By Gerry Oberst

Just as the satellite radio sector in the United States seems to be gaining strength, regulators in the United Kingdom seem to want to sell the spectrum out from under any similar type of service in Europe.

At the end of March, the U.K. Office of Communications (Ofcom) issued a consultation paper to allow the public to review its proposal to auction spectrum in the 1452 to 1492 MHz band. The upper part of this spectrum has long been designated in Europe for satellite radio service, called satellite digital audio radio (S-DAB).

Ofcom recognizes that the radio regulations of the International Telecommunication Union (ITU) require Ofcom to protect reception of registered S-DAB services in neighboring European countries. It also notes at least five satellite networks are notified or pending at the ITU. If any of these actually get off the ground, they would cause "material constraints," in Ofcom’s words, to terrestrial use of this sub-band across much of the United Kingdom.

Nevertheless, the regulator seems intent on moving forward to auction the spectrum for terrestrial service and may even seek to renegotiate international agreements with neighboring countries to decrease constraints on the entire band.

The satellite industry is up in arms over this proposal. The band in question is one of the last available for providing European-wide services and is the result of a long, hard fight in Europe between terrestrial radio services and S-DAB – a fight the satellite sector largely lost. Now, if the United Kingdom carves out that last remaining frequency range, the prospects of providing satellite radio into the country, and the economics of providing it across Europe, will be seriously damaged. Ofcom set the deadline for comments for early June and intends to conduct an auction in early 2007.

We expect to see challenges based on English law to Ofcom’s proposal, due to the way it upsets the European-wide designation of the frequencies. Ofcom is bound by national law to comply with the overall framework for electronic communications within the European Union, which should provide constraints on Ofcom’s plan to go it alone on service and spectrum designations.

We also expect references to recent European policy initiatives on spectrum auctions, trading and service neutrality as arguments against Ofcom’s plans. The European Commission has been pushing strongly for spectrum trading and reliance on market mechanisms to govern allocation and use of spectrum resources. But even the most fervent advocates recognize satellite networks can be irretrievably harmed if any European country decides to auction away spectrum in a manner inconsistent with international allocations, which can impede service patterns beyond a single country’s reception area.

It has been generally recognized that the international nature of satellite footprint and spectrum use limits the ability of satellite companies to participate in national auctions. Satellite operators have to bid in virtually all countries within their service area, while terrestrial operators can cherry pick in a limited area but still block satellite development over an entire continent. This is, in effect, what would happen with the Ofcom plan.

The European regulatory structure provides some brakes on such insular planning. The European Union Framework Directive provides that national regulators must promote the harmonization of radio frequencies. While this is a soft requirement with discretionary wording, we expect to see arguments that national actions that move directly away from harmonized approaches cannot meet this European Union goal.

On policy grounds, the Ofcom proposal also is contrary to recent Commission pronouncements on creation of pan-European services and management of certain spectrum for satellites at the global level. Further, the plan is inconsistent with a recent opinion from the European Radio Spectrum Policy Group that cautioned about the challenge of "avoiding spectrum fragmentation where it could lead to inefficient use of spectrum."

The United Kingdom has traditionally been good to satellite interests. The British National Space Centre 2006 report on the size and health of the U.K. space industry, based on survey results from 227 companies active in the sector, showed space industry revenues of 4.8 billion British pounds ($8.9 billion). Satellite broadcasting services represented almost three quarters of this revenue, virtually all from satellite television. Taking spectrum away from satellite radio means this sector will have no future of contributing to the U.K. economy in the same way the industry has developed in the United States.

Gerry Oberst is a lawyer in the Brussels office of the Hogan & Hartson law firm.