Govt plans to auction off remaining 4G spectrum

The Government plans to auction off the remaining block of radio spectrum to be used by mobile companies to carry faster 4G internet traffic, despite protests from 2degrees.

Communications and Information Technology Minister Amy Adams announced today that the Government intends to auction the remaining 2x5 MHz block of 700 MHz radio spectrum.

Last month Telecom and Vodafone each successfully bid for three lots of this spectrum for $66 million, while 2degrees bid for two lots for $44 million, - leaving one block unsold.

This spectrum, freed up from the switchover of television broadcasting from analogue to digital, will be used to carry much faster 4G mobile internet services.

The Government raised $176 million from the original auction.

Adams said the Government intends to auction off this remaining block of spectrum with a reserve price of $22 million later this month and that Telecom, Vodafone and 2degrees are eligible to participate.

This follows 2degrees' call last month to leave the unallocated spectrum on the shelf, rather than "damage long term competition by selling the unsold spectrum to Telecom or Vodafone."

"Spectrum is the motorway for mobile operators, and in the next few years that motorway will be built on 1800MHz spectrum, which all mobile operators already own. There are no mobile devices or networks using 700MHz that can be deployed in New Zealand right now, so there's no pressing consumer need to sell the remaining portion of that band," 2degrees chief executive Stewart Sherriff said at the time

Telecommunications User Association chief executive Paul Brislen also said the remaining blocks should not be sold:

"It should be left on the shelf for now, there's no real benefit but a lot of downside," Brislen said this afternoon.

"The downsides are that Vodafone and Telecom now are going to enter a bidding war for this chunk of spectrum, it will ratchet up the overall price and this is money that is better spent on the network itself rather than on a piece of paper which says 'congratulations you have permission to build a network'. That's the first problem, the second is that it leaves 2degrees in a very difficult position because they don't have enough spectrum to be able to compete on a level playing field if you like with the other two," Brislen said.

2degrees founder Tex Edwards told the Herald the Government was repeating mistakes of the 1990s "ensuring an operator can maintain dominance perpetually".
"It's a disgrace. Kiwi consumers deserve better policy," he said.

Telecom and Vodafone have both applied to the Commerce Commission for permission to purchase four lots rather than three lots of the spectrum and Adams said today that final settlement of the auction would not be completed until the regulator gives the go ahead.

If they are successful they will be required to meet extra conditions:

"Under the auction terms, bidders who acquire three lots of radio spectrum must build at least five new cell sites each year, for five years. However, for any bidders who win four lots, the requirement increases to ten new cell sites each year for five years. The auction conditions are designed to ensure that at least 90 per cent of New Zealanders have access to a 4G network and faster mobile broadband coverage within five years," Adams said today

source: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11159564

Regulator urged to block 4G spectrum sale to Vodafone, Telecom in 2degrees sponsored report

The Commerce Commission has been urged not to sign off on the country's dominant mobile phone operators buying the remaining 700 megahertz radio spectrum for fear of undermining burgeoning competition in the market.

A Covec report, commissioned by new entrant Two Degrees Mobile, claims competition among mobile carriers would be "substantially enhanced" if the antitrust regulator declines clearance for Vodafone New Zealand and Telecom Corp to buy the unsold pair of 5MHz spectrum blocks. The spectrum became available when the government decided to switch-off analogue television services, freeing up the radio waves for use on 4G mobile networks.

If the dominant mobile carriers are cleared to buy the spectrum, the Covec report warns 2degrees will face higher capital costs of the long-run, reducing its incentive to compete aggressively for retail and wholesale customers, particularly for those clients generating high data volumes.

"The retail market concern is the most pronounced in the on-account market segments, which have not yet been fully disrupted, where data traffic is relatively more important, and where 700 MHz spectrum is therefore of greater value," the report said.

Approval would also crowd out 2degrees' ability to offer the same quality of service as Vodafone and Telecom, and hinder incentives for effective spectrum-sharing and national roaming services.

"Each of these is a serious issue in a market, and a group of affected markets is jointly important for mobile sector competition," the report said. "Collectively, they seem likely to pose a material risk to the intensity of competition, especially since the sector is currently transitioning out of a duopoly structure, but we do not yet have three similar-strength networks."

The submission, published on the regulator's website, comes ahead of the Dec. 6 due date for the commission's decision, and as Vodafone and Telecom bid for the remaining blocks at auction. In the first round of the auction last month, Telecom and Vodafone each bought three blocks each (2x15 MHz) and 2degrees two blocks (2x10MHz).

The Covec report said the opportunity cost of leaving the unsold spectrum unallocated is very low as it won't be needed in the foreseeable future. That means declining clearance now doesn't extinguish the prospect of allocating the spectrum to Vodafone or Telecom at a later date.

source: http://www.nbr.co.nz/article/regulator-urged-block-4g-spectrum-sale-vodafone-telecom-2degrees-sponsored-report-bd-149516