulator exempts participants from procedures that delay or discourage the conclusion negotiations between Operators. h. Decisions are assigned to the discretion of the user regarding the use for assigned frequencies, the technology used and the services provided. i. The model is relegated the operators of the space segment, the services of public interest, aeronautical and maritime. j. This can happen as a result of the lack of surveillance by the regulator as well as by the excessive use of the resource by operators that harm the minimum conditions of non-interference. k. These regulatory relaxation mechanisms are not applicable to the entire radio spectrum, but certain bands should still be governed by a “command and control” model that defines a scope of use that allows these users to adjust to the conditions of use regulated internationally (e.g., satellite operators). S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 23 Finally, it is relevant to mention that different responses have arisen with the aim of improving spectrum management under the command and control model. One example is the implementation of propagation models with increased precision that allow transmitters to be established with less space between frequencies, avoiding the risks of interference and increasing the efficiency of spectrum use. Another possible solution is the definition of fees for the exploitation of authorized spectrum through licenses awarded to users in a way that reflects the economic value of the resource they consume. A third example is restricting the use of certain bands for a specific group of services, with the aim of harmonizing allocation with interna- tional standards and encouraging the efficient use of the radio spectrum (KB Enterprises 2009). For a better understanding of the application of the different models, Figure 1.1 presents the most common uses for the three primary models. FIGURE 1.1. Spectrum Management Models According to Type of Service and Band HOW TO MANAGE DIFFERENT BANDS AND RADIOCOMMUNICATION SERVICES I COMMAND AND CONTROL MODEL II MARKET BASED MODEL III COMMONS MODEL Spacial Commercial Terrestrial Commercial and Radiocommunication Radiocommunication noncommercial Terrestrial Radiocommunication Space research, Earth • Fixed exploration, etc. • Mobile and • ICM Bands terrestrial mobile • Millimeter Bands Terrestrial • Broadcasting • White Spaces Radiocommuniaction New technologies and • Commercial and application of dynamic noncommercial spectrum assignment satelite services • Defense, security • Cognitive radio and rescue • Software-defined radio • Radionavigation (aero/ • MGWS maritime), radiolocation, amateurs and others Radioastronomy Source: BlueNote 24 DI GI TAL DEV E LOP ME N T PART NE RSH I P National administrations have discussed in detail what would be appropriate regarding spectrum fees. The rationale behind these fees are twofold: • As the spectrum is an asset, it represents • Administrations incur administrative costs to manage a source of potential economic benefit for the spectrum, which should be reimbursed by their their holders. holders. The first is the most followed approach, especially when the spectrum administrations have to set a price (for ex- ample, for a license renewal, to set a base price for an auction), and to do so they usually develop a financial model of the spectrum. All spectrum financial models have a key principle, that is, the scarcity of the resource. That scarcity might generate extraordinary returns to their holders, well above those that would be generated under perfect competitive condi- tions. Administrations should be wary of such extraordinary returns because they might prompt market failure. In economic terms, spectrum scarcity implies that spectrum fees (that is, its “price”) is set purely by its demand, as there is no possibility of increasing the offering of spectrum in either the short or long term.9 In the case of market processes to assign the spectrum, that fee will be set by the market (and so, the fee will turn a “clear market price”), but when there are no market conditions, that price is set by the administrators who follow one of the methodolo- gies already described. Note the incidence of new technologies on the scarcity principle. New technologies, such as SDR and band-sharing, are moving the spectrum supply curve to the right. Even though the spectrum is still scarce, new technologies, al- lowing a better use of it, increase the effective amount of spectrum to be potentially used. This movement of the supply curve of spectrum fueled by new technologies has two implications: • in scenarios where the fees are set by market • in scenarios where fees are purely defined by the processes, that movement allows lower clear market administrations, that movement reduces the need for fees for the spectrum. administrations to keep a tight control on spectrum prices to avoid extraordinary returns and market failure. 9. The amount of spectrum is fixed and independent of its price (that is, a vertical supply curve). S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 25 Key Spectrum Management Strategies SECONDARY LICENSING Although the regulator oversees granting spectrum use licenses to operators, it is a growing trend to enable a secondary spectrum market to motivate efficient use of the spectrum. This consists of enabling trade in licenses and transfer between network and services providers, usually with the technical and economic endorsement of the regulator in question. The main reason for the emergence of this concept is the limited flexibility of the traditional spectrum management system to reflect spectrum needs of operators and satisfy them according to the current status and evolution of communications services. Spectrum trading or secondary licensing provides operators and other licensees with a market- based economic incentive to use spectrum efficiently or allocate it to others. Secondary licensing includes the lease or sale of certain types of whole licenses, with no other changes permitted, the reconfiguring licenses, for example, by subdividing or aggregating spectrum allocation by geog- raphy or frequency, or short-term or long-term leasing or sharing of some of the license rights, which would be found in the criteria/articles within the license (World Bank 2017). The European Commission identifies sale, buy-back, leasing, and mortgage (where right to use is a collateral or a loan rather than a sale) as accepted methods for transferring spectrum rights of use (ITU. n.d.). The role of the regulator in the implementation of the secondary market is to approve and control the assignment of rights to avoid negotiations that lead to the establishment of dominant positions with respect to the spectrum. In addition, it is necessary to control the efficient use of the spectrum and monitor compliance according to obligations as determined in the licenses. On the other hand, it must be involved in resolving problems that arise in relation to the levels of interference that affect the normal functioning of the services. In addition, the regulator has to keep a record that allows the monitoring of operations and provides transparency to the com- mercialization processes. Its main advantages are (see World Bank 2017): • Promotion of the efficient use of the radio spectrum, since it allows the transfer of underutilized portions of the resource to other operators, obtaining a greater economic return that may also translate into greater welfare for citizens. • Increased flexibility given the elimination of the administrative and regulatory entry barriers for new operators. • Once published, the transactional values used between operators help to establish a price policy for the radio spectrum according to the market’s knowledge and valuation for a specific frequency band. • When abiding by the principle of technological neutrality, it allows for the promotion of innovation through the use of new technologies and the provision of alternative services. • Improving transparency for spectrum management carried out by the regulator, since transfers expose to the public the information related to the use of the commercialized frequency. 26 DI GI TAL DEV E LOP ME N T PART NE RSH I P REFARMING Spectrum refarming (ITU. 2015a), also known as spectrum redeployment, is a combination of administrative, financial, and technical measures aimed at removing users of, or equipment for, existing frequency assignments either completely or partially from a particular frequency band. The frequency band may then be allocated to the same or different service(s). It should be included in the administration’s national spectrum strategy together with the mechanism identified to assist implementation of redeployment. Technical issues such as fre- quency usage plans and equipment characteristics are important considerations for administra- tions and users that need to be available for efficient and successful redeployment with appro- priate timeframes. In this regard, the timely involvement of affected and interested parties in this process is relevant in defining an appropriate refarming strategy and migration plan if necessary. Spectrum refarming is a spectrum management tool that can be used to satisfy new market demands, increase spectrum efficiency or to respond to changes in international frequency al- locations. Also, to improve existing services or introduce new services, it may be necessary to move existing users of the radio spectrum to more modern technologies or new frequency bands. In many cases, spectrum redeployment is a natural process as existing users change their radio operations based on new technologies. The main problems relating to redeployment occur when insufficient time is available for in- troducing a change in spectrum use, and it is necessary to use a supporting mechanism to speed up the redeployment process. However, the use of such supporting mechanisms can lead to ob- jections from new or existing users about the consequent expenditure and inconvenience; it may require as much, if not more, management effort than the redeployment process. From the standpoint of the incumbent license holder, refarming refers to reallocating spec- trum frequency licensed bands already under their exclusive right of use to new mobile network technologies. For example, when 3G and then 4G came to market, mobile operators reallocated frequency bands they had previously used for 2G or 3G to usage with 4G/LTE technology (World Bank 2017). Some issues related to re-farming need to be addressed more specifically. For example, to re-farm a frequency, it is necessary to reconcile interests with incumbent frequency users, which usually takes a long time and is a costly process. Therefore, it is crucial to secure a legal ground and come up with a proactive frequency management plan based on emerging technologies and the projected future demand for the radio frequency. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 27 INTERNATIONAL BENCHMARKS A growing number of countries have begun to shift away from relying predominantly on the traditional model of spectrum management and their level of experience is directly related to the rapidly rising demand for radio spectrum. As countries begin to embrace greater flexibility, constraints on usage and technologies are relaxed and they start to make possible the expansion of license exempt frequencies (Industry Canada 2016). The leading countries where improvements in this regard were initially identified include Aus- tralia, the United States, New Zealand, Guatemala, and El Salvador (ITU n.d.). Other countries that followed towards a more flexible approach include Mexico, the United Kingdom, Spain, France, and Paraguay. Figure 1.2 shows the advances each country has made when measuring flexible use versus secondary trading. FIGURE 1.2. International Experiences + Guatemala United States Colombia France Australia FLEXIBLE Spain England USE El Savaldor New Zealand - + Peru Mexico Source: BlueNote SECONDARY TRADING - 28 DI GI TAL DEV E LOP ME N T PART NE RSH I P The Secondary Trading axis represents whether or not the country allows it, and the Flexible Use axis considers whether spectrum sharing is allowed and also if there is any regulation or legislation in place regarding the use of white spaces. The most advanced countries are the United States, France, and Guatemala as they comply with these two variables. Colombia also complies with both, presenting development in terms of flexibility, but secondary trading is only allowed by authorization from the relevant ministry. Other advanced countries that qualify in the most flexible quadrant are the United Kingdom, where the TVWS Pilot officially closed on 31 January 2016 (OFCOM 2016), and Australia, and Spain, where regulations for TVWS is still lacking. Other countries that allow secondary trading but need to take additional measures to show progress in terms of spectrum sharing are New Zealand, El Salvador, México, and Peru.10 The previous qualifications are based on the regulatory and policy information indicators and statistics available in the ITU’s ICT-EYE website, from data collected directly from countries and validated by the ITU. According to this data, there are 49 countries worldwide that allow secondary trading, 85 where spectrum sharing is also permitted, and only four with regulation for TVWS in place (Colombia, United Kingdom and three other countries are not included on this list, yet11). LATIN AMERICAN SPECIFIC EXPERIENCES COLOMBIA In 2017 Colombia became the first country in Latin America to finalize its TVWS regulation, resulting in huge expectations for the country to leverage better connectivity and social and economic inclusion. According to the resolution of ANE (see Appendix A), the free spectrum allocated for the TV service between 470 MHz and 698 MHz can be used to provide connectivity in rural areas. The regulation establishes the technical and operational parameters for the use of those bands to avoid interference with other services. Currently, less than 10 channels out of the 48 available for television broadcasting are used in 99 percent of the municipalities, which allows the use of those frequencies for other technologies and new services.12 ANE conducted electromagnetic compatibility tests between TVWS devices and the analog and digital television, demonstrating feasibility for this technology. In addition, three pilots were deployed in 2016 to successfully provide broadband Internet service to remote rural schools. In conclusion, the use of white spaces will contribute to connectivity goals, to lowering costs, and to making spectrum use more efficient.13 ANE recently received its first requests to initiate the registry procedure to enable white space use. The database implementation for automating the process is scheduled for 2018. 10 - ITU, ICT EYE. http://www.itu.int/net4/itu-d/icteye/AdvancedDataSearch.aspx. 11 - Nine countries have TV White Spaces regulation: United States, United Kingdom, Canada, Singapore, Sur Korea, Filipinas, Colombia, Trinidad and Tobago 12 - http://www.mintic.gov.co/portal/604/w3-article-51571.html. 13 - https://www.ane.gov.co/images/COMUNICACIONES2016/PRESENTACION.pdf. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 29 MEXICO In 2016, the Federal Institute of Telecommunications (IFT) approved general guidelines for the authorization of radio spectrum lease (see Appendix B), which enables the creation of a secondary spectrum market in Mexico aimed at providing flexibility, agility, and dynamism in the management of the radio spectrum. The measure allows the awarded spectrum that remains idle or underutilized to be used by third parties, with prior authorization from IFT. For the rental of spectrum to be possible, it should not affect the continuity of the service and should not generate concentration, hoarding, or crossownership. For this reason, the regulator reserves the approval of contracts with the objective of evaluating the effects on the accumulation of radio spectrum. In 2015, the regulator had already shown signs of encouraging the creation of a secondary spectrum market by authorizing the exchange of frequency blocks between AT&T and Movistar. The guidelines foresee a sublease of the spectrum, with the express consent of the lessor and authorization of the regulator. The sublessee may not, under any circum- stances, sublease the right to use and exploit the frequen- cy bands.14 14 - http://www.telesemana.com/blog/2016/03/31/mexico-aprue- ba-la-creacion-de-un-mercado-secundario-de-espectro/. 30 DI GI TAL DEV E LOP ME N T PART NE RSH I P GUATEMALA Guatemala was one of the first mover countries in implementing spectrum deregulation. Since 1996, the radio spectrum deregulation reform privatized the Guatemalan radio spectrum and allowed owners of radio spectrum to lease, sell, subdivide, or consolidate their spectrum licenses. Regulation is focused on control of interference and emissions (not solved by mediation as a first instance) and establishing reserved bands.15 The General Bylaw of Telecommunications (1996), allows allocation of spectrum in three groups:16 a) Reserved for Government use: 1,331 MHz in total, distributed in the bands recognized by the ITU but mainly from 3 KHz to 3000 MHz. b) Reserved for amateurs: 4,761 MHz in total, mainly distributed from 1.8 MHz to 250 GHz. Users in these bands, receive an Authorization of Use of Frequency (AUF: Autorización de Uso de Frecuencia) which cannot be sold or transferred. c) Regulated bands. Users receive a Title for Frequency Usufruct (TUF: Título de Usufructo de Frecuencia), which can be traded and has flexibility under technical constraints. These titles describe the frequency, hours of operation, maximum transmission power, coverage area, maximum interference at border of adjacent frequency, and duration of right. A TUF is essentially a property right, with the freedom to use the spectrum as the holder sees fit, subject to technical restrictions. El Salvador also decided at about the same time as Guatemala to adopt a simple but effective spectrum market which, in the case of nonpublic sector spectrum, gave private parties exclusive control over use of bandwidth and confined the regulator to defining, issuing, and protecting spectrum rights, although the regime in El Salvador is not as well documented (ITU n.d.). 15 - http://www.ictregulationtoolkit.org/document?document_id=2286. 16 - http://www.ictregulationtoolkit.org/document?document_id=3630. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 31 Best Practice As evolution takes place in both the spectrum market and spectrum management strategies, the trend is towards a more flexible environment in terms of management considerations and also to a less-regulated environment in terms of the spectrum market. In the same way, there is a direct relationship between the management model and flexibility in marketing the resource, as Figure 1.3 depicts: FIGURE 1.3. Spectrum Management Evolution FLEXIBLE SPECTRUM MANAGEMENT EVOLUTION FLEXIBLE COMMAND AND MARKET COMMONS CONTROL MODEL BASED MODEL MODEL PRIMARY SECONDARY USE FULL MARKET MARKET FLEXIBILITY LIBERIZATION FLEXIBLE SPECTRUM MANAGEMENT EVOLUTION FLEXIBLE Institutional best practice identified by the ITU in regard to spectrum management is characterized by (ITU 2015.d): • Allocating spectrum in an economic and efficient man- • Facilitating timely introduction of new applications and ner by relying on market forces, economic incentives, technology, while protecting existing services from and technical innovations. harmful interference, ensuring the most efficient use of radio spectrum. • Achieving transparency of spectrum management operations by promoting transparent, nondiscrimina- • Seeking international harmonization by aligning do- tory, economically efficient and effective policies, that mestic spectrum policies with international best prac- provide regulatory certainty. tice, in order to achieve faster take up of new bands and economies of scale. • Striving for technological neutrality and flexible spec- trum use, which involves promoting wireless innovation • Ensuring affordable and fair spectrum access by by creating conditions for the development of new providing all players with equitable and fair access to services, reducing investment risks, and stimulating spectrum resources and also by promoting develop- competition among different technologies, including ment of wireless technologies, especially in less devel- facilitating entry of new competitors into the market. oped areas. Additionally, to promote and facilitate the updated technology of incumbent operators is important to increase the efficiency in the use of the spectrum. 32 DI GI TAL DEV E LOP ME N T PART NE RSH I P Spectrum management is a chain of processes, and each stage of the chain must be well-established to produce desired results. The process’s steps are described in the next figure. FIGURE 1.4. Steps for spectrum management process APPLICATION OF NEW RE-FARMING TECHNOLOGY MONITORING THE USE PREVENTION OF OPTIMAL INTERFERENCE ALLOCATION (QUALITY FINDING AND CONTROL) SECURING FREQUENCY RESOURCES (ENSURING AVAILABILITY) Source: Myung Ryu, 2018 At the first step, the regulator must precisely know the frequency spectrum currently in use and the future frequency supply plans based on the demand forecast. In order to achieve the goal of efficiently utilizing limited resources, it is necessary to analyze the entire frequency band comprehensively. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 33 Conclusions Achieving effective spectrum management is the main contemporary challenge that regulators face because of the constant technological advances in the industry and constant increasing demand. This needed efficiency involves the analysis of diverse factors that imply fundamental technical, economic, and social aspects to guarantee not only the development of the indus- try’s activity but also the fruitful progress of a country. Based on this new challenge, both regulators and international organizations have developed possible alternatives to the previous command and control model, in such a way that these new precepts allow for spectrum management in the face of constant technological advances in the industry that stimulate the growth of the demand of the resource. In con- sequence, this advocates for the regulator defining specific guidelines only for those bands considered as strategic, while releasing some considerations at the discretion and analysis of users, and given the increasing demand for the use of un- licensed spectrum, it seems convenient for regulators to assign new frequency bands oriented to this type of use. Based on noninterference schemes and without protection against them, the allocation of frequencies for services that require released spectrum should be carried out through the total or partial application of common radio spectrum management models. For these services, it is recommended to use continuous blocks whose bandwidths are greater than 5 GHz and which are located in the spectrum between 30 GHz and 300 GHz. 34 DI GI TAL DEV E LOP ME N T PART NE RSH I P As a summary, the advantages and disadvantages for each management model are shown in Table 1.2. TA B L E 1 . 2 . Summary of Different Spectrum Management Models BENEFITS CHALLENGES • International Interoperability • Spectrum bands are often and harmonization – occupied by older and less COMMAND AND economies of scale efficient technologies CONTROL • Nonprofit use of spectrum • More flexible use and (general interest related public promotes efficient use MARKET service) might be crowded out by of the radio spectrum BASED market-based competition • Facilitates innovation • Can lead to overuse and in spectrum efficient overabundance of demand COMMONS technologies S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 35 The Peruvian Context This chapter presents the most relevant aspects of the Peruvian market, and highlights the country’s social and economic context, including the telecommunications ecosystem. Market Overview SOCIAL AND ECONOMIC CONTEXT: The population in Peru in 2017 was estimated at 31.8 million inhabitants, with an annual growth rate of one percent.17 Some 78 percent of the population is concentrated in urban areas, with major cities representing 62 percent of the population. By itself, the department of Lima and Callao accounts for 35 percent. Of the 25 departments, 12 account for 80 percent of the total population. The economy in Peru, measured by Gross Domestic Product, showed sustained annual growth of more than 5 percent between 2004 and 2013, except for 2009 because of the worldwide spread economic crisis.18 As a result, between 2005 and 2015 there was an average annual growth of 5.9 percent, decreasing to 5.4 percent for the period between 2010 and 2015. In 2015, GDP in Peru at current prices exceeded S/. 606 billion (about USD $186 billion). When looking at its composition at the departmental level, there is a 50 percent concentration of the Gross Value Added (GVA) in Lima (including Callao). The other departments of the country make minor contributions that do not exceed six percent, and the Pareto index (79 percent) is distrib- uted in seven additional departments. The average monthly income for 2014 in Peru was S/. 1,230 (about USD $377), presenting a significant inequality between regions: the average income in Metropolitan Lima is equivalent to 35 percent more than the national income, while the lowest corresponds to rural areas (equivalent to 50 percent). However, the existing gap between the average income of the rural population has been decreasing with respect to urban incomes: in 2005, the average was 38 percent of the urban income and in 2014 it was equivalent to 46 percent. TELECOMMUNICATIONS MARKET In Jun 2018, 34.05 percent of households in Peru had telephone landlines. The penetration of this service shows a smooth behavior since 2009, when it reached 8.628 lines less. In urban areas, the penetration is 31.7 percent, while historically it has been below 3 percent in rural areas.19 In contrast, 87.2 percent of households in Peru have at least one member of the house- hold with a cellular phone (in 2015). Penetration is still growing in rural areas, resulting in a sig- nificant decrease in the gap between rural and urban areas, which was 36 percent in 2010 and 18.6 percent in 2015. Coverage for the mobile telephony service in the rural population is 63.2 percent nationwide.20 17 - INEI. Population Statistics. https://www.inei.gob.pe/estadisticas/indice-tematico/poblacion-y-vivienda/#url. 18 - INEI. Economy Statistics. https:/ /www.inei.gob.pe/estadisticas/indice-tematico/economia/. 19 - INEI, Statistics, Information and Communication Technologies, Fixed Telephony by household, https:/ /www.inei.gob.pe/estadisticas/indice-tematico/households-with-access-to-informa- tion-and-communic/. 20 - INEI, Statistics, Information and Communication Technologies, Household with at least one member with mobile telephone, https:/ /www.inei.gob.pe/estadisticas/indice-tematico/house- holds-with-access-to-information-and-communic/. 38 DI GI TAL DEV E LOP ME N T PART NE RSH I P There are more than 40.6 million active mobile connections in Peru (see Table 2.1), which represents a mobile service penetration rate of 132.2 percent (as of Jun 2018).21 TA B L E 2 .1 . Active Mobile Connections by Company, September 2017 NUMBER OF ACTIVE MOBILE MARKET COMPANY CONNECTIONS (MILLION) SHARE (%) TELEFÓNICA DEL PERÚ 15,553 38,3% AMÉRICA MÓVIL PERÚ 12,785 31,5% ENTEL PERÚ S.A. 7,127 17,5% BITEL 5,124 12,6% TOTAL 40,637 Source: OSIPTEL, Mobile Service Indicators, Jun 2018. ACCORDING TO OSIPTEL’S 2016 RESIDENTIAL SURVEY OF TELECOMMUNICATIONS SERVICES (ERESTEL),22 66.5 percent of households had Internet access (either fixed or mobile), a 23 percent growth since 2015. However, it is noteworthy that growth was not driven by Metropolitan Lima, which only increased by 2.5 percentage points. Internet penetration in rural areas was 37.8 percent in 2016, rising by more than 12 percentage points over the previous year. 21 - OSIPTEL, Mobile Service Indicators, September 2017, and Telegeography, https://www.osiptel.gob.pe/documentos/2-indicadores-del-servicio-movil. 22 - OSIPTEL, ERESTEL 2016, Telecommunications services by household, https:/ /www.osiptel.gob.pe/documentos/2-indicadores-del-servicio-movil. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 39 FIXED INTERNET ACCESS In Jun 2018, 27.9 percent of households in Peru had fixed Internet access, being almost nonexistent (one percent) in rural areas, while in urban areas 30.2 percent of households had access. Lima Metro has the highest penetration, reaching 42.4 percent of households, however, for the rest of the country the value decreases to 14.3 percent.23 From a population standpoint, in Peru 40.9 percent of people six years and older use the In- ternet (fixed access), with Lima Metro (59.4 percent) and urban areas of residence (49.6 percent). However, penetration decreases to 32.2 percent in the rest of the country and only 12 percent in rural areas, which also presents the lowest growth by regions. The digital divide was 38 percent- age points in 2015.24 The most used Internet access technologies are CableModem, with more than half of the market (59 percent) and xDSL with a 32,4 percent market share. In addition, 44,8 percent of fixed Internet connections have data speed of 2 to 4 Mbps. Table 2.2 shows the number of fixed Internet connections by operator in Jun 2018.25 TA B L E 2 . 2 . Number of Internet Connections, September 2017 FIXED INTERNET ACCESS MARKET COMPANY NUMBER OF CONNECTIONS SHARE (%) TELEFÓNICA DEL PERÚ 1,838,601 75,4% AMÉRICA MÓVIL PERÚ 442,233 18,1% ENTEL PERÚ S.A. 112,053 4,6% OTHER 44,357 1,8% TOTAL 2,193,741 Source: OSIPTEL, Fixed Internet Access Indicators, Jun 2018. 23 - INEI, Statistics, Information and Communication Technologies, Internet access by household, https://www.inei.gob.pe/estadisticas/indice-tematico/households-with-access-to-informa- tion-and-communic. 24 - INEI, Statistics, Information and Communication Technologies, Internet access by population over 6 years old, https://www.inei.gob.pe/estadisticas/indice-tematico/households-with-ac- cess-to-information-and-communic. 25 - OSIPTEL, Mobile Internet access service penetration, December 2016, https:/ /www.osiptel.gob.pe/documentos/2-indicadores-del-servicio-movil. 40 DI GI TAL DEV E LOP ME N T PART NE RSH I P MOBILE INTERNET ACCESS During the last quarter of 2017, 69 out of 100 inhabitants accessed the Internet through a mobile telephone or other portable devices. Mobile Internet access grew by 85 percent since the first quarter of 2014 when 11.4 millions of Internet mobile lines were reported (see Figure 2.1). FIGURE 2.1. Mobile Internet Access Penetration 70% 69,2 60% 57,4 58,8 59,2 56,6 57,7 50% 53,6 48,9 48,5 50,0 40% 42,7 38,6 39,9 30% 20% 10% 0% 2016-3 2015-3 2016-2 2016-4 2014-3 2015-2 2015-4 2014-2 2014-4 2016-1 2017-4 2015-1 2014-1 2014 2015 2016 2017 Source: OSIPTEL, Mobile Internet Access Indicators, December 2017. In the last quarter of 2016, 52 percent of the mobile telephones that accessed the Internet had a data plan (see Figure 2.2). While 3G accounted for 56.7 percent of mobile telephones accessing the Internet, 30 percent accessed using 4G technology, growing by 5 percentage points in just one quarter. 2G still accounts for 13.5 percent of mobile telephones accessing the Internet (decreasing 4 percentage points from the previous quarter).26 26 - OSIPTEL, Mobile Internet access service penetration, December 2016, https://www.osiptel.gob.pe/documentos/2-indicadores-del-servicio-movil. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 41 FIGURE 2.2. Penetration of Data Plans 64% 36% 57% 43% 48% 52% 2014-4 2015-4 2016-4 2014 2015 2016 DATA PLAN NO DATA PLAN Source: OSIPTEL, Mobile Internet Access Indicators. In terms of 4G mobile coverage, note that the 700 MHz band, which is the best option for rural coverage, was assigned in 2016 to Claro, Movistar, and Entel (30 MHz for each) with minimum coverage requirements or obligations, which made it possible to achieve the administration’s collection objectives network deployment is ongoing. Figure 2.3 shows the number of population centers covered by 4G networks, by operator. 42 DI GI TAL DEV E LOP ME N T PART NE RSH I P FIGURE 2.3. Number of Population Centers Covered by 4G, by Operator 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0% ENATEL MOVISTAR CLARO BITEL Source: OSIPTEL 2017. According to ITU, GSMA Intelligence, and CISCO traffic estimates, global IMT traffic will grow in the range of 10-100 times from 2020 to 2030 (ITU. 2015c). In addition, the current average traffic asymmetry ratio of mobile broadband is in favor of the downlink, and this is expected to increase because of growing demand for audiovisual content. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 43 Broadband penetration in Peru compared to the best performers and the average in the region are shown in Figure 2.4. FIGURE 2.4. Fixed and Mobile Broadband Subscriptions per 100 Inhabitants, 2016 150 102 100 89.5 82.7 68.2 64 62 56.5 59.5 59.7 50 45.5 24.6 19.1 10.5 11.7 5.7 0 FIXED INDIVIDUALS USING MOBILE (WIRED) INTERNET (%) PERU URUGUAY MEXICO BRAZIL AMERICAS Source: BNMC Analysis based on ITU-D Statistics, 2016 (ITU-D 2016). TOTAL BROADBAND SUBSCRIPTIONS IN PERU REACHED 2.16 MILLION in September 2017 representing 27.1 percent of households, which is below the regional average of 42.9 percent.27 27. Telegeography, September 2017, http://www.telegeography.com. 44 DI GI TAL DEV E LOP ME N T PART NE RSH I P Institutional Framework INSTITUTIONS: Within the government, the Ministry of Transport and Communications (MTC) is responsible for the development of transport systems, communications infrastructure, and telecommunications in the country. Specifically, through the Communications Vice Ministry, it exercises the function of controlling and supervising the provision of communications services and activities. It is also responsible for the evaluation and processing of applications related to the operation of radio and television stations with an open signal and private telecommunications services and, therefore, it is the entity in charge of spectrum management. The Communications Vice Ministry is, in turn, subdivided into four general cabinets that per- form various functions in relation to spectrum management in Peru. Other entities, such as OSIP- TEL and ProInversión, support spectrum management activities. Figure 2.5 depicts the relationship of spectrum management institutions in Peru. The main functions of each institution are described in detail in Appendix C. FIGURE 2.5. Spectrum Management Institutions in Peru OSIPTEL COMMUNICATIONS VICE MINISTRY PROINVERSIÓN FITEL CONTROL AND REGULATION AND AUTHORIZATIONS CONCESSIONS SUPERVISION INTL. AFFAIRS NAT (PNAF) COMMISSION Source: BlueNote. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 45 • General Cabinet of Telecommunications Authorizations: responsible for the evaluation and processing of applications related to the operation of open-signal radio and tele- vision stations and private telecommunications services; determining the frequencies or channels for its operation. It evaluates compliance with the obligations derived from the granted authoriza- tions, such as economic obligations. It is also responsible for planning the radio spectrum used by radio and television stations with an open signal and private telecommunications services. • General Cabinet of Control and Supervision: responsible for controlling and supervising the provision of communications services and activities. It has the power to sanction in the area of its competence, as well as ensuring the correct use of the radio spectrum. It man- ages the National System of Management and Control of Radioelectric Spectrum, also composed of fixed stations, remote stations, mobile stations, and portable equipment, which provides the necessary infrastructure to verify the correct use of the radio spectrum in accordance with national standards and ITU Recommendations, allowing it to act efficiently on the emissions coming from illegal stations. • General Cabinet of Regulation and International Af- fairs: responsible for proposing and evaluating the policies and regulation of the sector. It is also responsible for the dissemination of the sector policy and regulations, the calendar of international meetings and events, the sta- tistical information of the sector, such as bulletins, formats and general instructions, and cadastre and infrastructure registration. • General Cabinet of Concessions: responsible for pro- posing, granting, modifying, renewing, and canceling concessions and registrations to provide public telecommunications services and postal services. It is also responsible for the administration of the radio spectrum and other resources associated with the provision of public telecommunications services. • The Permanent Multisector NAT (PNAF) Commis- sion: issues specialized technical reports and recommendations for the planning and management of the radio spectrum and the adjust- ments of the National Frequency Allocation Plan. Attached to the Ministry of Transport and Communications, it comprises four members from MTC, one member from each of the general cabinets, and one member from OSIPTEL, from the Policy Regulations Direction. The president of the commission is the member of the Concessions cabinet from MTC. 46 DI GI TAL DEV E LOP ME N T PART NE RSH I P The National Allocation Table (NAT), which is also referred to as the National Frequency Assignment Plan (PNAF)28 (see Appendix E), indicates how the frequency bands are allocated into the different telecommunications services and classifies spectrum use, in order to: MINIMIZE THE ALLOW THE COEXISTENCE ENSURE ITS LIKELIHOOD OF SERVICES WITHIN THE OPERATION OF HARMFUL SAME FREQUENCY BAND, INTERFERENCE WHEN APPLICABLE. Other stakeholders within the government that are associated with the communications legal framework in Peru include: • OSIPTEL: the Supervisory Agency • FITEL: The Telecommunications for Private Investment in Telecom- Investment Fund oversees the provision munications is a decentralized public of universal access to telecommunica- entity in charge of regulating and tions in Peru.30 It finances the provision supervising the telecommunications of telecommunication services in rural public services market. OSIPTEL is at- areas and places considered to have tached to the Presidency of the Coun- preferential social interest, contributing cil of Ministers in Peru. Its mission is to the socioeconomic development of to regulate and supervise the tele- the country. FITEL receives 20 percent communications market to promote of the royalties collected through spec- competition, the quality of services trum use. and respect for the rights of users.29 • ProInversión: The Private Investment Promotion Agency is a public agency under the Ministry of Economy and Finance whose mission is to promote sustainable private invest- ment with efficiency, quality, and transparency. ProInversión is also involved in the offering of frequency bands, and organizing, managing, and supervising public contests and spectrum auction processes. The agency promotes the incorporation of private investment in services and public infrastructure, assets, projects, state enterprises, and other state activities based on public and private initiatives of national competence. Furthermore, it provides specialized tech- nical assistance to public bodies in investment matters.31 28 - Due to the dynamism associated with the management of band frequencies, the table is periodically updated in response to the different agreements reached at the World Radiocommunication Conferences of the ITU; bilateral and multilateral agreements; to recommendations made by international organizations such as CITEL and due to modifications, additions or issuance of new national regulations. There are ministerial resolutions modifying parts of the document, however the document itself was last published in 2008 and therefore is in need of a consolidated new version. 29 - https://www.osiptel.gob.pe/categoria/mision-vision-finalidad. 30 - http://www.fitel.gob.pe/pg/fondo-inversion-telecomunicaciones-fitel.php. 31- http://www.proinversion.gob.pe/modulos/jer/PlantillaStandard.aspx?are=1&prf=1&jer=8260&sec=52. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 47 Regulatory Framework According to Peru’s legal framework, telecommunications services are classified by type, according to ITU classification, and also by their use, which could be private or public (see Table 2.3): Public services are those for which use is available to the general public in exchange for a determined tariff. Carrier services are considered as a public service by legal definition. Private services are established by a natural or legal person to strictly meet their own communications needs. Free voice and/or data transmission are considered private and not public services. Regulation is based on a limited classification for services, which lacks components for the introduction of key innovative concepts (for example, convergence). 48 DI GI TAL DEV E LOP ME N T PART NE RSH I P TA B L E 2 . 3 . Service Classification by Type TYPE OF SERVICE PUBLIC PRIVATE Microwave links CARRIER SERVICES (point-to-point) Mobile services TELECOMMUNICATIONS Fixed land terrestrial PCS SERVICES (SERVICES Mobile land terrestrial PROVIDED TO FINAL USERS) Wireless fixed access Microwave links Trunking DTH Radio and VHF & UHF TV BROADCAST SERVICES Cable TV (i.e. Private service of public MMDS interest) Data storage VALUE ADDED SERVICES Messenger services Source: OSIPTEL; TUO, General Bylaw of the Telecommunications Regulation; BlueNote analysis. The Unique Ordered Text (TUO) of the General Bylaw of the Telecommunications Regulation establishes the general guidelines for the provision of telecommunication services, spectrum management, standardization and approval of telecommunications equipment, and the regulation of the services so that they are carried out in compliance with the objectives and principles established in the telecommunications law. Article 57 of the Telecommunications Law (TUO),32 states that the radio spectrum is a natural resource of limited dimensions that is part of the nation’s heritage (see Appendix D). Likewise, Article 199 of the General Bylaw of the Telecommunications Regulation (TUO)33 defines the radio spectrum as the means by which radio waves can propagate without artificial guidance (see Appendix E). It constitutes a limited natural resource that is part of the nation’s patrimony, assigning the Ministry of Transportation and Communications as responsible for the administration, allocation, assignment, and control of the radio frequency spectrum and, in general, as concerns the radio spectrum. 32 - Approved by Supreme Decree No. 013-93-TCC. 33 - Approved by Supreme Decree No. 020-2007-MTC. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 49 Public Agenda The state’s policy on the development of information and communication technologies (ICT) can be summarized in the following main points: Deployment of fiber optic Infrastructure, reflected in the National Dorsal Fiber Optic Network (RDNFO) and Regional Fiber Optic Networks (RRFO) projects (see Appendix F). Network neutrality to guarantee freedom of use. Promotion of e-government by facilitating citizen access to the state via ICT. Promotion of content creation, applications, and digital capacity building, focusing on areas such as education and health. 50 DI GI TAL DEV E LOP ME N T PART NE RSH I P PROJECTS: The government is committed to reducing the telecommunications infrastructure gap as a means of improving the quality of life of the population for which a series of measures and projects have been formulated and implemented to ensure the universal right of Peruvians to use telecommunications services with an emphasis on social inclusion:34 • National Dorsal • Regional Fiber • Fourth Mobile Fiber Optic Network Optic Networks Operator: The entry of Bitel (RDNFO): The most signifi- (RRFO): As a complement, (Viettel) as the fourth operator cant project is the National Dor- 21 regional fiber-optic projects of mobile telephony services sal Fiber Optic Network, which will be developed that will allow has boosted competition in the comprised the deployment Internet access to the districts market and expanded the offer of 13.500 kilometers of fiber and localities in the interior of of telecommunications services throughout the country, allowing the country. The project, which in the country. The company 92 percent (180 of the 195) pro- involves an investment of more began operations in July 2014 vincial capitals to access high- than $1,100 million, will be thanks to the concession for speed Internet. The concession cofinanced by the state and the provision of the service for contract for the construction, operated by private companies. 20 years in the 900 MHz band. operation, and maintenance of Each includes the implementa- The government, in line with its the RDNFO was signed for 20 tion of wireless access networks inclusive policy, committed the years in June 2014, through a to provide needed coverage in operator to provide mobile ser- public-private partnership that more than 1,500 district capitals vice in 48 remote and prioritized involved an investment of $333 and nearby rural towns (more districts outside of Lima and million. The project represented than 6,000 localities), which Callao. Currently, Bitel has no a milestone in the develop- means that access will be given spectrum for 4G as they did not ment of telecommunications to 3.9 million people. Eight of participate in the most recent infrastructure in Peru, because the projects have already been auctions, that is, for Advanced there was no high-speed com- awarded and initiated. The Wireless Services (AWS) and munication medium that would World Bank will cofinance three 700 MHz. allow competing companies to regional projects (Arequipa, offer their services at the na- Pasco, and La Libertad) that are tional level. Thus, one of its main expected to be initiated in 2018. benefits is that it promotes the development of a high-speed Internet offer in places where it did not exist, encouraging com- petition and the reduction of the price of Internet access to close the infrastructure and telecom- munications services gap. 34 - Ministry of Transport and Communications, http://www.mtc.gob.pe/logros.html. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 51 PUBLIC AGENDA ON SPECTRUM MANAGEMENT • Ongoing Studies for New Frequencies 510 MHz of spectrum is currently under evaluation to be identified as IMT in the medium term, which includes consideration for wireless broadband fixed access within the framework of the new bands under study, such as the 2.5 GHz band and higher frequency bands (for example, 3.5 GHz). There are also studies for the 5.4 GHz band as potential for use as unlicensed spectrum (see Table 2.4). TA B L E 2 . 4 . New Frequencies Under Evaluation IMT BANDS BANDWIDTH CURRENT ASSIGNMENT 450MHz band: The R.M. N ° 095-2018/MTC 01.03 allocated to public 452,5 – 457,5MHz / 10MHz telecommunications services using wireless access systems 462,5 – 467,5 MHz and booking the band Extended 850 MHz band Trunking services (800 MHz): 30MHz /36 The R.M. N° 095-2018/MTC 01.03 allocated to public 806 – 821 MHz/851 – MHz telecommunications services using wireless access systems 866MHz 821-824 MHz/866-8649 MHz and booking the band The R.M. N° 095-2018/MTC 01.03 allocated to public 1500MHz band (Band L) 90MHz telecommunications services using wireless access systems 1.427 – 1.517 MHz and booking the band Fixed wireless access (WiMax/LTE) 2.3 GHz band: The R.M. N° 095-2018/MTC 01.03 allocated to public 100 MHz 2300-2400 MHz telecommunications services using wireless access systems and booking the band Channelization for Multichannel Multipoint Distribution Service (MMDS), 6 MHz per channel 2.5 GHz band: WiMax/LTE technologies deployed – fixed services 190 MHz 2500-2690 MHz The R.M. N° 095-2018/MTC 01.03 allocated to public telecommunications services using wireless access systems and booking the band Fixed wireless access (WiMax/LTE) 3.5 GHz band: The R.M. N° 095-2018/MTC 01.03 allocated to public 200 MHz 3400-3600 MHz telecommunications services using wireless access systems and booking the band Source: MTC, General Cabinet of Regulations and International Affairs. • New Technologies Enabling 4G/LTE Technology In July 2013, the government awarded two blocks of spectrum in the 1.7-2.1 GHz band (AWS) to Telefónica and Entel for more than $255 million.35 The measure promoted the deployment and implementation of mobile Internet services with 4G/LTE technology with coverage nationwide, establishing a minimum speed of 1 Mbps per user. To implement the mobile network in this band, operators have invested about $1100 million. To date, 4G/LTE technology is offered in 90 provinces from 13 departments. Subsequently, over the next four years, the coverage of this service will be national in all the main cities and tourist places of the country (234 localities). About two-thirds of the population of Peru will benefit from 4G/LTE coverage. In addition, to expand the reach of 4G/LTE high-speed mobile Internet services, in June 2014 ProInversión was entrusted with conducting the tender to award three blocks of spectrum in the 700 MHz band (known as Digital Dividend spectrum), a process initiated with the implementation of the AWS band. The tender conducted in May 2016, which allotted 90 MHz of spectrum between three of the main competitors (Claro, Movistar, and Entel),36 will contribute to extending the coverage of high-speed mobile broadband In- ternet service to the most remote locations with the least resources in the country, because it allows provision of greater coverage at a lower cost than other spectrum frequencies. Likewise, it will improve the quality of the service, since it offers a better coverage inside buildings. The Master Plan for the Implementation of Digital Terrestrial Television (DTT) in Peru was approved by Supreme Decree No. 017-2010-MTC (see Appendix G). It establishes the nec- essary measures for the transition of television broadcast- ing services with analog technology towards the provision of these services using digital technology, foreseeing the implementation of DTT progressively in the four territo- ries defined for this purpose (see Figure 2.6). 35 - Ministry of Transport and Communications, http://www.mtc.gob.pe/logros.html. 36 - http://telconomia.com/peru-resultados-la-subasta-700-mhz. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 53 FIGURE 2.6. DTT Implementation VHF BAND UHF BAND MIGRATE MIGRATE ANALOG DIGITAL PUBLIC TV TERRESTRIAL TV SERVICES 54 MHz 216 MHz 470 MHz 689 MHz Source: MTC, 2015 The Master Plan sets latest deadlines for the approval of the channeling and frequency assignment plans for the broadcasting service by digital terrestrial television in the UHF band, as well as for the start of transmissions with digital technology and also for the end of the transmissions with analog technology in each of the territories. Complete analog switchoff is not expected until 2028, although Lima and Callao will be ready in 2020, when performing tests could include new technologies for TV white space implementation (MTC 2015). 54 DI GI TAL DEV E LOP ME N T PART NE RSH I P TA B L E 2 . 5 . Master Plan for DTT 1. 2. 3. 4. TERRITORY LIMA AND NORTHERN OTHER OTHER CALLAO CITIES DEPARTMENT LOCATIONS CAPITALS % 31 14 8 47 POPULATION SIMULTANEOUS 2015-4Q 2017-3Q 2019-4Q 2024-1Q TRANSMISSION DIRECT 2019-4Q 2021-4Q 2023-4Q 2025-1Q TRANSMISSION ANALOG 2020-4Q 2022-4Q 2024-4Q 2028 SWITCHOFF Channel plan Channel plan ap- approved proved Channel plan Channel plan STATUS 20 digital 4 digital in development approved stations stations (115 locations ok) transmitting transmitting Source: MTC, General Cabinet of Authorizations. NOTE: The third and fourth stages were subdivided in three stages, without modifications in the deadline for analog switchoff. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 55 Smart Cities Although progress in the development of new technologies is limited in Peru, in 2016 MTC published a document on smart cities that recognized the need to start planning for smart cities as a long-term strategy with the aim of improving the quality of life for citizens. In addition, it identified the need for policies and strategies to respond to public concerns, making citizen security and control of vehicular traffic the issues to be prioritized for the Peruvian reality. • Licensing No significant initiatives were identified in relation to spectrum licensing. MTC performed a study in 2016 on the feasibility for the secondary market which was motivated by the need for Claro to lease 10 MHz from Telefónica. The study was not published and it has not been implemented to date. There is also awareness of Colombia’s recently issued regulation on TV white space, which is currently under review within the respective areas in MTC. 56 DI GI TAL DEV E LOP ME N T PART NE RSH I P Assessment of the Current Situation Assessment revolves around the four stages of spectrum management as shown in Figure 2.7. F I G U R E 2 . 7. The Four Stages of Spectrum Management PLANING CONTROL MANAGEMENT ASSIGNMENT PLANNING The ability to take full advantage of the radio spectrum depends heavily on the national spectrum management activities established within the country, as it provides a framework within which spectrum is made available for the constantly evolving needs, and the spectrum management system. In Peru, spectrum planning is primarily based upon Recommendations from the World Ra- diocommunication Conferences. However, activities related to planning for IMT bands, such as spectrum demand, new bands, spectrum caps, and migration plans, among others, are limited. There are also limited innovation activities that could optimize accommodation of users through the establishment of capabilities that promote efficient and effective spectrum use. The spectrum management process should attempt to anticipate developments that increase mobile spectrum needs and demand and ensure that adequate spectrum will be allocated to the mobile service to meet those needs. However, so far, the country has not conducted any studies to anticipate spectrum demand. Related to the ITU Recommendation for IMT, Peru has assigned 28 percent of the spectrum. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 57 TA B L E 2 . 6 . ITU Recommendation for an Optimal Mobile Broadband Connection (2020) SPECTRUM SPECTRUM TOTAL SPECTRUM CLASSIFICATION REQUIREMENT REQUIREMENT REQUIREMENT RATG 1A RATG 2B RATGS 1 AND 2 Lower user 440 MHz 900 MHz 1340 MHz density settings Higher user 540 MHz 1420 MHz 1960 MHz density settings Source: ITU 2014. NOTE: a. Radio Access Technology Group 1: Pre-IMT, IMT- 2000 and its enhancements. b. Radio Access Technology Group 2: IMT-Advanced (new mobile access and new nomadic/local area access). MANAGEMENT Spectrum management in Peru has taken a traditional approach focused on the command and control model, which explains the lack of specific regulation that responds or considers competition factors, resulting also in low focus on improving spectrum efficiency. There is also an identified need to improve information technology tools, tables and databases, processes and algorithms related to spectrum management in general. ASSIGNMENT The spectrum assignment process is well established although it is rigid, responding to the country’s approach related to the adopted management model. Assignment and concessions processes are based on the National Allocation Table (PNAF), although there is an important lag in updating the NAT document, since updates have been handled through the publication of resolutions. The government does not have a clear methodology for spectrum valuation, which results in spectrum being assigned primarily on a first come, first served basis, through administrative deci- sions and competitive bidding. According to the National Allocation Table (PNAF), assigned spectrum is summarized in Table 2.7. 58 DI GI TAL DEV E LOP ME N T PART NE RSH I P TA B L E 2 . 7. Terrestrial Services (Fixed and Mobile) SPECTRUM SPECTRUM CLASSIFICATION FREQUENCIES ALLOCATION ALLOCATION FIXEDA MOBILEA Low Bands < 1 GHz 256 MHz 256 MHz Intermediate Bands 1 GHz < x < 3 GHz 1043.1 MHz 963.1 MHz High Bands 3 GHz < x < 6 GHz 1475 MHz 930 MHz TOTAL 2774.1 MHz 2149.1 MHz Source: NAT, National Allocation Table (PNAF); BlueNote analysis. NOTE: a. Most bands are allocated to fixed and mobile services simultaneously. Within the spectrum bands allocated to mobile services, there are some ranges already identified for IMT used, mainly in 2G, 3G and 4G cellular technologies. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 59 TA B L E 2 . 8 . Spectrum Identified for Use as IMT AVAILABLE IMT BANDS BANDWIDTH ASSIGNMENT SPECTRUM 700 MHz band: To mobile 90 MHz 703-748 MHz/758-803 MHz operators (2015) 850 MHz band: To mobile 50 MHz 824-849 MHz/869-894MHz operators 8 MHz 900 MHz band: 32 MHz assigned to 40 MHz (in use by private 895-915 MHz/940-960 MHz mobile operators fixed services) 1900 MHz band: 120 MHz Assigned 1850-1910 MHz/1930-1990 MHz AWS band: 90 MHz 80 MHz assigned 10 MHz 1710-1755 MHz/2110-2155 MHz Already identified Extended AWS band: 30 MHz as IMT and going 30 MHz 1755-1770 MHz/2155-2170 MHz through approvals Source: NAT. National Allocation Table (PNAF); BlueNote analysis. • Assigned spectrum in Peru for mobile services is 370 • Considering also the available spectrum (that is, 510 MHz, just above the average for the Latin America MHz) in the public agenda studies, there is still a gap region, which is 319 MHz.36 This represents 28 percent of 34 percent (460 MHz) of the lower user density of the lower user density settings and 19 percent of the settings and 55 percent (1,080 MHz) of the higher higher user density settings. user density settings. 37 - https://www.gsma.com/latinamerica/spectrum-in-latin-america. 60 DI GI TAL DEV E LOP ME N T PART NE RSH I P Regarding licensing, it should be noted that there are two pivotal licensing titles which ultimately depend on the service type: Concession: A legal act by means of which the state Authorization: A facility granted by the state to a nat- grants a natural or legal person the power to provide ural or legal person to establish a telecommunications public telecommunications services. The ministry will service, which does not require a concession to install grant a single concession for the provision of all public and operate radiocommunication equipment. services of telecommunications, regardless of the de- nomination of these contained in this law or in its regula- Permissions are also granted by the state to natural or tion, with the exception of the concession for indepen- legal persons to install radiocommunication equipment dent operators. The concession was perfected by written in a specific place; and licenses which are granted to op- agreement approved by resolution of the sector holder. erate an authorized radiocommunication service. TA B L E 2 . 9 . Licensing Titles SERVICE TITLE ADJUDICATION FEATURESa Fixed/Mobile Access: • Public bid in Lima and Term = 20 years Callaob and other provinces Renewal according to contract if demand is higher than Concession rights = 2.5 per thousand supply of the initial investment planned (one PUBLIC • By request: in other time) CONCESSION provinces SERVICE Term = 20 years Carrier services: Renewal according to contract • By request: first come, Concession rights = 2.5 per thousand first served of the initial investment planned (one time) Term = 5 years – Private Term = 10 years – TV FEATURES AUTHORIZATION • By request Automatic renewal Authorization rights = 1 UIT (one time) Source: OSIPTEL; TUO, General Bylaw of the Telecommunications Regulation; BlueNote analysis. NOTE: a. In addition to concessions/authorizations rights, there is a fee for spectrum use. b. Public bid in Lima and Callao is mandatory, does not depend on demand. Public bid also applies for national licenses for mobile services (IMT) S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 61 SPECTRUM FEES SCHEME The article 60 of the Peruvian law of telecommunications establishes that “the use of the radio spectrum leads to the payment of a fee to the owners of radio stations should be...” and corresponds to the MTC the definition of applicable fees to this canon. In 2018, an important modification of the existing compensation scheme for public mobile services (mobile telephone, personal communications services and trunked service) through Supreme Decree 003-2018-MTC providing a path of gradualism to the payment of the fee until the 2020 and combines the results obtained considered the old methodology (based on the amount of Terminals) and the new methodology (based on bandwidth, amount and type of bands, geographical area, type of service, budget target and improvement/expansion of existing infrastructure), as described in the following formula: Canon2018 = ( 2 3 results obtained with the methodology for terminals ( 2018 ( 1 3 results obtained with new methodology ( Canon2019 = ( 1 3 results obtained with the methodology for terminals ( 2019 ( 2 3 results obtained with new methodology ( Quantity-of-Terminals-based methodology is summarized in the following table: TA B L E 2 .1 0 . Terminal-based methodology CLASSIFICATION RATE OF THE SPECTRUM RATES FOR SERVICES OF SERVICE ("CANNON") ("RATE") Moviles4, PCS, Trunking3 services: 4 ranges: PUBLIC TELESERVICES • -Starting from terminals between 1 and 300 Annual commercial rate = 0.5 k = 0.35 percent ITU for mobile terminal percent of gross revenues • -Ending to more than 3 million Terminal = 0.20 percent ITU for mobile terminal Source: TUO - general regulation of Telecommunications Act 62 DI GI TAL DEV E LOP ME N T PART NE RSH I P The new methodology is given by the following formula for calculating; C = CAB × NF × CA × CPB × CPZ × FS × PO - CEI Where: C = annual fee for the use of the spectrum CAB = coefficient of bandwidth, corresponding to the total bandwidth of the spectrum assigned for transmission and reception (MHz). NF = number of assigned bands or channels. CA = coefficient corresponding to the surface area (Km2) assigned. CPB = coefficient of weighting by band, equivalent to 1 for the low bands (< 1 GHz) and 0.4 for high bands (> 1 GHz). CPZ = coefficient of weighting by zone, which is a function of the human development index (IDH) and the urbanity index (IU). The values are defined in the Decree 003-2018. FS = coefficient of participation per service calculated each year as a function of the barrel capacity index of operating companies, participation bandwidth and territorial expansion. The 2018 FS value was estimated at 0.000000219 percent. PO = target budget, which is made by the budget institutional modified (PIM) sub-sector of telecommunications, indirect expenses of the MTC (17 percent of the PIM) and found transfer to the FITEL (40 percent of the PIM). CEI= coefficient of infrastructure expansion and/or technological improvement, calculated based on new or better infrastructure at locations identified by the MTC as of interest. It is estimated annually by methodology defined in the Decree mentioned. The canon by use of the spectrum for other services is given by the capacity of the links or the assigned bandwidth. The following table summarizes the methodology of calculation of the canon of spectrum for other services. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 63 TA B L E 2 .1 1 . Canon for use of radio spectrum for other services CLASSIFICATION RATE OF THE SPECTRUM RATES FOR OF SERVICE (“CANNON”) SERVICES (“RATE”) Microwave 1 (digital) links: 7 ranges based on the ability to:- CARRIER Annual commercial rate = starting - up to 128 Kb/sec = 2 UIT2 SERVICES 0.5 percent of gross revenues -Ending to more than 34,368 Mb/sec = 20 percent ITU Fixed terrestrial = 4 percent ITU fixed station and transmission frequency PRIVATE Annual commercial rate = -Mobile terrestrial = 10 percent UIT TELESERVICE 0.25 percent of gross revenues for mobile station MMDS: 20 percentITU per channel • DTH: 2 percent by assigned MHz ITU • Broadcasting (Radio and TV) BROADCAST Canon is determined applying the Annual commercial rate = SERVICES general formula of assessment (see 0.25 percent of gross revenues coefficients such as the bandwidth, coverage, congestion of the spectrum, band and exclusivity of frequency, among others). Source: OSIPTEL; TUO, general regulation of telecommunications law; Blue Note website CONTROL Monitoring and evaluation functions are coordinated between two of the general cabinets within the Vice Ministry of Communications (Concessions, and Supervision and Control) to ensure proper alignment with spectrum use licenses through a shared database. 64 DI GI TAL DEV E LOP ME N T PART NE RSH I P Findings With the public agenda focused on a traditional approach, there is a need to include innovative approaches to lower the spectrum availability g ap. The current spectrum agenda can be summarized as follows: • The government has only assigned 28 percent of the spectrum required to satisfy traffic demand based on forecasts for IMT to 2020. This would indicate that current IMT spectrum will be insufficient in the short term and, with a traditional approach, it could take time to assign new frequencies. The potential new IMT frequency bands are currently occupied (that is, there are spectrum licenses assigned to operate other services such as MMDS, microwave links, and so on) and the migration plan to release the spectrum is not yet available. • Peru has identified 420 MHz for IMT and is currently examining the feasibility of an additional 510 MHz. However, this will still be insufficient for expected demand, according to ITU IMT spectrum forecasts to 2020. • Part of AWS band (10MHz), the AWS-Extended band (30MHz) and the 2,5GHz band (190MHz) are feasible to be used to increase the 4G networks capacity in short term. Hence, it’s advisable to focus priority efforts in planning activities such as frequency clearance, channelization and assignation, reducing the gap between spectrum available and ITU forecasted. • The MTC is currently studying the 5.4 GHz band as potential for unlicensed use. With regards to spectrum management modification, this might face resistance by different stakeholders, especially those incumbent users of spectrum that consider it as a valuable financial asset and a source of extraordinary benefits, and those whose use of spectrum holdings remain below efficient levels. Digital Development Partnership Technical Assistance Potential Impact Public policies are required to promote efficiency in spectrum management: • Review current regulatory framework regarding spectrum efficiency, that is, secondary market, use of TVWS, Internet of Things (IoT), and so on. • Promote and incorporate new technologies, such as: »» Cognitive radio »» Software- »» Internet of »» White space (spectrum defined Radio Things (IoT) feasibility sharing) (SDR) analysis • Evaluate and update the processes and tools for spectrum monitoring to support innovate spectrum management techniques such as spectrum sharing. Chapter 3 assesses the potential for the initiatives to be implemented in Peru based on findings and the government’s public policy agenda. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 65 Preparation for Future Actions It is necessary to adopt certain contextual elements to In order to: support the pursuit of increased flexibility in spectrum management. Therefore, the following conditions should • Formulate policies and laws that adopt market be promoted: mechanisms as more efficient models to allocate the resource where there is greater scarcity. • Policies aimed at liberalizing the economy and deregulating the telecommunications sector • Protect and reserve certain frequency bands. in particular. • Gradually implement more efficient models, driven • Review and increase awareness of the mainly by the deployment and growth of mobile and inadequate speed and efficiency of the command broadband services. and control model. • Provide a general framework for the development • Recognize the increasing need for both spectrum and incorporation of future technologies, including access and the impact of technological complexity experimentation in suitable spectrum spaces. and diversity • Promote solutions to increase the efficient use of scarce resources such as spectrum and infrastructure. This chapter provides a general overview of initiatives that have potential for implementation in Peru considering four main aspects: More spectrum available for FREQUENCY BANDS wireless broadband access TECHNOLOGIES More efficient use of the spectrum LICENSING Facilitate access to spectrum Promote the technical, economic, and socially efficient SPECTRUM FEES use of the spectrum through fee schemes Subsequently, in Chapter 4, possible initiatives are assessed and an implementation plan is proposed. 68 DI GI TAL DEV E LOP ME N T PART NE RSH I P Initial Assessment of Initiatives NEW FREQUENCIES FOR IMT There is a need to develop a long-run plan for IMT bands based on estimated spectrum demand and established caps regulation. Moving forward, action plans should focus on: • Defining a strategy to for smart cities in Peru, including IoT development. • Identifying IMT bands feasible to meet mobile traffic demand, 5G development and IoT promotion. • Conducting a study to consider 5.4 GHz as an unlicensed band. • Reviewing and updating regulation for unlicensed bands (that is, with regard to power transmission limits). TA B L E 3 .1 . Potential Identification of 250 MHz of Additional Spectrum for IMT BANDS BANDWIDTH COMMENTS 450 MHz band: Analyze social approach 20 MHz 450-470 the MHz and commercial ecosystem. 600 MHz band (Digital Recent migration (700 MHz band) 84 MHz complicates any further relocation in the Dividend II): 614-698 MHz short term. Analog switch off in 2028. L band: 1427-1518 MHz 91 MHz Currently used in radars. Potential use for supplemental downlink. 2 GHz band: 2010-2015 MHz (TDD), and 2000-2020 55 MHz Analyze potential for IoT, MHz/2180-2200 MHz fixed wireless broadband. Source: NAT, National Allocation Table (PNAF); BlueNote analysis. In addition, as conclusion of ITU working groups meeting focus on item 1.3 of WCR-19 agenda, we identify an interest on mmWave Spectrum, especially in the next frequency bands: 24.25 - 27.5, 26.5 - 29.5, 37 - 43.5 and 66 -71 GHz (see Figure 12) S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 69 FIGURE 3.1 mmWave bands for 5G CRM-15 ART 3 Y 5 (REGIÓN 2) CRM-19 AGENDA 1.13 GERMANY UK JAPAN EEUU KOREA CHINA INDIA 470-694/698 MHz 2 500-2 690 MHz 3 400-3 600 MHz 3 300-3 600 MHz 2 300-2 400 MHz 1 885-2 025 MHz 2 110-2 200 MHz 1 710-1 885 MHz 1 427-1 518 MHz 24.25 - 27.5 GHz 37.0 - 40.0 GHz 26.5 - 29.5 GHz 40.5 - 42.5 GHz 42.5 - 43.5 GHz 698-960 MHz 450-470 MHz 66 - 71 GHz 4.5 GHz 3.7 GHz UHF: 300 - 3000 MHz SHF: 3 - 30 GHz EHF: 30 - 300 GHz Source: Source: BNMC The mmWave bands have appropriate technical and economic conditions for 5G network deployment as well as many coun- tries (UK, German, USA, Finland, Japan, South Korea, China, India, etc.) already started vibrant run towards 5G. Furthermore, Peruvian government is evaluating new 510MHz for IMT development (See Table 3.3.). TA B L E 3 . 2 . Current Ongoing Studies for the Identification of an Additional 510 MHz for IMT BANDS BANDWIDTH COMMENTS Extended 850 MHz band: Study potential development of public security (i.e., 20 MHz 814-824 MHz/839-849 MHz PPDR network). Define refarming and migration plan. 2.3 GHz band: Fixed wireless access (WiMax/LTE). 100 MHz 2300-2400 MHz Define channelization and migration plan. 2.5 GHz band: 190 MHz Define channelization and migration plan. 2500-2690 MHz 3.5 GHz band: Fixed wireless access (WiMax/LTE). Define channelization and 200 MHz 3400-3600 MHz migration plan (coexistence with satellite services). Source: NAT, National Allocation Table (PNAF); BlueNote analysis. 70 DI GI TAL DEV E LOP ME N T PART NE RSH I P TA B L E 3 . 3 . Spectrum Availability for Potential Unlicensed Bands BANDS BANDWIDTH NOTE: a. This band may 26 MHz also be used for LTE 902-928 MHz exclusively or for sharing 2400-2483,5 MHz 83.5 MHz with other services. 5150-5250 MHz 100 MHz LTE standards facilitate spectrum sharing in this 5.4 GHza Currently being studied band with Wi-Fi, radar, 5725-5850 MHza 125 MHz and so on. Total 334.5 MHz Source: NAT, National Allocation Table (PNAF); BlueNote analysis. NEW TECHNOLOGIES >> TV WHITE SPACE TVWS technology uses unused or unassigned spectrum in the UHF and VHF bands, allowing the offer of low-cost broadband and other forms of connectivity across large geographic areas. This technology operates on a secondary basis without causing interference to primary users, such as broadcasting licensees. With complete TV analog switchoff in Peru scheduled for 2028, UHF and VHF spectrum will not be use efficiently in rural areas for 10 years more. Consequently, there is an opportunity to analyze technological alternatives to exploit currently unused spectrum to increase broadband coverage. However, TVWS requires development of technologies such as cognitive radio and software-defined radio: COGNITIVE RADIO (ANE 2016): Essentially cognitive radio implies spectrum sharing. When a licensee is not using the spectrum, then a cognitive user can access these vacant spaces even without a license. The required technology for implementation consists in spectrum sensing to determine available spaces and developing alternatives to efficiently distribute it, allowing relocation of us- ers while ensuring quality and lowering interference. This technology is essential for TVWS implementation allowing the detection of inefficiently used spectrum gaps and promoting its reuse without harmful interference. Wireless devices in cognitive environments should, in principle and as a minimum, be able to know the state of the spectrum and detect gaps or spaces where it is feasible to connect and detect interference from the spectrum they are using to dislodge it when necessary. • Channel Status Information (CSI) • Spectrum detection S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 71 SOFTWARE-DEFINED RADIO (SDR): The principle of SDR solutions where some or all components of a system of radio signals transmission/reception (i.e. physical layer functions), that have been traditionally implemented in hardware (e.g. filters, modulators, duplexers), are implemented in software instead, allowing a more efficient resources management, and a flexible environment. SDR technology provides access to multi-mode, multi-band and/or multi-function wireless solutions, with the ability to evolve through software upgrade processes. Some of these devices include Field Programmable Gate Arrays (FPGA), Digital Signal Processors (DSP), Programmable System on Chip (SoC), among others. >> INTERNET OF THINGS The IoT could allow people and things to be connected anytime, anyplace, with anything and anyone, ideally using any path or network and any service.38 It is a widely used term for a set of technologies, systems, and design principles associated with the emerging wave of Internet-connected things that are based on the physical environment. The IoT is about the technology, the remote monitoring, and control, and also about where these technologies are ap- plied. It also refers to the connection of such systems and sensors to the broader Internet, as well as the use of general Internet technologies. In the longer term, it is envisaged that an IoT ecosystem will emerge not dissimilar to today´s Internet, allowing things and real-world objects to connect, communicate, and interact with one another in the same way humans do via the Web today. Forecasts for the IoT indicate that there will be 16 billion connected devices by the year 2020,39 a global average of six devices per person and considerably greater in digital societies. Smart phones and machine-to-machine (M2M) commu- nications will be the main drivers for further IoT development. The IoT will constitute the nervous system of smart cities, support the interconnection and the continuous flow of information between the environment, machines, urban or rural infrastructure, and people. IoT development is based on two main technological alternatives: • Proprietary technologies using unlicensed spectrum (p.e. LoRa, SIGFOX, Neul) • Technologies based on 3GPP standard (p.e. NB-IoT, LTE-M), which could operate on legacy LTE-Networks The Peruvian government is interested in the potential for smart city technologies but needs to define a strategy to promote the IoT environment, particularly in transportation and mobility, health, security, government, and education. The IoT strategy includes spectrum definition, licensing scheme innovation, reviewing the regulatory framework, market promotion, public policy, digital skills, and so on. Chapter 4 presents more detail about how this initiative could be implemented in Peru. 38 - ITU-D, 2016. Technical Report on Smart Sustainable Cities Infrastructure, https://www.itu.int/en/ITU-D/Regional-Presence/AsiaPacific/Documents/Module%202%20Smart%20Sustainable%20Cities%20 Infrastructure%20Draft%20H.pdf. 39 - IEEE, Popular Internet of Things Forecast, 2016 https://spectrum.ieee.org/tech-talk/telecom/internet/popular-internet-of-things-forecast-of-50-billion-devices-by-2020-is-outdated. 72 DI GI TAL DEV E LOP ME N T PART NE RSH I P LICENSING With regard to licensing, the following potential initiatives have been identified: • Opportunity to update the study on secondary markets conduced in 2016 by MTC and its implementation to allow for the lease or sale of certain types of whole licenses. • Study alternatives for automatic licensing for access to public services (for example, fixed wireless broadband, mobile services). • Study license flexibility to allow for change of services. • Develop a regulatory framework to promote the efficient use of scarce resources (that is, spectrum and infrastructure). Alternatives based on active and passive infrastructure sharing should be analyzed (for example, radio access network sharing, virtual operator, national roaming, and so on). • Refarming licenses: subdividing or aggregating spectrum by geography or frequency. • Long-term or short-term leasing or sharing of some license rights. • Regulatory oversight remains essential to ensure suballocation in accordance with international agreements or interference protection requirements. »» Technical evalu- »» Analog switchoff »» Commercial »» International ation to analyze scheduled for interest to experience the feasibility of completion by deploy white (for example, implementing White 2028. space system. Colombia’s Spaces in Peru recently issued considering:VHF and regulation). UHF band occupa- tion study. Analysis of the current regulatory framework for the potential introduction of white Television spaces SPECTRUM FEES In relation to spectrum fees, alternatives to the traditional pricing definition should be explored by encouraging: • Efficient spectrum use. • Methodology to determine spectrum pricing (If demand is higher than supply). • Price differentiation by geographical zone or time to stimulate spectrum sharing. • Development of a methodology to measure spectrum efficiency usage. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 73 Roadmap and Work Plan The initial assessment of all the potential initiatives identified throughout the study analyzed two elements for each initiative: • Potential impact and relevance to • Implementation feasibility: mainly related to stakeholders: based on interviews with the current regulatory framework and ease of stakeholders related to the short and medium implementing some modifications to it. term needs of the administration. Figure 4.1 provides a visual mapping of the assessment of the initiatives, enabling priorities to be established. FIGURE 4.1. Assessment of Initiatives 1 Develop long term plan on IMT bands 2 Estimate spectrum demand and caps regulation • Study on secondary market • Study on atomatic licensing • Study on license flexibility 3 Study potential development of PPDR HIGH Relevance to stakeholders • Methodology to determine spectrum pricing • Potential Identification of Potential Impact 250 MHz as IMT (Short run) • Explore alternatives for traditional pricing • Develop methodology to measure spectrum efficiency usage • Develop regulation framework to promote access sharing technologies LOW 4 Leverage Peru’s involvement in ITU Smart Sustainable Cities studies (high impact • TVWS analysis in long run) LOW HIGH implementation feasibility Source: BlueNote. 76 DI GI TAL DEV E LOP ME N T PART NE RSH I P The main activities involved in the four selected initiatives are described below. Spectrum Demand and Regulatory Caps for Wireless Broadband Services As previously mentioned, Peru has assigned 28 percent of spectrum required for mobile communications services consid- ering the ITU’s spectrum forecast for IMT to 2020. Even if the additional spectrum under study is considered, the spectrum gap is more than 38 percent. The aim of this initiative is to understand Peru’s situation with regard to future spectrum demand and to analyze the regulatory caps to determine the appropriate spectrum holding for each operator in order to promote efficient spectrum use and a competitive environment. To achieve this objective, the initiative includes the activities described in Figure 4.2. FIGURE 4.2. Spectrum Demand and Caps Definition STEP 1 STEP 2 STEP 3 WIRELESS IMT IMT BROADBAND SPECTRUM SPECTRUM TRAFFIC DEMAND DEMAND CAPS ESTIMATION ESTIMATION DEFINITION Broadband traffic model Spectrum demand model Market analysis (HHI) (Excel) Key inputs: Define key issues Key inputs: • Industry trends (4G, 5G) related to spectrum • Subscribers forecast • Spectrum efficiency (bps/ holdings caps: • Users profiles Hz) per technology • Per cluster • Type of devices • Sites deployment (dense urban, and penetration (geographical area, clutter, urban, rural…) • New services population, interference • Per band or group • IoT levels…) of band (p.e. low • Offloading to band, high band) Sources: non-IMT networks Spectrum caps • CISCO forecast per operator • GSMA Intelligence fore- Sources & Reference: cast • 3GPP (Technology spec- • Broadband traffic and us- trum efficiency) ers evolution in Peru (last • ITU-R M.2023 8 years) • Industry practices • Social telecommunica- (Site deployment) tions projects • -… • -… Source: BlueNote. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 77 • Estimating future mobile traffic demand includes designing a traffic model considering forecast of the number of subscribers in Peru, evolution of user profiles according to international trends, types of devices, IoT penetration, and so on. • Estimating spectrum demand includes a comparison between traffic demand and the spectral efficiency of the networks to be deployed (3G/4G/5G) and potential base station density (according to geographical area, population, technical and operative deployment boundaries, and so on). Additionally, it should consider traffic offloading to fixed networks and other technologies (non-IMT). • Spectrum demand will consider different time periods (for example, for one, two, and five years) and according to different scenarios (for example, High density: Lima, Callao, Arequipa, and so on; and Low density: medium-sized cities and rural areas). • Finally, this initiative will conclude by estimating appropriate spectrum holdings necessary to operate a mobile network in efficient technical conditions, representative of the market and with high quality of services levels. Then, spectrum caps convenience could be evaluated as the conditions to define it, for instance, to define spectrum caps per group of frequency bands (i.e. low bands less than 1GHz, middle bands from 1GHz to 3GHz, and bands higher than 3GHz). Develop a Long-term Plan for IMT Bands and Alternatives to Promote Rural Broadband Access (eg. TV White Spaces, Spectrum Sharing Techniques, etc.) Developing a long-term plan for IMT bands will allow Peru’s administration access to a powerful road map for spectrum management and will provide certainty to private investors. For this reason, MTC should accelerate studies to define the long-term spectrum plan as soon as possible in order to be ready to attend the market demand and industry trends. The Road Map for Spectrum Assignment will consider spectrum demand in Peru, the availability of frequency bands and Industry trends. These factors should be analyzed to establish how to meet the needs of the mobile communications market and estimating the time and costs involved. Figure 4.3 summarizes the main activities involved. 78 DI GI TAL DEV E LOP ME N T PART NE RSH I P FIGURE 4.3. Activities for the Road Map for Spectrum Assignment Identify Analyze potential new spectrum Migration Licensing IMT bands (510 occupation, Implementation Define plan (cost scheme & MHz under international road map channelization estimation) spectrum fee study + trends & eco 250 MHz system additional) BANDS BANDWIDTH COMMENTS 450MHz Band: Analyze social approach & 20 MHz 450 – 470 MHz commercial ecosystem Recent migration (700 MHz band) 600MHz Band complicates any further relocation in the 84 MHz (Digital Dividend II): 614 - 698 MHz short term. Analogue switch off in 2028 L Band: Currently used in radars. Potencial use 91 MHz 1427 - 15 18 MHz for Supplemental Downlink 2GHz Band: Analyze potential for IoT, 2010 – 2015 MHz (TDD) & 55 MHz 2000 - 2020 MHz / 2180 – 2200 MHz fixed wireless broadband Extended 850 MHz Trunking services. Study potential Band (800MHz): 20 MHz development of public security. Defined 814 - 824MHz / 839 - 849MHz refarming and migration plan Fixed wireless access (WiMax / LTE). 2.3 GHz Band: 100 MHz Define channelization and 2300 – 2400 MHz migration plan 2.5 GHz Band: Define channelization 190 MHz 2500 - 2690 MHz and migration plan Fixed wireless access (WiMax / LTE). 3.5 GHz Band: Define channelization and migration plan 200 MHz 3400 - 3600 MHz (coexistence with satellite services) mmWaves Bands: 24 - 29.5 GHz / 37 - 43.5GHz ~ 17 GHz Fixed Services 66 - 71GHz Source: BlueNote. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 79 The identification of new IMT bands will take into account market trends (industry road map and device ecosystem), development of new technologies (for example, 5G, IoT) and regional (that is, Latin America) and worldwide harmonization. In particular, its necessary to consider that LTE-Advanced and 5G technologies development will need carrier aggregation to set bandwidth of 100MHz and 1GHz, respectively; consequently, the spectrum planning should consider an assignment processes with spectrum block size which facilitate this aggregation. In addition, it’s relevant to mention that the 2.3 GHz, 2.5 GHz and 3.5 GHz bands are already used for 4G in other countries. Consequently, there is a commercial ecosystem available enabling rapid implementation of these bands, also its implementation in Peru is feasible. Other bands, such as L-band, 2 GHz band, and bands higher than 5 GHz, could be considered in the medium or long term. Spectrum occupation (that is, type and quantity of spectrum users, licensing status, spectrum usage, regulation frame- work, and so on) and coexistence with other services operating in adjacent bands will provide information about the feasibil- ity of bands for IMT. Finally, this initiative includes a special focus on broadband coverage in rural areas in Peru. This activity will consider the stages summarized in Figure 4.4. FIGURE 4.4. Broadband Access in RuraL Areas • Prioritization • Broadband coverage IDENTIFY of zones will • % Internet penetration PRIORITY consider: • Internet speed ZONES • Cluster • Broadband coverage categorization • % Internet penetration CLUSTER will consider: CATEGORIZATION • Internet speed • Solution alternatives: Broadband Fixed • International ANALYZE Access over LTE in low band (e.g. 450 MHz, experience and TECHNICAL SOLUTION industry trends 700 MHz, 800 MHz, 900 MHz), TV White ALTERNATIVE PER Spaces, Wi-Fi, Wire Solution, etc. CLUSTER CATEGORY • Financing model alternatives DESIGN AN • Operational best practices IMPLEMENTATION PLAN PER CLUSTER Source: BlueNote. 80 DI GI TAL DEV E LOP ME N T PART NE RSH I P Study Potential Development of Public Protection and Disaster Relief Several international organizations (for example, the National Public Safety Telecommunications Council (NPSTC), the Critical Communication Association (TCCA), 3GPP, and the ITU), governmental entities, ICT companies and firms specializing in technology for public security communication (such as Nokia, Motorola, Alcatel, and Harris), and operators and have made efforts to promote standardization that facilitates the deployment of solutions in public protection and disaster relief, always aligned with the concept of efficiency in costs and the use of scarce resources. There are three key elements that need to be defined before deploying a broadband PPDR solution: i) Spectrum: it is necessary to define which frequency bands are appropriate in which to deploy a broadband PPDR solution, what is the spectrum demand for PPDR, and whether spectrum use will be shared with commercial users or will be exclusive for PPDR users. Figure 4.5 summarizes international experience in relation to PPDR spectrum demand estimation. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 81 FIGURE 4.5. Estimating PPDR Spectrum Demand – International Benchmarking UP LINK (UL) DOWN LINK (DL) 3,6 – 9,47 MHz 4,31 – 8,85 MHz Considers worst case 1 Incident (incidents to occur on cell COLOMBIA edge) and average cases 5,03 – 10,86 Assumes 100 PPDR 2 Incidents 5,19 – 9,98 MHz MHz |users per cell Day to day 3,9 MHz 3,7 MHz ARAB Assumes 362 1 Incident 6,3 MHz 6 MHz EMIRATES PPDR users per site 2 Incidents 16,9 MHz 8 MHz Emergency 1,448 agents per situation KOREA 7,4 MHz 5,2 MHz Situation (multiple agencies) Level 1 > 5 MHz ~ 5 MHz Assumes cell edge and MOTOROLA Level 2 ~ 10 MHz > 5 MHz 20% additional as backup Level 3 > 10 MHz ~ 10 MHz Source: Colombia (Ministry of ICT 2012), Arab Emirates, Korea & Motorola (ITU. 2015b). ii) Network architecture: alternative architectures should be considered, with a view to promoting cost efficiency, which should be sustainable in the long term and meet the requirements of PPDR communications services. Figure 4.6 shows some technical alternatives to deploy a broadband PPDR network which include radio access network sharing alternatives. 82 DI GI TAL DEV E LOP ME N T PART NE RSH I P FIGURE 4.6. Network Architecture Alternatives for Broadband PPDR IMPLEMENTATION ALTERNATIVES OF A BROADBAND SOLUTION FOR PPDR (1/2) COMMERCIAL PROVIDERS MOBILE OPERATORS AS ACCESS OF PPDR’ SERVICES PROVIDERS TO PPDR’S APPS Seguridad Publica Servidores de Applicación ppdr Suporte a Servidores Usuarios de PCRF / ims PPDR Applicación Operador Comercial SPR Grupo S6a HSS Supervisión s1-mme Rx MME PCRF IMS SGi Gx Suporte a Usuarios Servidores eNodeB S1-U S-GW P-GW SGi internet PPDR de Otras Redes Operador Comercial SPR Applicación S6a HSS Tarifacación s1-mme Rx MME PCRF IMS SGi Gx eNodeB S1-U S-GW P-GW SGi internet Otras Redes Tarifacación HYBRID MODELS (BOTH COMMERCIAL USE AND PPDR) MOBILE VIRTUAL RAN SHARING (DEDICATED RURAL AREAS DEDICATED AND OPERATORS (MVNO) OR SHARED SPECTRUM) URBAN AREAS RAN SHARING Operador Comercial Seguridad Publica Operador Comercial Seguridad Publica Operador Comercial Seguridad Publica Servidores Servidores core aplicaciones SPR de HSS SPR de HSS SPR ppt video Applicación MME Applicación MME PCRF IMS PCRF IMS PCRF IMS Red p25 HSS P-GW S-GW P-GW Acceso S-GW P-GW LTE internet internet (zonas internet Tarifacación Tarifacación exclisuvas ppdr) Tarifacación Otras Redes Otras Redes Otras Redes Servidores de Servidores de Servidores Applicación Applicación de usuario usuario SPR Applicación SPR comercial SPR comercial S6a S6a S6a HSS HSS HSS s1-mme Rx s1-mme Rx s1-mme Rx MME PCRF IMS MME PCRF IMS MME PCRF IMS SGi SGi SGi Gx Gx Red Gx eNodeB S1-U SGi internet eNodeB S1-U SGi internet Acceso S1-U SGi internet S-GW P-GW Otras Redes S-GW P-GW Otras Redes S-GW P-GW Otras Redes LTE (zonas urbanas, suburbanas) Tarifacación Tarifacación Tarifacación DEDICATED NETWORK Seguridad Publica Servidores HSS SPR de MME Applicación PCRF IMS Red Acceso S-GW P-GW (e.g. small cell) Tarifacación internet Otras Redes Meet technical demands for Rapid Costs Innovation PPDR communications deployment efficiency Source: Based on Resolution 646 [COM5/4] (WRC 15); Recommendation ITU-R M.2009-1 de 2015; Report ITU-R M 2291-0 de 2013; Report ITU-R M.2033 de 2003. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 83 iii) Financing model: Considering the budgetary constraints in Latin American countries, the aim of the financing model is to guarantee the self-sustainability of the solution in the medium and long term, for example, by adopting a public-private partnership model. This stage should define the appropriate financing model for a broadband PPDR solution considering the Peruvian context and regulation. Internet of Things for Smart Cities in Peru As previously mentioned, the IoT could allow people and things to be connected anytime, anyplace, with anything and anyone. It will constitute the nervous system of smart cities, and support the interconnection and the continuous flow of information between the environment, machines, urban or rural infrastructure, and people. To facilitate IoT development, it is important that the spectrum administration takes decision in advance about: • Frequency bands to be used for the IoT (that is, IMT frequency band, unlicensed bands, and so on). • A new licensing scheme to facilitate spectrum access. • Adjusting the regulatory framework to adapt to new technologies and new players in the market (for example, active and passive infrastructure sharing allowing new alternatives based on radio access network sharing, or different market agreements such us national roaming, virtual operators and so on. • Promoting private investment. • Developing digital skills in public entities and the community. 84 DI GI TAL DEV E LOP ME N T PART NE RSH I P References ANE. 2016. Design of a System Radio Spectrum MTC. 2007. Supreme Decree No. 020-2007-MTC. Management in Licensed Bands. Bogota, Colombia. MTC. 2015. “Annual Evaluation Report on the DTT Blackman, Colin, and Lara Srivastava. 2011. Implementation Process in Peru 2015.” Telecommunications Regulation Handbook. The World MTC. 2017. Plan Maestro sobre nuevas tendencias y Bank, InfoDev, and The International Telecommunication desarrollo de infraetsructura TIC que promuevan la Union. https://openknowledge.worldbank.org/bitstream/ construcción de ciudades inteligentes. Accessed 2017. handle/10986/13277/74543.pdf?sequence=1 http://www.mtc.gob.pe/comunicaciones/regulacion_ FITEL. 2017. Quienes Somos? http://www.fitel.gob.pe/pg/ internacional/publicaciones/Publicaciones/Ciudades%20 fondo-inversion-telecomunicaciones-fitel.php. Inteligentes.pdf. Industry Canada. 2016. Spectrum Report. https://www.ic.gc. OFCOM. 2016. TV White Space Databases. 14 January. ca/eic/site/smt-gst.nsf/eng/sf09401.html. https://www.ofcom.org.uk/spectrum/spectrum- management/TV-white-space-databases. ITU. n.d. ICT Regulation Toolkit. http://www. ictregulationtoolkit.org/toolkit/5.4. OSIPTEL. 2017. “Misión.” https://www.osiptel.gob.pe/ categoria/mision-vision-finalidad. ITU. 2014. “Future spectrum requirements estimate for terrestrial IMT”. Report ITU-R M.2290-0 OSIPTEL. 2017. “Reporte Estadístico.” https://www.osiptel. gob.pe/Archivos/Publicaciones/reporteestadistico_ ITU. 2015a. “Spectrum Redeployment as a Method of agosto2017/files/assets/common/downloads/ National Spectrum Management.” Recommendation ITU-R Reporte%20Agosto%202017.pdf. SM.1603. The World Bank. 2017. “Peru Innovative Spectrum. ITU. 2015b. Radiocommunications Objectives and Component 1. Environmental mapping and analysis. Best Requirements for Public Protection and Disaster Relief.” practices in Spectrum allocation and management.” Recommendation ITU-R M.2377-0. Ure, John. 2010. “Spectrum Liberalization.” TRPC: Asia ITU. 2015c. “IMT traffic estimates for the years 2020 to Pacific Radio Spectrum Conference 2010. http:/ / 2030.” Report ITU-R M.2370-0. trpc.biz/wp-content/uploads/2010-04_TRPC_ ITU. 2015d. “Trends in Spectrum Management. MCMC SpectrumLiberalization_presentation.pdf.pdf. International Training Program.” ITU-D. 2016. Statistics. https://www.itu.int/en/ITU-D/ Statistics/Pages/stat/default.aspx. Ministry of ICT. 2012. “Design of National Telecommunications Network of Emergency - RNTE.” Colombia. MTC. 1993. Supreme Decree No. 013-93-TCC. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 85 Appendixes Appendix A RESOLUTION 461 FROM AUGUST 1, 201740 “By which Resolution 711 of 2016 is modified to establish the conditions of use of white space devices” THE DIRECTOR GENERAL OF THE NATIONAL SPECTRUM AGENCY (ANE) In the exercise of its faculties established in Law 1341 of 2009 and the Decrees No. 093 of 2010 and 4169 of 2011 ARTICLE 1: OBJECT The purpose of this resolution is to modify the Annex to Resolution 711 of 2016 “By which the bands of Frequency of free use within the national territory and repeal some provisions,” establishing the conditions of use of the blank spaces in the band from 470 MHz to 698 MHz under the free-use spectrum framework. 40 - https://ane.gov.co/images/ArchivosDescargables/Normatividad/Planeacion_del_espectro/Resolucion461de2017.pdf. 88 DI GI TAL DEV E LOP ME N T PART NE RSH I P Appendix B FEDERAL TELECOMMUNICATIONS INSTITUTE AGREEMENT by which the Plenary of the Federal Institute of Telecommunications approves and issues the General Guidelines on the authorization of lease of radio spectrum.41 SECOND. Secondary Market of Radioelectric Spectrum The objective of the secondary market of radio spectrum is to provide flexibility, agility and dynamism to the radio spec- trum management, through the use of allocated spectrum that remains idle or underutilized, to allow third parties its use in order to satisfy the demand of users and achieve a more efficient use of the spectrum. It is also an alternative that allows interested parties to access the radio spectrum, without the need of the State to carry out a bidding process for its allocation, which reduces the main entry barrier for new competitors, by facilitating access. In this way, it seeks to encourage competition in services that require the use of the radioelectric spectrum, leading to an efficient use of it, and, in consequence, a greater number of users accessing services in better quality terms and pricing. The secondary market for radio spectrum is of great importance because of the economic and technical efficiency benefits in the use of the spectrum, understanding economic efficiency as the use of a scarce resource (radio spectrum), as required by the short and medium term demand of it, without the existence of elements that restrict its offer. In terms of technical efficiency, it refers to maximizing the use of spectrum, that is, the use of as many frequency bands as possible and with greater transmission capabilities in providing more and better services. By regulating the secondary market for radio spectrum, the Institute must prevent phenomena of concentration or cross-ownership contrary to public interest or hoarding, through regulatory mechanisms given by law and whose applica- tion is the competence of the Institute. In terms of the Federal Law of Economic Competition (LFCE), the lease constitutes a concentration whenever the sub- jects involved in this act are economic agents, and under this consideration, the lessee, through the lease, joins the radio spectrum to its assets originally granted to another economic agent, the lessor. In its nature of concentrations, they must be subject to a notification procedure to request authorization from the Plenary of the Institute for its accomplishment, when the value of the accumulated asset or the amount agreed between the parties updates the thresholds established in the same order. The Institute has two procedures to analyze the effects of spectrum leasing of economic competition: that which derives from the analysis of competence foreseen in the Article 104 of the Law, and the general, of prior notification of concentra- tions foreseen in the LFCE. However, the procedural norms must be interpreted from the perspective of human rights and, therefore, in order to provide certainty and legal security and allow timely, effective and expeditious access to justice, it is not necessary to subject the same act to two different procedures whose procedure, evaluation and resolution falls to the same authority. 41 - http://www.ift.org.mx/sites/default/files/conocenos/pleno/sesiones/acuerdoliga/dofpift29021664_1.pdf. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 89 These principles are embodied in the Law and served as the basis for its preparation. The Law establishes that Institute officials should be guided by the principles of autonomy, legality, objectivity, impartiality, certainty, efficiency, effectiveness, transparency and accountability. On the other hand, one of the central purposes of the constitutional reform is to consoli- date a fully regulatory regime that provides the Institute with the necessary tools to be an effective regulator in the telecom- munications and broadcasting sectors. In sum, the procedural economy and regulatory convergence are necessary for an efficient, effective and timely performance that provides legal certainty to the regulated that, in turn, drives the development of the secondary mar- ket of radio spectrum and provide flexibility, agility and dynamism to the radio spectrum management. Therefore, when evaluating radioelectric spectrum lease applications, the Institute will include the analysis on economic competition that corresponds by Law and, consequently, it will not be necessary for the parties to exhaust the procedure of prior notification of concentrations foreseen in the LFCE, only for what corresponds to the spectrum involved. The foregoing in the under- standing that the obligation to request prior authorization from the Institute, as sectorial regulator in terms of the Law and as an economic competition authority in terms of the LFCE, is satisfied through the procedure to which the Law refers, for the lease of radio spectrum. 90 DI GI TAL DEV E LOP ME N T PART NE RSH I P Appendix C MAIN FUNCTIONS OF THE GENERAL CABINETS WITHIN THE VICE MINISTRY OF COMMUNICATIONS General Cabinet of Telecommunications Authorizations • To evaluate and process requests for the operation of • To plan spectrum use and frequency assignment for open signal radio and television stations. private telecommunications services of public interest (broadcasting). • To provide information to citizens regarding issues related to broadcasting services as well as private tele- • To determine and monitor compliance with economic communications services. obligations for the same services. • To evaluate and process requests related to the opera- • To grant information to citizens regarding economic tion of private telecommunications services. obligations related to telecommunications. General Cabinet of Control and Supervision • To ensure correct use of spectrum by technically • To sanction infractions for infringement of the evaluating radioelectric emissions for the identification regulations on communications and postal services. and elimination of harmful interferences and by supervising compliance with the maximum permissible • To approve telecommunications equipment and limits of non-ionizing radiation in telecommunications. devices such as radio broadcasting equipment, antennas, cell phones, private centers, among others. • To supervise compliance with technical conditions • established in the concession contracts and to impose To certify non-ionizing radiation measurement corrective measures in communications services. equipment. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 91 General Cabinet of Regulation and International Affairs • To propose policies in the field of communications and tional agreements. spectrum management. • To represent Peru’s government in international meet- ings such us ITU and CITEL. • To propose and evaluate policies and regulations aimed at promoting the sustainable development and • To analyze the situation of the telecommunications and universal access of communications services. postal services markets. • To establish conditions and terms for conducting pub- • To carry out studies such as services convergence and lic bids for telecommunications services. frequency allocation, in order to adapt the regulations in force. • To determine the industry’s position related to interna- GENERAL CABINET OF CONCESSIONS • To evaluate concessions requests to provide for public • To grant permission for the installation of telecommu- telecommunication services, as well as their transfer, nications equipment and devices. modification, renewal and/or cancellation • To conduct public tenders to grant concessions of • To assign frequencies of the radio spectrum, as well as public telecommunications services. series and numbering and signaling codes for public telecommunications services. • To determine, require and monitor the fulfillment of economic obligations by the holders of concessions • To manage the National Registry of Frequencies (PNAF) of public telecommunications services and postal as well as the Registry of Postal Dealers. services. • To approve modifications of technical characteristics of the concessions and radioelectric stations of the public telecommunications services, as well as modifications of the minimum expansion plans or coverage plans. 92 DI GI TAL DEV E LOP ME N T PART NE RSH I P OSIPTEL OSIPTEL was created in order to guarantee the quality and efficiency of the telecommunications service provided to the user and to protect the market of public telecommunications services from practices contrary to free and fair competition. OSIPTEL fulfills the function of regulation of services and interconnection standards and participates as a consultant in several of the radio spectrum planning, management and evaluation activities. Other functions involve: • Regulating the • Increasing • Improving user • Improving the balance of rates. competition in the satisfaction with institutional telecommunications telecommunications management markets. services. looking for levels of excellence. FITEL Its main functions are to: • Formulate and finance projects for the provision of • Carry out coordination and strategic alliances with telecommunications services in rural areas or places of private sector companies, national and international preferential social interest, as well as infrastructure stud- public institutions, as well as universities, research cen- ies to guarantee overall access. ters, among others, so that they commit to design and/ or execute activities that contribute to the sustainability • Promote the participation of the private sector in of the projects financed through FITEL resources. the provision of telecommunications services in these areas. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 93 Appendix D SUPREME DECREE NO. 013-93-TCC42 UNIQUE ORDERED TEXT (TUO) OF THE TELECOMMUNICATIONS LAW Preliminary Provision: The development of Telecommunications as an instrument was declared of public necessity of pacification and strengthen- ing of national consciousness, for which purpose it is necessary to capture private investments, both domestic and foreign. Article 57: The radio spectrum is a natural resource of limited dimensions that is part of the Nation’s heritage. Its use and granting of use to individuals shall take place under the conditions set forth in this Law and its regulations. CONCORDANCES: D.S. Nº 041-2011-PCM (Supreme Decree creating the Multisector Commission Permanent respon- sible for issuing technical reports and recommendations for the planning and management of the radio spectrum). 42 - http://transparencia.mtc.gob.pe/idm_docs/normas_legales/1_0_892.pdf. 94 DI GI TAL DEV E LOP ME N T PART NE RSH I P Appendix E SUPREME DECREE NO. 020-2007-MTC43 UNIQUE ORDERED TEXT (TUO) OF THE GENERAL TELECOMMUNICATIONS BYLAW Article 199: Article 200: Spectrum Definition National Frequency Assignment Plan (PNAF) Radio spectrum is the means by which radio waves can The National Frequency Allocation Plan (NAT), to which the propagate without artificial guidance. It is a limited natural Law refers, also called the National Plan of Frequency Allo- resource that is part of the national heritage. cation (PNAF), is approved by ministerial resolution. Its administration corresponds to the ministry, as well The NAT is the normative technical document that con- as the allocation, assignment and control of the radio tains the tables of frequency allocation and the classification spectrum frequencies and, in general, everything that re- of uses of the radio spectrum, as well as the general techni- lates to the radio spectrum. cal standards for the use of the radio spectrum. The Ministry will allocate the frequency bands for the operation of the telecommunications services of the Armed Forces and National Police of Peru, prior coordination with the Joint Command of the Armed Forces, which will be con- tained in the NAT. The NAT will indicate the class and category of tele- communications services for each of the frequency bands, in accordance with the Radio Regulations, annexed to the Convention of the International Telecommunication Union, and must consider the needs of the national security and defense systems. The NAT, as well as its subsequent modifications, will be published in the Official Gazette El Peruano. All frequency assignments are made based on the respective channeling plan, which will be approved by vice-ministerial resolution. 43 - https://www.mtc.gob.pe/comunicaciones/autorizaciones/normas/servicios_privados/documentos/DS%20020-2007-MTC%2004JUL2007%20REGL%20DE%20TUO-%20LEY%20TELEC.pdf. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 95 Appendix F REGULATION OF LAW NO. 29904 (OF 2012), LAW ON PROMOTION OF BROADBAND AND CONSTRUCTION OF THE NATIONAL FIBER OPTIC DORSAL NETWORK44 SUPREME DECREE NO. 014-2013-MTC The Law of Promotion of Broadband and Construction of the National Dorsal Fiber Optic Network, establishes that “the purpose of the Law is to promote development, use and massification of broadband throughout the national territory, both in the offer and in the demand for this service, promoting the deployment of infrastructure, services, contents, applications and digital skills as a means that favors and facilitates social inclusion, socio-economic development, competitiveness, country security and organizational transformation towards a society of information and knowledge”. That, likewise, the aforementioned Law declares of public necessity and national interest the construction of the Na- tional Dorsal Fiber Optic Network and the access and use of infrastructure associated with the provision of public services of electric energy and hydrocarbons, as well as the use of the right of way of the National Road Network; and, establishes provisions regarding the infrastructure of Broadband, the generation of content, applications and capacity building, deter- mines the competent agencies for the promotion of broadband, among other provisions. 44 - https://www.osiptel.gob.pe/repositorioaps/data/1/1/1/PAR/ley-29904-promocion-banda-ancha-rdnfo/ds014-2013-mtc.pdf. 96 DI GI TAL DEV E LOP ME N T PART NE RSH I P Appendix G SUPREME DECREE NO. 017-2010-MTC45 By article 5 of Law No. 28278, the Radio and Television Law, establishes that the State promotes the development of digital broadcasting; for this purpose, the Ministry of Transport and Communications takes the necessary measures related to the radio spectrum and adopts the corresponding technical standards, based on international trends, the highest efficiency and the maximum benefit for the country. Through Supreme Resolution No. 019-2009-MTC, it was decided to adopt the ISDB-T (Integrated Services Digital Broad- casting Terrestrial) standard with the technological improvements that would be made at the time of its implementation, as a digital terrestrial television system (DTT) for Peru, considering the fundamentals set forth in the Recommendation Report of the Standard of Digital Terrestrial Television presented by the Multisector Commission constituted for that purpose, through Supreme Resolution No. 010-2007-MTC. Through Supreme Resolution No. 082-2009-MTC, the Temporary Multi-sector Commission was created to make rec- ommendations to the Ministry of Transportation and Communications for the preparation of the Master Plan for the Imple- mentation of Digital Terrestrial Television in Peru. The NAT (National Frequency Attribution Plan – PNAF), approved by Ministerial Resolution No. 187-2005-MTC / 03 and its amendments, establishes that the bands 470 - 608 and 614 - 698 MHz are allocated to the television broadcasting ser- vice that uses digital technology. According to the statistical information available to the Ministry of Transport and Communications, as of December 2009, 1371 authorizations have been granted to provide television broadcasting based on analog technology at the national level, of which 873 correspond to the VHF band and 498 to the UHF band. In accordance with the preceding recitals, it is necessary to approve a Master Plan, as a planning instrument that incor- porates the necessary measures to regulate and promote the digitalization of radio broadcasting services by open-signal television in the country and facilitate the transition from analog television broadcasting services to the provision of these services with digital terrestrial technology, for whose elaboration the recommendations contained in the Report of the Temporary Multi-sector Commission created by Supreme Resolution No. 082-2009-MTC have been taken into account. Article 1. Approval of the Master Plan for the implementation of Digital Terrestrial Television in Peru Approves of the Master Plan for the implementation of Digital Terrestrial Television in Peru, which consists of five (05) Chap- ters, three (03) Subchapters, twenty-three (23) Articles and three (03) Final Complementary Provisions, which is part member of this Decree Supreme. 45 - http://transparencia.mtc.gob.pe/idm_docs/normas_legales/1_0_1882.pdf. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 97 Appendix H: THE WORKSHOP IN PERU As previously mentioned, the participation of stakeholders is important to achieve the technical assistance objectives in or- der to understand the Peruvian current situation and needs in terms of digitalization. A World Bank team visited Lima, Peru, between December 5 and 7, 2017 to lead a workshop on “Digital Agenda and Spectrum Innovation in Peru” in collaboration with the Ministry of Transport and Communications. The mission was led by Doyle Gallegos (Lead ICT Policy Specialist and TTL of the Project) and was accompanied by Marisol Ruelas (Team Assistant), Juan M. Galarza (ICT Policy Specialist – Senior Consultant), and Juan Ignacio Crosta (Consultant). The team met with officials from the Ministry of Transport and Communi- cations (MTC) of Peru and held meetings with other agencies (USAID). The main objective of the workshop was to present best practice on the digital agenda regarding spectrum innovation in the region and more specifically in Peru. The workshop aimed to help policy and decision makers understand the main challenges and opportunities in spectrum management, new technologies and spectrum assignments that are commonly developing throughout the region. It included expert panelists on the digital agenda and spectrum use from Mexico, Co- lombia, and Peru. This section describes the workshop structure, participants, and results. METHODOLOGY, TOPICS, AND SPEAKERS The workshop consisted of two interactive panels as well as presentations from Boris Utria (Operations Manager of the Peru World Bank Office), Doyle Gallegos (Project TTL), and Carlos Valdez (Peruvian Vice Minister of Communications, MTC). The main topics addressed were as follows: • Doyle Gallegos presented the World Bank’s Digital • Carlos Valdez, Communications Vice Minister, referred Agenda for the country. to the objectives and accomplishments of public policy for the development of the Digital Agenda in Peru, • The first panel on Innovating for Digital Development especially the adjudication of seven regional fiber proj- addressed the need to promote digital inclusion to fos- ects that will enable broadband services to almost 600 ter ICT use through policies and technologies aiming locations in Peru. towards increasing Internet use. • Juan Ignacio Crosta presented the main findings and • The second panel on Innovating on Radioelectric opportunities related to this study. Spectrum Management to Increase Broadband Access touched on spectrum management best practice, new approaches to license concessions, new technologies to increase spectrum use efficiency, and price setting determination. 98 DI GI TAL DEV E LOP ME N T PART NE RSH I P MAIN FINDINGS The presentations, as well as the discussions during the The workshop was attended by 56 panels, resulted in significant findings on digitalization participants from the public and private and spectrum usage efficiency. sectors, academia, and World Bank and MTC staff. The panel members and top- The first panel discussion analyzed regional innova- ics were: tive trends that have begun to be implemented by the private sector as well as initiatives implemented by the Panel 1: Innovating for Digital public sector. The panel also discussed innovations from Development was moderated by Juan the sector, spurred by the burgeoning role of digital ac- Ignacio Crosta, World Bank consultant, tors who are implementing digitalization such as the use and was comprised of: of spectrum in rural Mexico, shared access in spectrum space, the role of network operators in the Latin Amer- • Jorge Mesía, FITEL Peru ica-Caribbean region, the collaborative work by Micro- soft and the Colombian Government on the use of white • Lucas Gallitto, GSMA-LATAM spaces and the use of Internet of Things trends in the region. • Germán Otalora, Microsoft-LATAM The GSMA´s speaker remarked on the relevance of • Erick Huerta, Rhizomatica focusing not only on coverage but rather on other levers Communications. to encourage Internet adoption. In particular, the local content and end user’s affordability are becoming the Panel 2: Innovating the Management main barriers in several countries in the region; govern- of Radio-electric Spectrum to Broaden ments, the private sector and decision makers should the Access to Bandwidth was moderated direct their efforts in promoting the business environ- by Juan Ignacio Crosta, World Bank ment and digital ecosystem to remove such barriers. consultant, and was comprised of: However, the discussions around the role of new • Ricardo Castañeda, IFT México technologies (that is, cognitive radio, white space, soft- ware-defined radio) to improve Internet access resulted • Manuel Muñoz, MTC Peru in important initiatives to be considered when making the public agenda for the sector. For instance, the ex- • Rafael Muente, OSIPTEL Peru perience in Colombia regarding the regulation of white space is a leading case for the region, with several coun- • Rodrigo Guillén, Telefónica tries awaiting its outcome. • Hector López, Rivada Networks • Jorge Fernandini, Entel • Edison Javier, América Móvil. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 99 The experience with social Internet service in Mexico shed light on a common belief: that the spectrum sharing tech- nique might lead to interference problems. In turn, the experience shows that in those remote towns where such tech- niques are implemented, with difficult access and low socioeconomic levels, the usual IMT spectrum bands are not used, and so the interference issue might be overstated. The price of devices, often quoted as one of the main barriers for Internet adoption, is now losing relevance because of the upsurge of several vendors offering a wide portfolio of terminals support- ing 3G and 4G. In the second panel, the discussion focused on the new opportunities that technology enables for greater access to bandwidth through better management of the spectrum. Additionally, the panel also discussed how to better meet de- mands of growing traffic. In order to do so, the necessity of a modern regulatory framework was explored, as well as the establishment of a monitoring methodology oriented towards costs, multiservice use of bandwidth (for example, the Co- lombia experience on implementing TVWS was presented), 5G and smart cities, and new licensing schemes. On the efficiency of current models for spectrum management, Rivada highlighted the large mismatch between data needs and pricing; while data needs and value vary by time and location, data prices, however, remain constant. There would be significant benefits if a wholesale RAN sharing model is applied, with retail prices falling by almost 70 percent. The local national regulator, OSIPTEL, highlighted the benefits of appropriate competitive conditions in improving Inter- net access and digitalization, whilst the private operators insisted that spectrum fees and the licensing regimes represent key tools in the hands of governments to improve the sector´s investments and service coverage. In his closing remarks, Vice Minister Valdez elaborated on Peru’s 2021 Digital Vision, as well as the ICT and digital agenda in Peru, and described Peru’s current regional bandwidth projects. 100 DI GI TAL DEV E LOP ME N T PART NE RSH I P Annex Public Policy and Efficient Use of the Spectrum LIMA, 2018 WITH SUPPORT FROM: Content Annex I. INTRODUCTION 105 II. Conceptual FRAMEWORK 107 II.a. Nature and incidence of the radio spectrum 109 II.b. Spectrum Public Management 111 II.c. Efficiency definitions in spectrum use 115 II.d. Public Policy and regulation 117 III. INTERNATIONAL PRACTICES 119 III.a. Initiatives to promote an efficient use of the spectrum 120 III.a.1. Secondary market 120 III.a.2. Frequency band re-farming 121 III.a.3. Sharing the spectrum 125 III.b. International experience measuring the efficient use of the spectrum 126 III.b.1. Brazil 126 III.b.2. United States 128 III.b.3. Mexico 129 III.c. Recommendations from international organizations 131 III.c.1. Recommendation ITU-R SM.1046: Definition of efficiency in spectrum use 131 III.c.2. EEE 132 III.c.3. European Community 133 IV. CONTEXT IN PERU 135 IV.a. Classification of spectrum users 136 IV.b. Regulatory guidelines 143 IV.b.1. License allocation for radioelectric spectrum use 143 IV.b.2. Remuneration scheme for spectrum use and radiocommunication services exploitation 145 IV.b.3. Spectrum for mobile services 147 V. RECOMMENDATIONS 149 V.a. Tools to improve and measure use efficiency 150 V.b. Barriers and challenges to implement the recommendations 153 VI. BIBLIOGRAPHY 155 FIGURES FIGURE II.1. Macro objectives for spectrum management 108 FIGURE II.2. GDP growth due to the increase in telecom service penetration 110 FIGURE II.3. Spectrum management models 111 FIGURE II.4. Spectrum management mechanisms to promote efficient use 113 FIGURE II.5. Efficiency in the spectrum use 115 FIGURE II.6: Desirable sectoral objectives of Peru regarding the current spectrum management 118 FIGURE III.1. Re-farming Procedure - Argentina 123 FIGURE III.2. Definitions of efficiency in the spectrum - SEWG (FCC) 128 FIGURE III.3. Efficiency concept criteria — EU 132 FIGURE III.4. Example of EU criteria application 134 FIGURE IV.1. Radio services 136 FIGURE IV.2. MTC wireless mobile services concessions 137 FIGURE IV.3. Diffusion of Mobile internet access - Dec 17 139 FIGURE IV.4. Mobile Internet Traffic 140 FIGURE IV.5. Mobile Connections by Technology 141 FIGURE IV.6. Locations covered by 4G networks by operators 142 FIGURE V.1. Guidelines to encourage efficient spectrum use 150 104 DI GI TAL DEV E LOP ME N T PART NE RSH I P ANNEX Introduction The radio spectrum is an essential resource for the creation and development of the information soci- ety across different regions and countries around the world. As such, it plays an important role to democratize access to broadband Internet, facili- tating the increase of productivity and competitive- ness of Latin American countries and accelerating the economic growth for the maximization of an overall well-being. In this sense, efficient use of this resource is essential and so becomes one of the objectives of the spectrum’s public administration. Efficiency in the use of the spectrum has three essential dimensions: technical efficiency, linked to efficiency indicators and spectrum use; economic efficiency, directly associated with market variables; and social ef- ficiency, related to the people’s wellbeing. Each dimension should be addressed from the specific conditions of each country and their public policy objectives. This document analyses the Peruvian context to identify initiatives and methods toward the measurement and promotion of the efficient use of the spectrum. The first part of the report makes an introduction to the essential concepts to understand the analysis, highlighting definitions associated with the spectrum and efficiency criteria in its use, as well as factors associ- ated with public policy and management of this resource. These concepts are strengthened by reviewing the best international practices in chapter three, where a summary of case studies of Brazil, Mexico, Argentina, United States, and Colombia are included; as well as recommendations of Inter- national Organizations such as the International Telecommunication Union - ITU, the Inter-American Telecommunications Commission of - CITEL, the European Community and the Institute of Electrical and Electronics Engineers - IEEE. Chapter four presents the analysis of the Peruvian context, considering both the regulatory framework and the identifi- cation of constraints and existing barriers to generate incentives to promote the efficient spectrum use. Finally, chapter five makes recommendations in terms of tools and mechanisms to measure and promote the efficient use of the radio spectrum in Peru. 106 DI GI TAL DEV E LOP ME N T PART NE RSH I P ANNEX Conceptual Framework According to ITU, the State´s main objec- tives regarding spectrum management are to ensure that this resource is available for use, stimulating the country’s economic and social progress, and that the use is done on an ef- ficient and effective manner. Under this framework, spectrum management must involve the definition of clear objectives tailored to the needs of each country and consider specific approaches based on administrative allocation, marketing tools for its management, and regulatory policies and control of unlicensed spectrum. The following figure summarizes this. FIGURE II.1. Macro objectives for spectrum management TECHNICAL EFFICIENCY OBJECTIVES Focus on Focus on use administrative of marketing assignment tools HIGH END Focus on ECONOMIC POLITICAL OBJECTIVES management of OBJECTIVES regular spectrum (unlicensed) Source: Based on ITU-R SM.2093 / National Spectrum Management Manual (2015) The macro-objectives represent the general goals relating to the basic role of spectrum management, which decides which frequency should be made available to the users and for what type of use. ECONOMIC OBJECTIVES: all those associated to guarantee that the spectrum is used in such a way that it meets the national goal of achieving an efficient allocation of resources, i.e., that the spectrum is used by organizations in the public and private sectors in such a way that they meet the country’s goals, including those related to economic growth. TECHNICAL EFFICIENCY OBJECTIVES: all those associated with the overall objective to ensure that the frequency bands are used allowing the maximum resource utilization, and preventing, for example, interference and separations (“guard bands”) unnecessarily wide between adjacent users. HIGH-LEVEL POLITICAL OBJECTIVES: those related to the consistency of Government policy on issues such as access to competition, non-discrimination, and equity and justice in the allocation and assignment of the spectrum between different users. This chapter analyzes the basic concepts about efficiency in spectrum use and the features of public policy and management of the resource associated with the fulfillment of this macro objective. 108 DI GI TAL DEV E LOP ME N T PART NE RSH I P II.a Nature and Incidence of the Radio Spectrum The radio spectrum is a scarce and limited resource with high economic and social value. Used efficiently it can generate highly positive impacts on the competitiveness and productivity of a country (ITU, s.f.) facilitating public access to radio communication services. In this sense, a rational and prioritized use of its most important applications is essential to provide the greatest possible socio-economic benefit to society. The growth in the demand for spectrum is a constant in all countries in response to the increase in traffic of different radiocommunication services. For this, spectrum authorities must plan ahead all management activities necessary to meet such demand, for example: increasing the amount of spectrum available for services that require it the most or for those that provide greater benefit to society (i.e. through spectrum processes reordering); or implementing techniques that al- low a more intensive use of the resource (i.e. spectrum sharing, flexible use, promote the deployment of technology with improved spectrum efficiency, etc.). Several studies, (see World Bank, 2008)46, show that the growth in the penetration of telecommunication services, par- ticularly access to Internet, generates an increase in the gross domestic product of a country. The following figure shows the results of the World Bank’s study. 46 - Christine Zhen-Wei Qiang and Carlo M. Rossotto, “Economic Impacts of Broadband” (chap. 3), World Bank, 2009, Information and Communications for Development: Extending Reach and Increasing PU B L I C PO L I CY A N D E F F I C I E N T U S E O F T H E S PECTRUM 109 FIGURE II.2. GDP growth due to increase in telecom service penetration GDP growth when a 10% increase in service penetration occurs >> Growth in access and penetration of 1,4 users to internet and 1,21 1,1 broadband generates the largest growth in 0,8 0,77 GDP of a country 0,7 0,6 0,43 >> Wireless technologies are an important tool to allow growth in service penetration in LAND LINES MOBILE INTERNET BROADBAND the short run LINES HIGH INCOME ECONOMIES LOW INCOME ECONOMIES Source: World Bank (2018), BNMC analysis Based on this, it is essential to carry out the connectivity and digitalization agendas developed by Governments in recent years, such as the National Plan for the development of broadband in Peru, which promotes the development of telecommunication infrastructure and allows access to information, services, and applications for education, health, work, among others. Such programs highlight the importance of wireless technologies as a tool to facilitate the implementation of connec- tivity goals, especially for last-mile connections (i.e. Wi-Fi, mobile networks) and for those areas where it is technically or financially unviable to get wired solutions. Given that the main resource of these technologies is the spectrum, it is impera- tive that regulators provide proper management for its efficient use. Concepts related to models of spectrum management, and criteria of efficiency in its use, will be pre- sented in the following sections. 110 DI GI TAL DEV E LOP ME N T PART NE RSH I P II.b Spectrum Public Management Public management of the radio spectrum is commonly structured under mechanisms and practices of available manage- ment models considering: the context and maturity of the market, the objectives of public policy, and the available technol- ogy. The following figure summarizes the spectrum management models adopted by administrations. FIGURE II.3. Spectrum Management Models - FLEXIBLE SPECTRUM MANAGEMENT EVOLUTION FLEXIBLE + COMMAND AND MARKET COMMON USE OF THE CONTROL MODEL BASED MODEL SPECTRUM MODEL PRIMARY SECONDARY FLEXIBILITY COMPLETE MARKET MARKET OF USE AUTONOMY + REGULATED SPECTRUM MARKETING EVOLUTION REGULATED - Source: BNMC PU B L I C PO L I CY A N D E F F I C I E N T U S E O F T H E S PECTRUM 111 COMMAND AND CONTROL: This model recognizes the spectrum as a scarce resource, which justifies the conscious and de- tailed planning to rationalize the use of frequencies47. It centralizes management and control of the spectrum, more specifically, determining the conditions in which the users will make use of the requested resource, as well as having the right to exploit the bands that it manages. MARKET-BASED: This model is an alternative involving the market dynamics caused by the law of supply and demand, giving priority to the operation of general interest services, as well as to the guidelines established by the carrier through standards, regulations or international agreements48. This way administrations incorporate market criteria to the allocation, allotment and assignment process- es, redefining the rights established by the licenses for the use of frequencies and introduce new measures to not only make the use more flexible but also promote the efficient radio spec- trum use. This model allows the incorporation of dynamic and transparent mechanisms for the process of assigning frequencies to users. Carriers have a variety of tools that allow them to promote the emergence of new services in the pursuit of efficient use of the spectrum. Sharing frequencies, administrations may attribute bands to a greater number of services, as well as encourage the use of the band for different applications within the same service. Infrastructure interchange will also reduce and optimize the costs generated by the implementation, operation and maintenance of networks. The spectrum reorganization allows to encourage the entry of new services of signifi- cant social value, as well as restructure the bands distribution to make a more efficient use of the spectrum based on new transmission technologies. SPECTRUM COMMONS: Usually, within the limits of band allocations, regulators reserve a spectrum band for operations on the basis of noninterference for free use by the public. These bands are called “unlicensed spec- trum,” which is the origin of the Spectrum Commons Model.49 This model is the embodiment of deregulation and liberalization of radio spectrum management.50 Its main feature is the focus on the reduction or elimination of restrictions determined by regulators regarding the use, the technolo- gies, and the services associated with licenses granted for spectrum use.51 47 - The Command and Control model is generally adopted by carriers at the start of radio spectrum administration, when the first problems that forced the establishment of a license allocation process appeared. Therefore, this is the most widespread international model and has a greater maturity. Processes involving the use of this model require a detailed planning of band use, analyzing in depth distribution, concession, and allocation. The aim of these procedures is to ensure a tolerable level of interference between assigned frequencies, ensuring proper operation of the services that use the radio spectrum. Therefore, it is the regulator that decides the priorities regarding the different services that can use the spectrum, defining the specific patterns of exploitation, planning the distribution of services in the spectrum, determining which technology is be used in each assigned band, and awarding licenses under carefully detailed terms. These conditions allow the consistent use of the spectrum for international interoperability, which also allows the achievement of economies of scale in the development of equipment and international services. 48 - This new model considers the spectrum as a finite resource, introducing privileges to modify applications and frequency bands technologies, for efficient use. On the other hand, by granting licenses with flexible and dynamic rights regarding conditions of use, technology and services, the carrier transfers the load to the users, who will decide based upon more efficient technical, economic and social conditions over the offered service across the spectrum. 49 - Lately, services used by these frequencies are low range radio applications like radios, access systems and wireless local networks, short range devices used for industrial, scientific, and medical applications (ISM). 50 - Technology development has led to the existence of a wide variety of wireless devices that use the spectrum without a license. Furthermore, progress in radiocommunication generated emergent technologies as well as new uses and applications that may take advantage of the free frequency bands. There is the need to regulate the unlicensed spectrum to guarantee the correct use of services and applications that use it through the “Spectrum Common Use” management model. 51- Apart from some regulatory flexibility, administrations continue regulating aspects related to the power of transmissions to determine acceptable levels of interference for their performance. 112 DI GI TAL DEV E LOP ME N T PART NE RSH I P Additionally, some administrations adopt hybrid models to meet their needs. Given the industry conditions and its inter- relation with the pros and cons of the models presented above, a new model emerges, balanced between the licensed and unlicensed spectrum policies. The “Hybrid” model promotes a policy framework that facilitates sharing the unlicensed spectrum, that coexists with the procedures of exclusive use granted by specific licenses for other bands through com- mand and control or market-based focus. Based on the models explained, different mechanisms are generated to promote the efficient spectrum use, some subject to market behavior or dynamics, and others that depend on public administration and are associated with technical criteria. The following figure gives an overview of the classification and types of mechanisms of spectrum management. FIGURE II.4. Spectrum Management Mechanisms to Promote Efficient Use SECONDARY MARKET SPECTRUM SHARING MANAGEMENT MECHANISMS FLEXIBLE SPECTRUM MANAGEMENT MARKET INCREASE IN MECHANISMS UNLICENSED SPECTRUM AUCTIONS MARKET PRICING MECHANISM MECHANISMS OPPORTUNITY-BASED RATES TECHNICAL EFFICIENCY INDICATORS TECHNICAL TECHNOLOGY MECHANISMS IMPROVEMENT EVOLUTION OF PRIVATE OVER PUBLIC NETWORKS Source: (2013 ANE) PU B L I C PO L I CY A N D E F F I C I E N T U S E O F T H E S PECTRUM 113 MARKET MECHANISMS: Correspond to those that appeal to supply and demand to efficiently administer the spectrum. They are divided into management and market analysis mechanisms. >> Management mechanisms SECONDARY MARKET: This mechanism allows a permit holder to obtain an additional return allowing parts of the spectrum that were assigned and not used, to be used by a third operator in exchange for payment.52 SHARED USE: A possibility offered by the current technology for multiple users accessing the same frequencies with adequate rules of access, power control, geographical areas, interference management. FLEXIBLE MANAGEMENT IN SPECTRUM USE: Allows an agent to exploit the assigned resource with applications and services in different geographical regions, according to the needs and demands of each related to the ERE, within a range of possibilities for its use. FREE ACCESS SPECTRUM: Refers to the use of the unlicensed spectrum, through free access to the spectrum. LIGHT LICENSING: Combines mechanisms of free use with the station’s obligation of enrolling and their technical characteristics, under the first come first serve rule. >> Market analysis mechanisms Focuses on price efficiency to promote economic and technical efficiency in the spectrum use, for example the processes of auction and opportunity-based rates. AUCTIONS: This mechanism allows economic and technical guarantee in its allocation since it is awarded to the agent that has a greater bid for the spectrum. OPPORTUNITY-BASED RATES: Are an economic mechanism of proxy price determination, through which the availability to pay for access to the spectrum rights of use is inferred. TECHNICAL MECHANISMS: >> Technical efficiency indicators: Based on practices related to the command and control model. >> Technological improvement: Focuses on the use of technologies with better spectral efficiency standards. >> Evolution of private over public networks: Consists on the deployment of networks that integrate traffic from several networks to be more efficient. Efficiency is an indispensable attribute of spectrum management due to the nature of radio frequencies. The radio frequency spectrum has key characteristics for which efficient management is required: it is scarce; costly—financially and time-wise—for re-farming; exclusive in its use (though there are cases where spectrum sharing is available); requiring cross-border coordination and harmonization bounded by national and international regulations; and affecting the cost of telecommunication services as a basis resource. 52 - In the Colombian context under the legal mandate, this mechanism should be complemented with auction processes on the initial allocation which allows the state to absorb surplus revenues. 114 DI GI TAL DEV E LOP ME N T PART NE RSH I P II.c Efficiency Definitions in Spectrum Use As previously mentioned, one of the main objectives of In this regard, the concept of efficiency in the use of the spectrum management is to achieve a more intensive use of spectrum must be approached from three scopes: i) the the spectrum, that is, greater efficiency in its operation and technical efficiency, ii) economic efficiency and iii) social ef- an increase on consumption of services that are supported ficiency, as summarized in the following figure. by this resource, in other words given the fact that we are dealing with a finite resource, it is necessary that it is used in- tensely and extensively, both in time and geographic areas. FIGURE II.5. Efficiency in the use of the spectrum The system efficiency can be explained as the relation between the end result and the resources required to obtain that result at the beginning (FCC, 2002), in other words an efficient system must produce the best possible results with the least amount of resources. This way, and from a techni- cal point of view, the spectral efficiency can be expressed TECHNICAL in terms of the amount of useful information, usually mea- sured in bits or bytes, which is transferred per spectrum unit (i.e. for each Hertz or Megahertz - MHz). In most cases, this relationship is referred to as a geographic unit, expressed EFFICIENCY either in Km2 or by radio base sector or cell. Thus, the spec- tral efficiency could be explained as the number of bits per second per MHz transmitted per squared kilometer or per SOCIAL ECONOMIC cell, i.e., bps/MHz/Km2 or bps/MHz/cell. Efficiency indicators of spectrum use are a tool for gov- ernment decisions in the field of spectrum management. However, the incorporation of other criteria related to the impact on market dynamics and the economic and social >> Efficiency indicators >> Technological developments benefits are relevant to define the objectives of public policy >> Alternative networks and resource planning; for example, the analysis of produc- >> ... tivity related features, demand for spectrum, regional or in- Spectrum as a common good ternational harmonization, interference management, and >> Unlicensed spectrum technological trends. >> Shared spectrum >> Flexible attributions >> ... Additionally, indicators or metrics to evaluate the ef- ficiency in the spectrum use, must have certain character- Market development >> Auction istics to facilitate the process of resource management. As >> Secondary Market an evaluation metric, it must be verifiable and repeatable, >> ... so it must incorporate objectivity criteria; also, because of the complexity in its measurement, it is appropriate that they Source: BNMC. have both quantitative and qualitative metrics. 53 - The report of the FCC’s work group on spectrum efficiency defines the term “efficiency” as output production related to a certain amount of input. PU B L I C PO L I CY A N D E F F I C I E N T U S E O F T H E S PECTRUM 115 TECHNICAL EFFICIENCY is obtained when all the resources used are implemented in such a way that the greatest possible result is generated at the lowest cost of those resources. In this case, resources mean both spectrum, as the essential element, investments in network equipment, labor, etc. (FCC, 2002) As described in section III.c., ITU-R SM. 1046-3 ITU recommendation stipulates that, “as a basic concept, the combined domain of broad band-space-time measurement on the use of the spectrum must be used”. However, while defining if a system is efficient or not based on this type of metrics, the technology evolution allows systems to increase their levels of spectral efficiency, for example, the new technology standards (i.e., multiple antennas arrays or MIMO, better errors correction components, more robust modulation schemes, etc.) increase the amount of information that can be transmitted by MHz. In this sense, the definition of efficiency criteria must be adjustable according to technology status. On the other hand, the geographical factors such as the terrain topography or the user’s location (i.e. distance and indoor location, deep indoor or outdoor) in relation with the radio base, directly impacts this type of efficiency metrics. This aspect is particularly relevant in the case of mobile networks. The criteria must be defined for each system and/or service since they can present substantial differences in use of spectrum measurements. The ECONOMIC EFFICIENCY refers to the use of all resources to obtain the greatest value for the consumers, which incorporates the value that the information transmitted across the spectrum has. In other words, economic efficiency examines the impact of the spectrum use and all resources regarding the consumers well-being; not just a measurement of the amount of information transmitted (i.e. bits). Finally, SOCIAL EFFICIENCY refers to the spectrum use as a common good, with ease of access to promote society’s wellbeing, noticeable in such factors as: the employment rate, competitiveness, education, among others. 116 DI GI TAL DEV E LOP ME N T PART NE RSH I P II.d Public Policy and Regulation As previously mentioned, the promotion of the efficient spectrum use represents one of the main objectives of government officials because of the impact that communications services have in the improvement of public’s lifestyle. Regarding the creation of a public policy, ITU highlights the importance of identifying the goals and objectives relevant to each country. In particular, the Radiocommunication Guidelines establish the following objectives: • Limit the spectrum use to • Encourage early • Frequencies should be the necessary minimum, use of the newest used without causing to obtain a satisfactory technological harmful interference to performance of the advances. other systems required service. The ITU establishes that the main objective for spectrum management in each country must have the follow- ing objectives: • Make spectrum for public or private purposes available, to • Encourage the promote social and economic progress; in other words, ensure efficient and effective the availability of spectrum, so companies or organizations can spectrum use. fulfill their mission with the appropriate quality service levels. In this regard, the regulatory framework for spectrum management should consider three elements or cor- nerstones (ITU, s.f.): a.) Economic element: promote economic b.) Social element: maximize socioeco- c.) Technical element: efficient spectrum use growth nomic benefits The implementation of initiatives focused on encouraging the efficient spectrum use, is essential within the resource man- agement process. Regarding Peru’s public policy agenda, the strategy for efficient use of a scarce resource has been adopted and incor- porated into the agenda of all institutions involved in resource management: The Ministry of Transport and Communications (MTC), OSIPTEL, PROINVERSION agency. Specifically, the efficiency in the use of the resource is the actual outline of the PNAF Commission, comprised of the MTC and the OSIPTEL. Peru’s National Government has been emphatic on the need to guarantee tools that promote the efficient use of the resource, incorporating them in the legal framework of existing licenses and permits. The current sectoral policy objectives consistently prioritize the efficiency of use over assignment and resource management. PU B L I C PO L I CY A N D E F F I C I E N T U S E O F T H E S PECTRUM 117 FIGURE II.6. Desirable sectoral objectives of Peru regarding the current spectrum management PROMOTE DISCOURAGE • Use efficiency and scale • Spectrum use as the WIRELESS (max use in exclusive first/only technology BROADBAND frequencies) option TRAFFIC DEMAND • Return/cession of under • Application of uncertain ESTIMATION used frequencies use frequencies • Relocation to less • Hording the spectrum congested frequencies with speculative use • Technology adoption ECONOMIC • Comply with public policy OBJECTIVES • Meet with fund requirements Source: BNMC. The current administration proposed modification should recall the planned objectives, creating a consistent framework alongside their achievement. 118 DI GI TAL DEV E LOP ME N T PART NE RSH I P ANNEX International Practices The encouragement for efficient use of the spec- trum has been addressed by each country ac- cording to their public policy objectives, regulatory framework, and market environment. Some coun- tries choose mechanisms that encourage efficient use by spectrum users, for example, through spec- trum flexibility mechanisms, while others incorpo- rate surveillance efficiency metrics. In the first section of this chapter, promotion initiatives for the efficient use of the spectrum are described, showing some relevant case studies. The second section presents an international anal- ysis of countries that have studied or implemented metrics for efficiency measurements in the use of the spectrum. Finally, the third part summarizes the conclusions of international agencies. Initiatives to promote an III.a efficient spectrum use Considering the knowledge of the countries in the region, some initiatives to promote an efficient spectrum use are detailed in this chapter i) the use of more flexible spectrum management models, using Mexico’s case about the secondary market model; (ii) the spectrum reordering or re-farming to allow the deployment of services with better spectral efficiency, applied in Colombia, Argentina, and the United States; and (iii) spectrum sharing, highlighting Colombia’s case with the white space regulation. III.a.1 - SECONDARY MARKET Although the regulator oversees licensing of spectrum use between operators, there is a growing trend to allow a secondary spectrum market to encourage the efficient spectrum use. This secondary market allows interchange and transfer of permits between networks and services carriers, usually with the technical and economic support of the current regulator. The main reason for this market is because of the limited flexibility of the traditional system of spectrum management to reflect the spectrum needs of operators and match them according to the current state and evolution of the communication services. Trade spectrum or secondary licensing provides a financial incentive to operators and other licensees to use the spec- trum efficiently or assign it to other markets. The secondary license includes the lease or sale of certain types of full licenses, with no other changes allowed. Licenses reconfiguration, subdividing or adding spectrum allocation by geography or fre- quency, for example. As well as the lease or exchange of short or long term licenses, (i.e. stablished rights in the license conditions regarding the areas of spectrum use and types of services to be provided) the European Commission identifies sale, repurchase, leasing, and mortgage (where the right of use is a guarantee or a loan rather than a sale) as accepted methods to transfer the spectrum rights of use. The regulator´s role in the implementation of the secondary market is approving and controlling the allocation of rights to avoid negotiations leading to the establishment of dominant positions on the spectrum. It is necessary to also control the efficient spectrum use and monitor compliance in accordance with its obligations as determined in the licenses. On the other hand, the carrier should be involved in problem solving due to the levels of interference that affect the normal opera- tion of the services. The regulator must maintain a register that allows operation monitoring and provides transparency to the commercialization processes. Their main advantages are: • It promotes the efficient radio spectrum use, since it allows underutilized portions of the resource to be transferred to other operators, obtaining higher economic performance which can also be translated in greater well-being for the users. • It increases flexibility because the regulatory and administrative entry barriers for new operators are eliminated. • Once published, transactional values used among operators help establish a pricing policy for the radio spectrum according to market knowledge and the assessment of a specific frequency band. • Following the technology neutrality principle, it encourages innovation using new technologies and the provision of alternative services. • It improves spectrum management transparency done by the regulator, since the transfers reveal the information related to the use of the commercial frequency to the public. 120 DI GI TAL DEV E LOP ME N T PART NE RSH I P CASE STUDY: MEXICO The Federal Telecommunications Institute (IFT) in 2016 adopted general guidelines on the approval for the lease of radio spectrum (see annex 2), which allows the creation of a secondary spectrum market in Mexico. This provides flexibility, agility and dynamism to radio spectrum management. The measure allows that allocated spectrum that remains idle or underutilized be used by third parties, with IFT’s authorization. For the spectrum rental to be possible, it should not affect the service continuity and should not generate concentration, accumulation or cross-ownership. Because of this, the regulator has the right to first, assess the effects of the accumulation of radio spectrum before approval. In 2015, the regulator had already given the first steps of encouraging the creation of a secondary spectrum market when they authorized the exchange of frequency blocks between AT&T and Movistar. The guidelines foresee a sublease of the spectrum, with the express consent of the lessor and the authorization of the regulator. The subtenant may not, under any circumstances, sublet the right of use and exploitation of frequency bands.54 III.a.2 - FREQUENCY BAND RE-FARMING Spectrum re-farming, also known as spectrum redistribution, is a set of administrative, financial, and system measures aimed at removing existing users or existing radio frequency infrastructure from current allocations, either totally or partially, so that it: generates the possibility of re-allocating the band to new users for the operation of the same or different services; or generates efficiencies in spectrum use, for example, allowing allocation of continuous spectrum blocks to a same licensee reducing the need for guard bands. Spectrum re-farming is a spectrum management tool that can be used to meet new market demands, increase spec- trum efficiency, or respond to international changes in frequency allocations. Also, it is useful to improve existing services or introduce new services by migrating existing spectrum users to more modern technologies or new frequency bands. In many cases, the redistribution of spectrum is a natural process because existing users change their radio operations based on new technologies. The main issues related to redistribution occur when there is not enough time to introduce a change in spectrum use, and a support mechanism is needed to accelerate the process of redistribution. However, the use of such mechanisms can generate additional costs or operational challenges by new or existing users. It also requires a legal review on the conditions of existing licenses. 54 - http://www.telesemana.com/blog/2016/03/31/mexico-aprueba-la-creacion-de-un-mercado-secundario-de-espectro/. PU B L I C PO L I CY A N D E F F I C I E N T U S E O F T H E S PECTRUM 121 Below, case studies regarding spectrum re-farming practices as tools to improve the efficiency in the use of the resource. CASE STUDY 1: ARGENTINA The Argentina’s Ministry of Communications (Department of Communications of the Ministry of Modernization) issued resolution 171 on January of 2017, which approves the Guidelines that establishes the Re-farming Procedure with Economic Reimbursement and Sharing of Frequencies.55 The guidelines establish “conditions and procedures related to the methodology implementa- tion of Re-farming for reorganization or re-qualification of the spectrum with economic compen- sation...” The latter is defined as “the amount established by the enforcement authority that the authorized provider must pay for the implementation of the procedure of Re-farming, based on the values obtained from Value of Reference Unit (VRU), Reference Value (RV), and the applica- tion of relevant discounts on the latter according to the coverage obligations and other findings carried out in the approved resolution”. Based on the guidelines, spectrum re-farming must comply with the following principles: • It only applies to frequency bands according to the ITU’s Radiocommunication Guide for Band Attribution, which in the sole judgement of the enforcement authority, have commercial availability in the technological ecosystem. • Enforcement authority shall determine if the applicant meets the conditions necessary for the development and delivery of the involved services. Additionally, it must analyze the project’s technical feasibility and whether the applicant has the technical capacity and economic solvency to meet those obligations. • Enforcement authority may enforce specific goals of services and coverage obligations. • Enforcement authority will consider the promotion of competition, the quality improvement of service and the users’ benefit. • Spectrum caps must be preserved. • Respect the principles of neutral technology and of service. 55 - Resolution 171/2017 presents a focus in the refarming of spectrum for more IMT frequency bands. Thus, article 2 asks ENACOM to “analyze the technical feasibility and implement the relevant measures to attribute to the mobile service (primary category), the 450 to 470 MHz frequency bands, band segments 698 to 960 MH”, 2300-2400 MHz band, 2500-2690 MHz band, as well as all those identified by the International Telecommunication Union for the deployment of IMT systems, to be used while providing Service of Advanced Mobile Communications...” (Argentina’s Ministry of Communications 2017). 122 DI GI TAL DEV E LOP ME N T PART NE RSH I P The procedure established by the Ministry for re-farming is summarized in the figure below. FIGURE III.1. Re-farming Procedure – Argentina VIABILITY ANALYSIS RE-FARMING COMPLETED BY PROJECT COMPLIANCE FOLLOW UP THE PERTINENT PROPOSAL AUTHORITY PROJECT RESOLUTION PAYMENT AND PERIOD • The project must be presented by the user that wants to assigned spectrum reorganized and reclassified from what it was originally assigned PROJECT CONTENT • Current spectrum bands, as well as future bands, for technology deployment for a greater spectrum efficiency • Coverage zones, impacted zones, and population in those zones • Impacted broadband 15-year timeline • Client range (15 years) • Investment plan (15 years) • Project information according to decree 764/2000 Source: Argentina Ministry of Communications (today Department of Communications) – Re-farming Regulation of Frequency Bands with Financial Compensation (Argentina Ministry of Communications, 2017). The project is evaluated by the Enforcement Authority and, if approved, must be issued by a resolutive act with enough information to carry out the procedure. From there, the provider has 30 days for financial compensation. Likewise, an 18 to 48 months period can be established to carry out the migration of all users to the new attributed band service. PU B L I C PO L I CY A N D E F F I C I E N T U S E O F T H E S PECTRUM 123 CASE STUDY 2: COLOMBIA Unlike Argentina, Colombia does not have a specific regulation for re-farming procedures. However, they have implemented regulatory strategies to facilitate these processes. For example, during the auction of 4G spectrum in 2013 (2.5GHz and AWS band) the following obligations were included for the winning spectrum bidders to comply (MINTIC Colombia, 2013): • Migration of the Navy’s, National Police, and Military Forces’ telecommunications networks, (P25 trunking networks and point to point links) that work in the 2.5GHz, 400 MHz, and AWS bands to allow the release of bands identified for IMT in Colombia (i.e. 700MHz, AWS, 2.5GHz). This requirement was of great relevance because it made the release of those bands, for the deployment of 4G networks, to be done within a two year period. • All recipients must retune their frequency within the same band when the Ministry of Infor- mation and Communication Technologies requests it, for the radio spectrum reorganization due to the new allocation process and to ensure spectrum allocations on the biggest pos- sible continuous blocks for all assignees within frequency bands. The goal was to reorder the 1900MHz band so that the operators could have continuous spectrum allocations, re- ducing the need for guard bands and facilitating the deployment of new technologies such as HSPA + - Dual Carrier. • When the Ministry of Information and Communication Technologies sets methodologies or sets metrics to validate the efficient use of the radio spectrum, the assignee must give strict compliance with such measures. CASE STUDY 3: UNITED STATES REVERSE AUCTION In 2016, the Federal Communications Commission (FCC) conducted an “incentive auction” to release the 600MHz frequency (FCC, 2017). The process consisted of a reverse auction mechanism in which mobile operators interested in the band for the deployment of mobile communication services (4G / 5G) did an offer to television operators who occupied this band. In other words, television operators “sold” their licenses so that spectrum was reused in IMT services, even gaining additional revenues that could be invested in programming or new community services. The auction ended in March 2017 and was able to recover 84MHz in the 600MHz band to be used by mobile communication technologies, mainly for 5G network operations. The auction de- livered $19.8 billion in revenues, of which $10.5 billion were for bid winning broadcasters, while the remaining amount went to the USA Treasury (FCC, 2017). 124 DI GI TAL DEV E LOP ME N T PART NE RSH I P III.a.3 - SHARING THE SPECTRUM Spectrum access and shared use of the spectrum is based on the premise that there are existing spaces in the frequency, in time or geographic spaces, in which the spectrum assigned to a service or a user is not used. Under this scenario and under the principle of not generating harmful interference, techniques that allow use to be made of these spaces are developed for the provision of other communications services or the same service to other users or for different purposes. This solution enables a more intensive use of spectrum, and therefore, a more efficient use. Some of the most developed technologies to facilitate spectrum sharing: i) Cognitive Radio, which consists of spectrum detection to determine available spaces and develop efficient distribution alternatives, allowing to relocate users while en- suring quality and reducing interference; and (ii) Software Defined Radio (SDR). Other mobile network solutions, based on radio access network sharing (RAN Sharing), enable the spectrum to be shared between different op- erators, allowing a more efficient use of the spectrum because the same spectrum block is accessed by a greater number of users. CASE STUDY: COLOMBIA In 2017, Colombia became the first country in Latin America to finish its TVWS regulation, which generated great expectations for the country to reach better connectivity, as well as social and economic inclusion. According to the ANE resolution (see annex 1), free spectrum allocated to TV between 470MHz and 698MHz can be used to provide connectivity in rural areas. To avoid interference with other services, the regulation establishes technical and operational parameters for the use of those bands. Currently, less than 10 out of the 48 available channels for TV transmission are used by 99% of the municipalities, which allows the use of these frequencies for other technologies and new services.56 ANE conducted electromagnetic compatibility tests between TVWS devices and ana- log and digital TV, proving the viability of this technology. In addition, three pilot programs in 2016 were implemented to successfully provide broadband Internet to remote rural schools. The use of white space will contribute to the objectives of achieving lower costs and have a more efficient use of the spectrum.57 ANE recently received the first application to start the registration process to begin the use of white space. In addition, the database implementation for the process automation is scheduled for 2018. 55 - http://www.mintic.gov.co/portal/604/w3-article-51571.html. 57 - https://www.ane.gov.co/images/COMUNICACIONES2016/PRESENTACION.pdf. PU B L I C PO L I CY A N D E F F I C I E N T U S E O F T H E S PECTRUM 125 International Experience Measuring III.b the Efficient Use of the Spectrum This section details the regulations or studies developed by Brazil, Mexico and United States for the implementation of metrics to measure the efficient use of the spectrum. III.b.1 - BRAZIL “Resolution 548 2010 issued by ANATEL, which approves the rules for evaluation of efficiency in the use of the radio frequency spectrum”58, establishes the criteria to measure the efficiency in spectrum use for point-to-point systems and point-to-area, and satellite systems. Point-to-area systems, regularly monitored by the agency, include: • Switched public telephone service • Personal mobile service • Multichannel Multipoint Distribution service • Multimedia communication service • Specialized mobile service • Special television service. For these spectrum ranges, the following criteria is established to measure efficiency: • SPECTRUM USE: defined as the product of the channel bandwidth or spectrum block, the geometric space covered, and the fraction of time that the system is active. Where: U = Spectrum use U=BxSxT B = Bandwidth (MHz) S = Geometric space (km2) T = percentage of time, where 0 < T < 1 • EFFICIENCY IN THE SPECTRUM USE: associated with the amount of information transmitted over a range of spectrum and calculated from the following formula: Where: M = Amount of transmitted information (terabits), M M or telephonic traffic (erlangs) in the current month, EUE = kx = kx U BxS or the rate of transmission (Mbps) K = Proportionality factor according to each application or system 58 - (ANATEL, 2010) 126 DI GI TAL DEV E LOP ME N T PART NE RSH I P • RELATIVE EFFICIENCY: is the relationship between the efficiency in the use of the spectrum for the current system (EUEc) and the efficiency in the use of the spectrum of a reference system (EUER). The resolution also establishes specific criteria and formulas for each system, however, compliance is done through Ef- ficiency rates: i) IME Efficiency Minimum Index- defined by a specific regulatory act for each service, application, and fre- quency band; and (ii) Temporary efficiency index ITE, as the following formula: n+1 ∑n i=1 ( ixEUE ( - ( i 2 (x ∑n i=1 ( EUE ( i Where: ITE = n+1 n = number of months considered ∑n i=1 (i ( - nx ( 2 2 ( 2 EUEi = Efficiency in the use of the spectrum in month i The results will be valid if: a.) EUE is greater than or equal to the IME; and b.) ITE, from the past 12 months is greater than or equal to 0 Failure to comply with the above stated causes the system to be considered inefficient and would be subject to the es- tablished penalties. Likewise, the none delivery or incorrect delivery of the information required for the calculation of the indicators will also be penalized. Sanctions can range from a fine to the forfeiture, partial or total, of the authorization of the use of frequency bands. Sanc- tions meant for the inefficient use of the spectrum, based on monthly measurements carried out in a consecutive period of 12 months, will be applied as described in the following table. EUE ITE Sanction Less than IME up to 2 results From 0 to 5 negative results Fine Fine or partial or complete license Less than IME up to 2 results From 6 to 12 negative results forfeiture Less than IME Partial or complete license Any result up to 3 or more results forfeiture The return of the spectrum will consider two factors: • Enough or necessary so that the sanctioned entity • Enough to make its use possible by another entity becomes efficient PU B L I C PO L I CY A N D E F F I C I E N T U S E O F T H E S PECTRUM 127 III.b.2 - UNITED STATES The Spectrum Efficiency Working Grouping - SEWG59 from the Spectrum Policy Task Force from the Federal Communications Commission (FCC) published a report in November 2002 to analyze the country’s spectrum use and identify regulatory models to promote the efficient use of the resource. The report shows a clear distinction between the definitions of spectrum efficiency, spectrum technical efficiency, and spectrum economic efficiency, as summarized in the following figure. FIGURE III.2. Definitions of efficiency in the spectrum - SEWG (FCC) SPECTRUM TECHNICAL ECONOMIC EFFICIENCY EFFICIENCY EFFICIENCY Transmitted information Transmitted information Information value Used spectrum f (T,B,S) Component expense Component expense Source: FCC Spectrum Policy Task Force 2002. While efficiency in spectrum use maximizes the greatest amount of information transferred given a spectrum, technical efficiency maximizes the amount of transmitted information per component expense. Economic efficiency, meanwhile, maximizes the value of the transmitted information based on the total component expense required to transmit it. Regarding commonly used metrics for efficiency measurement in spectrum use (i.e. bitspersecond/Hertz/Km2 or users/ Hertz), it is recommended to keep in mind that factors associated with levels of interference and desired quality standards can have significant impact in band width, area, and signal activity time. Many differences arise when measuring spectrum efficiency on a system with multiple devices than one with a single terminal. The 2002 report concludes that it is not possible or convenient to define a single metric of measurement or com- pare efficiencies between different systems of radio communications. In addition, it proposes some alternatives to encourage the efficient use of market spectrum: • Additional flexibility in • Exclusivity, flexibility and • More common use spectrum frequency band allocation, portability rights in spectrum having secondary uses use can create significant • Limited use of the command allowing the increase of incentives for an efficient use and control model supply of new services. of the resource. 59 - SEWG: Spectrum Efficiency Working Group 128 DI GI TAL DEV E LOP ME N T PART NE RSH I P Subsequently, in 2011, the Technological Advisory Council of the NTIA published a spectral efficiency metrics white paper taking into consideration the differences between radio-communications systems. For Personal Communication Systems (PCS) the following metrics are proposed: bps Transformation of information index ( Hz ( Spectrum Efficiency = Used Area Similarly, proposes the following metric for terrestrial systems point to point: bps Transformation of information index ( Hz ( x Lenght of transmition Spectrum Efficiency = Used Area 1 Where: Used area = S = R20HP R: sector radius (km) 2 OHP: Beam width at half-power (rad) The white paper’s findings match the 2002 report in relation to the complexity of measuring the spectral efficiency of a radiocommunication system and maintains to opt for the adoption of regulatory measures that encourage efficient market spectrum use, such as expanding spectrum use to secondary non-licensed users. III.b.3 - MEXICO The Federal Institute of Telecommunications – Mexico’s IFT has started several studies to define a regulatory framework meant to observe and evaluate the efficiency in spectrum use. The 28th article from Mexico’s Constitution establishes that the IFT’s work must ensure the efficient devel- opment of telecommunications and broadcasting services. Likewise, the Telecommunications and Broadcasting Federal Law establishes obligatory observance metrics for spectrum efficiency and the measuring methodology (Catañeda, 2018). Based on the regulations of the 31st article from the Organic Statute of the IFT, among its ob- jectives it includes “propose to the Council spectrum efficiency obligatory enforced metrics, as well as the measurement methodologies that will enable their quantification” (2018 Catañeda). To fulfill the above goal, the IFT carried out a study in 2015 on metrics for measurement of spectrum efficiency, that concluded the following recommendations for different systems or ra- diocommunications services. PU B L I C PO L I CY A N D E F F I C I E N T U S E O F T H E S PECTRUM 129 TA B L E I I I . 2 . Recommendations study IFT: spectral efficiency metrics Category Frequency Band Proposed Efficiency Metric 700 Band: 703-748 /758-803 MHz Public 850 Band: 824-849 /869-894 MHz access AWS band:1710-1780 /2155-2180 MHz Bps/hertz/km2 for each mobile PCS Band: 1850-1910 /1930-1990 MHz system measured nationwide networks 2500 Band: FDD 2500-2570 /2620-2690 MHz TDD 2570-2620 MHz 3.4-3.7 GHz 5725-5850 MHz 7110-7725 MHz 10.15-10.65 GHz Bps/hertz/km2 for the total Fixed links 14.5-15. 35 GHz number of measured links in 21.2-23.6 GHz the service area 37-38.6 GHz 71-76GHz and 81-86 GHz 136-174 MHz Private 380-399.9MHz mobile 410-430 MHz networks 440-450 MHz 806-814 / 851-859 MHz Source: Taken from the study of spectral efficiency metrics by Analysis Mason for Mexico’s IFT (ANALYSIS MASON, 2015) The study analyzed the academic and international recommendations such as IEEE and ITU, as well as regula- tors’ recommendations like the FCC and Ofcomm, resulting in the following comments by the Mexican Institute (Catañeda, 2018). • There is no standardized definition that allows for the scope and factors that comprise spectrum efficiency, to be known. • To evaluate spectrum efficiency, factors that should be considered to evaluate it, should not only consider technical aspects, but also other aspects such as economic, regulatory, social, etc. • The common denominator in the theoretical efforts related to definitions of spectrum efficiency considers the amount of spectrum used, geographical area, and the time used for that resource. • There must be caution in metric application, since, to promote spectrum efficiency, an economic burden for the spectrum owners can result given the potential costs that it would incur to achieve certain desirable level of spectrum efficiency. • Spectrum efficiency metrics must compare same type of radiocommunication systems. 130 DI GI TAL DEV E LOP ME N T PART NE RSH I P Recommendations from III.c International Organizations Given the importance of promoting an efficient spectrum use for carriers, some organizations have conducted studies and issued recommendations to help the administrations. Below are some of the most relevant. III.c.1 - RECOMMENDATION ITU-R SM.1046: DEFINITION OF EFFICIENCY IN SPECTRUM USE Since the spectrum is a limited resource of great economic and social value and its demand is growing exponentially, ITU has recommended that, as a basic concept, use the combined domain bandwidth-space-time as a measure of spectrum use, «spectrum factor», expressed as follows: U=BxSxT M M EUE = = U BxSxT or Where: U = Spectrum use U’ EUE = B = Bandwidth U S = Geometric space (area) T = Time of active system It acknowledges that “the efficient spectrum use is achieved Finally, ITU proposes the concept of Relative Efficiency (among other methods) by the obtained isolation gained by Spectrum Use (ERE) to compare the spectral efficiencies of the antenna’s direction, geographic separation, frequency two similar types of radiocommunication systems that pro- sharing or the use of orthogonal frequencies and time shar- vide the same service. Usually the system used as refer- ing or time division” .60 ence or pattern can meet any of the following criteria: As a starting point, the ITU defines effectiveness in • Theoretically be the most effective system, spectrum use (EUE) as the ratio between the usable effect (M) and spectrum use factor (U). In practical terms, Useful • a system that can easily be defined effect can be explained as the Spectrum Utilization Factor and understood, based on an actual measurement (i.e U’), while U becomes a reference value. This relationship is expressed by the fol- • a widely used system that is, in fact, an lowing formula. industry model. 60 - (International Telecommunications Union, 2017) PU B L I C PO L I CY A N D E F F I C I E N T U S E O F T H E S PECTRUM 131 ERE is described by the following expression: Where: EREr ERE = EREr = real ERE EREp EREp = model or reference ERE ITU’s recommendation includes some implementation examples of the above expressions for mo- bile systems and for spectrum use in radio links. Regarding mobile systems, a spectrum occupancy analysis is needed by geographic area, known as the spectrum occupancy for each transmission and the number of broadcasts in the area. In this case, a cell is defined as “the total cell occupancy in the n stations of that geographical area, divided by the total spectrum considered, B, and the area of the cell, S0.” (International Communications Union, 2017). The objective is to calculate the rate of spectrum used and denied. In case of radio links which are permanently active, eliminate the time component - T in the formula. III.c.2 - IEEE IEEE offers the following formula to measure efficiency of a wireless communications system: Where: Weff = Wireless system efficiency, expressed in Bit-Users/m2 C= System capacity in information delivery (bps), after demodulation and decoding processes Weff = (C x Ns) /(B x A) Ns = Number of system users or connections, within coverage area A and using spectrum B B = Spectrum bandwidth used by the system (hertz) A = Covered area (m2) used by the system where spectrum B is used 132 DI GI TAL DEV E LOP ME N T PART NE RSH I P III.c.3 - EUROPEAN COMMUNITY The European Community, under the of the Radio Spectrum Policy Programme’s (RSPP) leadership has been publishing studies related to radio spectrum use and management. In 2012, it published a study aimed to take inventory and review spectrum use in countries which are part of the European Community, to conduct an assessment of the European Union’s potential to improve spectrum efficiency (WIK - Consult for European Commission, 2012). The study divides efficiency in four criteria: i) spectrum use, ii) spectrum demand trends, iii) technology features and iv) geographical criteria, as shown in the following figure. FIGURE III.3. Efficiency concept criteria - EU • Actual amount of used spectrum over USE time determined by each application/ service in each band EFFICIENCY CRITERIA SPECTRUM • Shows if demand in an application/ DEMAND TREND service is stable through time or has changes (demand increase or decrease) • In relation with spectrum efficiency in TECHNOLOGY the deployed technology GEOGRAPHICAL • Population or covered area by the AREA resource being used FOR TIERS ARE USED: [0] >> NONE [1] >> LOW [2] >> MEDIUM [3] >> HIGH Source: (WIK- European Commission Consult, 2012) PU B L I C PO L I CY A N D E F F I C I E N T U S E O F T H E S PECTRUM 133 Each measure is assessed with four compliance levels evaluating the system’s efficiency. The following figure shows an example. FIGURE III.4. Example of EU criteria application USE CRITERIA INDICATOR 0 1 2 3 (NOT USE) (LOW USE) (MEDIUM USE) (EXTENSIVE USE) Mature mobile ser- < 30% 30-60% 60 - 90% > 90% vices (band use %) New mobile No commercial Partial band Complete band Not in use services service launch service launch service launch < 1 links/million 1-10 links/million > 10 links/million Fixed links Not used residents residents residents DEMAND CRITERIA INDICATOR 0 1 2 3 (NOT USE) (LOW USE) (MEDIUM USE) (EXTENSIVE USE) Low or moderate Demand Declined Stable High growth growth GEOGRAPHIC CRITERIA INDICATOR 0 1 2 3 (NOT USE) (LOW USE) (MEDIUM USE) (EXTENSIVE USE) Several locations in Several locations Range None One location a country’s region nation wide Source: (WIK- European Commission Consult, 2012) 134 DI GI TAL DEV E LOP ME N T PART NE RSH I P ANNEX Context in Peru The chapter presents an analysis regarding existing incentives for the promotion of an efficient spectrum use in Peru, as well as regulatory and market instances that may impact the development of new tools for this efficiency’s measurement. Classification of IV.a Spectrum Users Within the regulatory framework of the MTC, radioelectric spectrum is used in Peru, mainly for the following services: F I G U R E I V.1 . Radio services TYPE OF SERVICE PUBLIC PRIVATE Carriers services (Point-to-point) microwave links Mobile services Fixed landline Teleservices (provided to end PCS Landline mobile users) Fixed wireless access Microwave links Trunking Satellite TV TV (Radio and VHF & UHF*) Broadcast services MMDS (*Public interest private service) Source: TUO - General Telecommunications Regulation; Blue Note analysis Described in more detail below, public service telecommunication exploitation is awarded under a concession title. Up until 2017, 42 wireless landline communication service concessions were registered in the MTC’s databases (i.e. mobile service, PCS, trunked, virtual mobile operation and rural operator infrastructure). 136 DI GI TAL DEV E LOP ME N T PART NE RSH I P Within the regulatory framework of the MTC, in Peru the radio spectrum is used mainly for the services shown in Table 4.1 : F I G U R E I V. 2 . MTC wireless mobile service concessions 20 18 16 14 12 10 8 6 4 2 0 2013 2014 2015 2016 2017 Up until 2017, 42 wireless landline communication service concessions were registered MOBILE SERVICES TRUNKING MVNO PCS RURAL INFRASTRUCTURE OP Source: MTC (MTC, 2017) These services are provided in the following spectrum bands: 400MHZ/800MHZ Trunked 700MHZ/850MHZ/ Mobile phones (includes virtual mobile operation) 900MHZ/1900MHZ/AWS S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 137 Companies such as Claro, Movistar, Entel and Bitel have spectrum allocations to provide mobile communications services in the previously mentioned bands, with a distribution described in the following table. TA B L E I V.1 . Mobile phone spectrum allocations by operator FREQUENCY CLARO MOVISTAR ENTEL BITEL BAND 700 MHz 30 MHz 3 MHz 30 MHz 850 MHz 25 MHz 25 MHz 900 MHz 10 MHz 32 MHz 1900 MHz 35 MHz 25 MHz 35 MHz 25 MHz AWS (1.7/2.1GHz) 40 MHz 40 MHz Source: BlueNote Analysis Since technological point of view, 170MHz (almost half of the total spectrum assigned) are being used by LTE networks. Mobile service is the one that reported most users reaching 40 million active lines up to Jun 2018, which represents a 132.2% of Penetration of mobile phone service.61 TA B L E I V. 2 . Working lines by company – Jun 2018 COMPANY WORKING LINES MARKET SHARE TELEFÓNICA DEL PERÚ 15,552.977 38,3% AMÉRICA MÓVIL PERÚ 12,785.368 31,5% ENTEL PERÚ S.A. 7,127.370 17,5% BITEL 5,124.456 12,6% TOTAL 40,636.836 Source: Osiptel - mobile service indicators 61 - Osiptel. Indicators of mobile services. September 2017 & Tele-geography 138 DI GI TAL DEV E LOP ME N T PART NE RSH I P During the last quarter of 2017, 69 out of 100 people had access to mobile Internet via a mobile phone or other portable device. Mobile internet access showed a 85% growth from the first quarter of 2014, when 11,4 millions of connections were reported. F I G U R E I V. 3 . Diffusion of Mobile internet access - Dec 17 70% 69,2 60% 58,8 59,2 57,4 56,6 57,7 53,6 50% 50,0 48,9 48,5 40% 42,7 39,9 38,6 30% 20% 10% 0% 2016-3 2015-3 2016-2 2016-4 2015-2 2014-3 2015-4 2014-2 2014-4 2016-1 2017-4 2015-1 2014-1 2014 2015 2016 2017 Source: Osiptel - Mobile internet access indicators Mobile Internet traffic has shown an exponential growth between 2014 and 2017, which suggests that existing networks will need more capacity; that’s mean more investment in infrastructure deployment, users’ migration towards more efficient technologies (ie 4G and 5G) and new IMT spectrum. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 139 Between 2014-1Q and 2017-4Q, Internet traffic carried by mobile networks multiplied by 27 times, as shown in the fol- lowing figure. F I G U R E I V. 4 . Mobile Internet Traffic Total mobile internet Traffic Millions of Megabytes 180000 166991 160000 X27 140000 120000 100000 80000 60103 60000 40000 19100 20000 5883 8983 0 2014-1 2014-4 2015-4 2016-4 2017-4 Average traffic per user per quarter Megabytes 9000 7890 8000 X14 7000 6000 5000 4000 3070 3000 2000 1113 1000 517 618 0 2014-1 2014-4 2015-4 2016-4 2017-4 Source: OSIPTEL – Dec 2017 140 DI GI TAL DEV E LOP ME N T PART NE RSH I P Mobile Internet traffic is mainly carried out by 3G networks. According to OSIPTEL report, 59% of the mobile lines that access the Internet do so through 3G networks . Based on GSMA Intelligence statistics, in the second quarter of 2018, only 26.4% of mobile connections corresponded to 4G users in Peru, as shown in the next figure. F I G U R E I V. 5 . Mobile Connections by Technology Mobile connections by technology 100% 90% 29% 80% 2G 70% 60% 44,6% 50% 3G 40% 30% 26,4% 20% 4G 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018-2Q Source: GSMA Intelligence The 4G connections share is lower than other countries such as Brazil and Chile, where LTE users reach 50.9% and 52.5% of penetration, respectively. In fact, Peru is below the regional average (i.e. Latin America and the Caribbean), which reported 31 percent of LTE connections’ share on March 2018, according to 5G Americas. In this sense, it is important to establish measures to encourage the migration of users to 4G technologies, which allows a more efficient use of the spectrum. Regarding 4G mobile coverage, it is important to mention that the 700MHz band, which allows coverage to be extended to rural areas, was assigned in 2016 to Claro, Movistar and Entel (30MHz each). The deployment of networks in this band is ongoing, however, Peruvian mobile operators have reported their investments to expand the coverage of LTE services. The following figure shows the number of population centers covered by 4G networks by operators. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 141 F I G U R E I V. 6 . Locations covered by 4G networks by operators 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 ENATEL MOVISTAR CLARO BITEL Source: OSIPTEL 2017. Finally, the new administration of MTC is mindful about how efficient the spectrum is being used by the current spectrum holders; specifically, in some high-potential bands such as the 2.5GHz, where one operator holds 130MHz (out of 190MHz) and shows limited operations. In this line, the MTC is assessing new regulation to gauge the efficient use of spectrum and, eventually, implement remedies in case of sub utilization. As a complement of such initiative, the MTC drafted new re-farming procedures, aimed at re-farming the bands candidates for IMT and making them available for mobile services. Those bands are currently assigned to different users (ie, fixed wireless, TV, carrier services) and so there is a need to define a clear-cut procedure for re-farming and for new assignations (ie, to secure the efficient usage by the new holders). There are two recent regulation acts from the MTC on that matter: • Ministerial Resolution No 634 (August 14th): which presents the project of the Supreme Decree (the act to set the new refarming regulation) • Ministerial Resolution No 687 (August 29th): which declares the refarming of several bands The Ministerial Resolution No 634 of the MTC basically presents a public consultancy to discuss the new procedure of spectrum re-farming. As such, they invited all stakeholders to actively take part of the process by submitting comments/suggestions . The new r-efarming procedure requires a Supreme Decree (DS) to be enacted, which is drafted in the public consultancy document. 142 DI GI TAL DEV E LOP ME N T PART NE RSH I P The DS entails a clear-cut objective: The core inspiration of this initiative is to promote the effective and efficient use of spectrum. “…regulate the refarming of any spectrum frequency originally attributed to specific The Ministerial Resolution No 687 of August 29th kicks off the services, to promote services and networks refarming process for the following bands: with higher spectral efficiency and/or high-end technology. To that purpose, hereby it is defined criteria to: modification BANDS UNDER REFARMING of attribution, change in channelization and modification (partial or total) of current 452,5 - 457,5 MHz and 462,5 - 467,5 MHz spectrum assignations” (art. 1). 806 - 821 MHz and 851 - 866 MHz 821 - 824 MHz and 866 - 869 MHz “…. the current act is aimed at promoting 2 500 – 2 692 MHz a better utilization and usage of the 2 300 - 2 400 MHz radioelectric spectrum…” (art. 2). 3 400 - 3 600 MHz Regulatory IV.b Guidelines The Telecommunications Regulations Bylaws sets general guidelines for the provision of telecommunication services, spectrum management, standardization and adoption of telecommunication’s equipment, and service regulation, to be carried out in accordance with the objectives and principles set out in the Telecommunications Act. Article 5762 of the Telecommunications Act establishes that the radio spectrum is a natural resource of limited dimen- sions, which is part of the nation’s estate. Article 19963 of the Telecommunications Regulation Bylaws defines the radio spectrum as how the radio waves can spread without directing them artificially, it is a limited natural resource that is part of the nation’s estate, assigning the MTC the responsibility of spectrum administration, attribution, allocation, and control. To identify initiatives or tools to encourage efficient spectrum use in Peru, it is important to analyze some aspects of the existing regulatory framework. A summary of the issues that have the most impact on measurement or promotion of ef- ficiency in spectrum use is explained below: i) license allocation for spectrum exploitation, remuneration framework, and public policy regarding spectrum allocation and assignment. IV.b.1 - LICENSE ALLOCATION FOR RADIOELECTRIC SPECTRUM USE Regarding license allocation for spectrum use, Peru’s regulatory framework establishes two legal figures which depend on service type: i) grant for public services provision64, which classifies mobile communications provision (IMT), and ii) Authori- zation, which applies to private services65 and radio broadcasting. 62 - Approved by Supreme Decree No. 013-93-TCC. 63 - Approved by Supreme Decree No. 020-2007-MTC. 64 - Public services are those that are generally available to the public in exchange for a fixed rate. 65 - Private services are established by a person or entity to strictly meet their own communication needs. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 143 LICENSE Legal act through which the State grants a person or entity the right to provide public telecommu- nication services. The Ministry will award a single concession for the provision of all public telecom- munication services, regardless of the certificate included in this Act or its regulation, except for the license for independent operator. The license was approved by written agreement accepted by resolution from the sector owner. Licenses are awarded through public bidding processes or directly according to the affected province and the relationship between supply and demand. In the provinces of Lima and Callao, li- censes for public services use are always awarded through public bidding processes; in other prov- inces they can be licensed directly if the demand for spectrum does not exceed the current service. AUTHORIZATION Faculty granted by the State to a person or entity to establish a telecommunications service, when it does not require a license to install or operate radiocommunication equipment. Authorizations are granted directly at the person’s request, if they comply with the require- ments and obligations set out in the regulation. The following table summarizes this. TA B L E I V. 4 . License Titles SERVICE TITLE ALLOCATION FEATURESa Fixed/mobile access: Duration= 20 years • Public bid in Lima and Callaob and Renewal according to contract in other provinces if the demand is higher than supply. License rights= 2.5 per thousand of planned initial investment (on time) Public License • By application: in other provinces service Duration= 20 years Services carriers: Renewal according to contract • By request: First come, first serve License rights= 2.5 per thousand of planned initial investment (on time) Duration = 5 years - Private Private Duration = 10 years - TV Authorization • By application service Automatic renewal Authorization rights = 1 ITU (on time) Source: Osiptel. TUO – General Regulation from Telecommunications Bylaws; Blue Note analysis NOTE: a. A fee must be paid for spectrum use. b. In Lima and Callao spectrum can only be assigned through objective selection process regardless of supply and demand. 144 DI GI TAL DEV E LOP ME N T PART NE RSH I P IV.b.2 - REMUNERATION SCHEME FOR SPECTRUM USE AND RADIOCOMMUNICATION SERVICES EXPLOITATION Article 60 of the Telecommunications Law of Peru establishes that “the use of radio spectrum generates a payment fee that the owners of radio stations should pay...” and it is up to the MTC to define the applicable fee In 2018, an important amendment to the existing compensation scheme for public mobile services (mobile telephone, personal communications and trunked services) was issued by the 003-2018 MTC Supreme Decree - providing a gradual path for the payment fee up to 2020 and which allows you to combine the obtained results from the old methodology (based on the number of terminals) and the new methodology (based on bandwidth, amount and type of used bands, geographic area, type of service, target budget, and improvement/expansion of existing infrastructure), as described in the following formula: Fee2018 = ( 2 3 = result of terminal methodology + (( 1 3 = result of the new methodology ( Fee2019 = ( 1 3 = result of terminal methodology + (( 2 3 = result of the new methodology ( The methodology based on the number of terminals is summarized in the following table: TA B L E I V. 5 . Terminal-based methodology SERVICE SPECTRUM RATES SERVICES RATES CLASSIFICATION ("FEE") ("RATE") Mobile services, PCS, Trunking: 4 ranges: Public Teleservices • - Starting from terminals between 1 and Yearly commercial rate = 300k = 0.35% ITU per mobile terminal 0.5% of gross revenues • - Ending in more than 3 million terminals = 0.20% ITU per mobile terminal Source: Osiptel, TUO - General Regulation from Telecommunications Bylaws. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 145 C = CAB × N F× CA × CPB × CPZ × FS × PO - CEI Where: C = Annual fee for spectrum use CAB = Bandwidth coefficient, corresponding to the total spectrum bandwidth allocated for transmission and reception (MHz). NF = Number of assigned bands or channels CA = Area coefficient corresponding to the assigned surface (km2) CP = Weighting coefficient by band, equivalent to 1 for the low bands (< 1 GHz) and 0.4 for high bands (> 1 GHz) CPZ = Weighting coefficient by zone, which is a function of the Human Development Index (IDH) and the urbanity index (IU) and the values are defined in the 003-2018 Decree FS = Participation fee coefficient calculated each year as a function of fee capacity index of operating companies, bandwidth participation and territorial expansion. For 2018 FS value was estimated at 0.000000219% PO = Target budget, which is composed of the Institutional Modified Budget (PIM) from the telecommunications subsector, indirect expenses from the MTC (17% of the PIM) and FITEL transfers (40% of the PIM) CIS = Infrastructure expansion coefficient and/or technological improvement, based on new or better infrastructure at identified locations of interest by the MTC. It is estimated annually by the methodology defined in that Decree. The fee for spectrum use of other services is given by the links capacity or the assigned bandwidth. Table 4.6 summarizes the methodology of fee calculation for other services. TA B L E I V. 6 . Fee for spectrum use of other radioelectric services SERVICE SERVICES RATES SPECTRUM RATE ("FEE") CLASSIFICATION ("RATE") Microwave (digital) links: Annual Carriers 7 capacity-based ranges: commercial rate = services • Starting up to 128 Kbps = 2% ITU2 0.5% of gross • Ending at more than 34,368 Mbps = 20% ITU revenues • Fixed landline = 4% ITU per fixed station Annual Private commercial rate = and transmission frequency Teleservice 0.25% of gross • Mobile landline = 10% ITU per mobile station revenues • MMDS: 20% ITU per channel • DTH: 2% ITU by assigned MHz Annual Broadcast • Broadcasting (Radio and TV) commercial rate = services Fee is determined by applying the general formula of assessment 0.25% of gross (considering coefficients such as bandwidth, coverage, spectrum revenues congestion, band and frequency exclusivity, among others). Source: Osiptel. TUO – General Regulation from Telecommunications Bylaws; Blue Note analysis 146 DI GI TAL DEV E LOP ME N T PART NE RSH I P IV.b.3 - SPECTRUM FOR MOBILE SERVICES Like other countries in the region, mobile communications services traffic has an accelerated growth66 and, consequently, spectrum demand from the industry. Currently, Peru has a spectrum allocation of 370MHz67 for mobile service operation and 510MHz of the spectrum are being assessed to be identified as IMT in the short term, considering broadband wireless fixed access in the current new bands, such as the 2.5GHz band, and the high frequency bands (3.5 GHz). TA B L E I V. 7. Mobile Services Spectrum in Peru TOTAL FREQUENCY BAND ASSIGNED SPECTRUM BANDWIDTH ASSIGNED SPECTRUM 700 MHz band: 90 MHz 3 30 MHz blocks allocated to mobile operators 703-748 MHz/758-803 MHz 850 MHz band: 50 MHz 2 25 MHz blocks allocated to mobile operators 824-849 MHz/869-894 MHz 900 MHz band: 40 MHz 32 MHz allocated to 1 operator 895-915 MHz/940-960 MHz Band 1900 MHz: 120 MHz Assigned 1850-1910 MHz/1930-1990 MHz AWS band: 90 MHz 2x40MHz allocated to mobile operators 1710-1755 MHz/2110-2155 MHz Extended AWS band: Identified as IMT 30 MHz 1755-1770 MHz/2155-2170 MHz Not assigned UNDER STUDY SPECTRUM Extended Band 850 MHz (800 MHz): 20 MHz Trunking services 814-824 MHz/839-849 MHz 2.3 GHz band: 100 MHz Fixed wireless access (WiMAX/LTE) 2300-2400 MHz Pipeline to Service 2.5 GHz band: Distribution Multichannel 190 MHz 2500-2690 MHz Multipoint (MMDS) 6 MHz per channel Deployed technologies WiMAX/LTE - fixed services 3.5 GHz band: Fixed wireless access 200 MHz 3400-3600 MHz (WiMAX / LTE) Source: BlueNote Analysis. Regarding the 2.5GHz band, already widely used internationally and in the region68, a special reordering process is required considering its current allocation for MMDS services with 6MHz channels. This band is mostly assigned (i.e., 189MHz) to two companies, which provide 4G mobile services within its portfolio, and with few users using those existing services. 66 - According to figures from OSIPTEL, during the last quarter of 2016, 59 of every 100 people accessed mobile Internet via a mobile phone or other portable devices. Mobile internet access presented a growth of 57% from the first quarter of 2014, when the penetration reached only 38.6% 67 - According to the ITU - R M.2290-0, report this represents 28% of the estimate of spectrum required for 2020 to lower user density areas and 19% of the high user density settings. (ITU, 2015) 68 - Brazil and Colombia carried out the allocation of the 2.5GHz band for mobile services in 2012 and 2013 respectively. S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 147 ANNEX Recommendations Considering international experience and the Peruvian context, this chapter shows some concepts focused on efficient spectrum use evaluation and incentives potentially applicable in Peru. Tools to Improve and V.a Measure Use Efficiency As previously stated, it is important that spectrum management sets guided regulatory framework to encourage market’s efficient spectrum use, objectives otherwise present in the current public sector agenda. The following figure shows some agreed upon central guidelines to achieve these goals. F I G U R E V.1 . Guidelines to encourage efficient spectrum use PROMOTE DISCOURAGE WIRELESS • Use efficiency and scale (max use • Spectrum use as the first/ BROADBAND in exclusive frequencies) only technology option TRAFFIC DEMAND • Return/cession of under used • Application of uncertain use ESTIMATION frequencies frequencies • Relocation to less congested • Hording the spectrum with frequencies speculative use • Technology adoption ECONOMIC • Comply with public policy OBJECTIVES • Meet with fund requirements Source: BNMC. Remuneration schemes for spectrum use are an important tool to encourage efficiency, therefore it is useful to incorporate some good practices in payment algorithms for frequency band exploitation, as those mentioned below. • Payment based on ability, not based on • Type of band differentiation fee consumption • Not to prioritize revenue collection • Geographic area fragmentation, avoid expand coverage incentives • Do not penalize/discourage deployment of more efficient technologies • Incorporate demand variables that determine periodic payment (ie, frequency congestion, • Promote simple formulas and avoid complex coordinates)) algorithms 150 DI GI TAL DEV E LOP ME N T PART NE RSH I P Below, are described initiatives and proposed tools to encourage efficient spectrum use in Peru focused on mobile com- munications69. MEASUREMENT METRIC FOR EFFICIENCY USE As discussed in chapter III considering international experience, the definition of measurement metrics for spectral ef- ficiency represents a major challenge for the carrier; however, they are a useful tool for spectrum management decision making in the field. Take into consideration the importance of defining metrics based on algorithms or objective methodologies, verifiable and repeatable70 and keep in mind public policy and regulatory principles when decisions are being made. The methodology based on determining efficiency in spectrum use from the load spectrum factor, as a function of the information transmitted, the assigned bandwidth, and the affected physical area; and compare it with a reference system to determine the level of efficiency in spectrum use, complies with the previously mentioned criteria. The following metric is recommended to measure the efficiency of spectrum use, as also recommended by ITU71: Where: ERU = Relative spectrum use efficiency UM UM = Use/load factor of measured spectrum (bps/MHz/Km2) ERU = Ur Ur = Use/load factor of reference spectrum (defined by resolutive act) (bps/MHz/Km2) and should consider type of service (pe. Fixed, Mobile, Carrier, etc.), type of zone (pe. Urban, rural), type of technology (pe. 2G, 3G, 4G), and type of band (pe. Low band, middle band, high band). Use or load factor is a function of the transmitted information, the allocated bandwidth and the affected area, represented in the following formula. Where: Mm = amount of transmitted information (bits) per second. This parameter must be measured in the network starting from the U = f { M, B, S } measured traffic in the radio access interface. It is suggested to consider the month’s peak traffic average of the complete sys- Mm (bps) Um = tem in the measurement area (all the radio stations’ traffic in the B (MHz) x S(Km2) area at the same time) eliminating statistical deviations (i.e. the 3 higher samples and the 3 lower) B = Allocated bandwidth in the analyzed area (MHz). S = Analysis surface (km2) While calculating the Um factor, it is suggested to eliminate areas or base stations associated with social telecommunica- tion projects or public interest places. Finally, make sure that increasing spectrum load does not impact the quality of communication services. 69 - Focus recommendations on mobile communications services (3G / 4G / 5G) due to their high demand for radio spectrum and because of their priority in the public agenda of Peru 70 - Recommendations of reports (2), see section III.c.3 71 - Adopted by ANATEL - (Brazil). S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 151 The results must be monthly analyzed in 6 months to a 1-year periods accordingly: { ≥1 1 URU = 0.8 ≤ URU < 1 0 < 0.8 -1 The sum of each month’s results obtained during the defined analysis period can result in penalties that can range from fines to the total or partial forfeiture of the license. For example, in a 12-month period, the following sanctions can be used: 12 Compliance = ∑ URU = [1; 0; -1] i=1 Compliance Analysis Result Sanction ≥ 10 Requirement of improved operator plan < 10 and ≥ 7 Fine < 7 and ≥ 5 Fine/partial revocation <5 Total or partial forfeiture This metric, although aligned with the objective of promoting the efficient use of the resource, has some limitations, namely: • It does not incorporate economic or social criteria associated with spectrum use. For this, it is necessary that the decisions taken, based on the obtained results, are studied considering the public policy objectives, market dynamics, and end user’s benefit. • The reference system used to compare the utilization factor, can vary through time, due to technological evolution, and show differences depending on physical area (i.e. urban vs. rural). It must also be defined for each system type (e.g. 3G, 4G) and type of band and consider the desired service quality levels72. The reference value should encourage the migrations to new technologies (ie. More efficient technologies) and promote investment in rural areas. This value must be defined by a resolutive act in an independent manner to give the carrier more flexibility. 72 -A high load factor in spectrum use can cause negative impacts on service quality. 152 DI GI TAL DEV E LOP ME N T PART NE RSH I P Barriers V.b and Challenges The proposal’s implementation has two central challenges: • Legal barriers because of the current • Competitor barriers a licenses expiration nd required tools The first barrier exists because most of the spectrum licenses granted in Peru are concessions or authorizations, whose terms are already agreed upon and have the characteristic of law among parties. In the current titles, the licensee must comply with an efficiency metric previously defined, and in most cases a metric chosen by the licensee. This efficiency metric is the spectral efficiency and is almost always met (under the assumption that the licensee implements the agreed upon technology). Although this metric, as stated, is suitable to promote more efficient technologies, it is not enough to guarantee the use of the scarce resource. Because of this, introducing a new way of efficiency measurement might prove legally controversial. In other regulatory frameworks, when the license title is given in a precarious manner73, the introduction of this type of metric is more plausible, but in regulatory contexts such as Peru74, this change can be interpreted as a substantial modification to the terms of the contract and, thus, the licensee blocks its implementation claiming an imbalance done post contract by one of the parties. In international practice, this legal barrier has been avoided through two alternatives: • Steady incorporation of these changes • Case-by-case negotiation. according to the license expiration and their renewal; or The second barrier relates to the need of building, and keep updated, a reference model to compare measurements in each case. It is an operational barrier, which has to do with the corresponding spectrum management institutions’ availability of models and specific tools. Although the reference model can demonstrate good practices and experiences in other countries, it must be built in ac- cordance with the structure and trends of Peru, since the conclusions regarding the efficient use of the spectrum depend on of the intrinsic conditions of each market. 73 - Such as Argentina’s case 74 - As Mexico and Colombia S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 153 Bibliography ANALYSIS MASON. (2015). Estudio de Métricas de Eficiencia Espectral - IFT. ANATEL. (2010). Resolución 548. ANE. (2013). Consulta Pública: Mecanismos de Flexibilización de Espectro. Catañeda, R. (2018). Impulsando la Eficiencia Espectral: De la Teoría a la Práctica. Presentación Workshop sobre eficiencia y uso innovador del Espectro, (pág. 6). Lima. FCC. (2002). Report of the Spectrum Efficiency Group. FCC. (2017). Broadcast Incentive Auction and Post-Auction Transition. From https://www.fcc.gov/about-fcc/fcc-initiatives/incentive-auctions FCC Spectrum Policy Task Force. (2002). Report of Spectrum Efficiency Working Group. ITU. (2015). ITU-R M.2290-0. ITU. (s.f.). ICT Regulation Toolkit. From de ttp://www.ictregulationtoolkit.org/toolkit/5.4 Ministerio de Comunicaciones de Argentina. (2017). Resolución 171 de E/2017. MINTIC Colombia. (2013). Resolución 449 de 2013: Subasta de Espectro 4G. Colombia. MTC. (2017). Concesiones Vigentes de Telecomunicaciones, según Tipo de Servicio: 2008-2017. From http://www.mtc.gob.pe/estadisticas/comunicaciones.html Telconomia. (2016). Subasta 600 MHz: de la TV a las redes móviles. From http://telconomia.com/600-mhz-la-tv-las-redes-moviles Unión Internacional de Telecomunicaciones. (2017). UIT-R SM.1046-3. WIK-Consult para Comision Europea. (2012). Inventory and review of spectrum use: Assessment of the EU potential for improving spectrum efficiency S PECT RU M M A N AG E M E N T FO R D I G I TA L D E VE LO PM E N T I N P ERU 155